Business confidence rises as investment and hiring intentions improve

Business confidence across the North West has risen to the highest level since the EU Referendum despite increasing economic and political uncertainty, according to the latest Business in Britain report from Lloyds Bank.

Business confidence – calculated as an average of respondents’ expected sales, orders and profits over the next six months – is now among the highest in the UK after rising five points to 31% since July 2017.

As a result, the net balance of firms looking to grow investment in the next six months leapt by 15 points to 23%.

The net balance of firms looking to hire more staff also rose by eight points to 18%, compared with July 2017.

The region still faces challenges, with the share of firms that continue to report difficulties hiring skilled labour falling four points but remaining relatively high at 46%.

Meanwhile, the number of firms expecting to increase pay increased by just one point to 25%, suggesting that companies are still taking a cautious approach.

The Business in Britain report, now in its 26th year, gathers the views of more than 1,500 UK companies, predominantly small to medium sized businesses, and tracks a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

The North West is the second most confident region in the UK, beaten only by the North East (38%). The lowest level of confidence was reported in Yorkshire and the Humber (15%), followed by Scotland (17%).

Glenn Bemment, regional director for the North West, Lloyds Bank Commercial Banking, said: “It’s encouraging to see that confidence across the North West has increased consistently over the past year, despite continued political and economic uncertainty continuing to impact firms.

“Increasing investment and job creation is a firm indication that companies are committed to growth in 2018, but they will need to plan carefully to navigate any challenges that the year ahead might bring.

“While the Brexit negotiations continue, businesses are focused on short term threats – including managing higher costs and maintaining positive cash flow – so that they can prepare for whatever 2018 brings.”

Economic uncertainty is now the single greatest risk to firms in the North West in the next six months, cited by 25% of firms in the region, up from 18% in July.

Weaker UK demand is also causing concern, with 16 per cent of companies stating it as the greatest risk to their business.

The share of North West firms that are confident about business interests being protected or promoted in Brexit negotiations fell to 49% from 63% previously, but remains higher than the share of businesses expressing a lack of confidence, which increased to 24% from 19%.

Nationally, business confidence was highest in manufacturing, while sectors more dependent on domestic demand, such as hospitality, leisure, and retail and wholesale also recorded gains.

The only sector that reported a significant fall was construction, in which confidence dropped from 31%to 14%.