Region’s business confidence rises ahead of Omicron impact

Business confidence in the North West rose 14 points during December to 48%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the North West reported higher confidence in their own business prospects month-on-month, up 12 points at 47%. When taken alongside their optimism in the economy, up 15 points to 49, this gives a headline confidence reading of 48%.

The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.

The survey captured responses between November 26, and December 10. The first two cases of Omicron in the UK were confirmed on November 27, and nations began announcing the reintroduction of restrictions in the week commencing December 6.

A net balance of 39% of businesses in the region expect to increase staff levels over the next year, up seven points on last month.

Despite potential challenges from the new COVID-19 variant on the horizon, firms remained positive about their future trading prospects, up four points month-on-month to 43%.

The net balance of businesses planning to create new jobs also increased by three points to 33%. Optimism in the economy overall remained positive at 38%, down just three points on November’s result.

Every UK nation and region maintained a positive overall confidence reading in the December barometer, with four reporting a higher reading than last month. Alongside the North West, the North East (13 points to 58%), Yorkshire and Humber (up four points to 35%) and East of England (up 12 points to 50%) all had stronger confidence readings month-on-month, with the North East and London (57%) the most optimistic overall.

Martyn Kendrick, regional director for the North West at Lloyds Bank Commercial Banking, said: “It’s been a challenging year for businesses and with the Omicron variant causing uncertainty about potential further restrictions, it’s understandable that firms will be cautious as we near the end of the year.

“Those in the hospitality or leisure sectors in particular will be concerned that they may have to contend with tighter trading restrictions in the near future.”

In the industry sectors, construction recovered to 39% from November’s seven-month low of 28%, following a minor easing in supply chain disruptions. Despite a slight fall in confidence in manufacturing to 40%, trading prospects in the sector have remained higher than the whole economy throughout this year.

There were also small declines for retail (43%) and services (39%) ahead of the festive period. There have been some marked differences in these sectors in recent months, with notable strengths in the professional services sector – including finance – and in IT/communications.

However, the current three month average sentiment among hospitality firms is at its lowest level (24%) since the first quarter of the year (four per cent). This has been fuelled by a significant monthly drop of 48 points to six per cent between November and December.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “It is a challenging end to 2021 as businesses are now having to adapt to the new Omicron variant and resultant restrictions across the UK.

“Nevertheless, business confidence remains resilient and above the long term average due to a rise in trading prospects, while pay and price expectations continue to be elevated.

“Businesses face into a number of headwinds and challenging trading conditions, including higher interest rates, as we move into 2022, but many remain resilient and hopeful that acute downside risks are not realised.”

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