Business confidence returns for first time since March

West Midlands business’ confidence rose 22 points month-on-month to 4% in December, an creating an overall optimistic view for the first time since the beginning of the pandemic in March.

According to the latest Business Barometer from Lloyds Bank Commercial Banking, the region’s firms’ optimism in the economy jumped 34 points month-on-month to 8%, while confidence in their own business prospects increased by nine points on November to 1%.  Together, this gives a headline confidence reading of 4%.

Businesses’ hiring intentions showed that a net balance of 6% of businesses in the region expect to increase staff levels over the next year. This compares to a net balance of 28% that had expected to reduce their headcounts in November.

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

Across the UK, overall confidence saw the biggest month-on-month increase in four years, growing 17 points on November’s reading to -4%. Economic optimism jumped 23 points to -5%, while firms’ confidence about their trading prospects increased 11 points to -3%.

All 12 UK nations and regions saw a rise in overall confidence during December. The most marked improvements were reported in Scotland (up twenty-nine points to -9%); the South West (up twenty-two points to 5%) and the West Midlands (up twenty-two points to 4%). The North East, South West and West Midlands all moved into net positive territory for the first time since March this year.

The South West recorded highest confidence at 5%, followed by the West Midlands and South West, each at 4%. The North West had the lowest confidence during December at      -13%, despite confidence increasing month-on-month by 15 points.

Amanda Dorel, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “It’s a relief to see confidence returning to the region. Alongside this, firms’ expectations that they will create more jobs in the year ahead is a strong sign that momentum is beginning to build behind the region’s recovery.

“However, the coming weeks will present challenges with a new trading relationship with the EU to navigate and uncertainty over lockdown restrictions, which could cause confidence to falter.

“Whatever happens, we’ll be by the side of West Midlands businesses as they step into the new year with greater confidence.”

National overview
In the industry sectors, confidence reached the highest levels seen since the start of the pandemic. Manufacturing reported a strong rebound this month despite looming uncertainty during the survey period about the UK’s new trading arrangements with the EU, surging by twenty-five points, from -25% to 0%.

This was followed by a growth in confidence for construction, which rose by eighteen points to -5%;  services, which jumped by sixteen points to -5% and the retail sector which reported an eleven point lift in confidence to -1%. Nevertheless, entering the holiday trading period, confidence in retail, as in other sectors, remains below the long-term average.

Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking, said: “The news of the vaccine progress has bolstered this month’s confidence figures, more than offsetting uncertainties around the UK’s new trading relationship with the EU. While confidence remains below average and significant challenges lie ahead, it is heartening to conclude a challenging year with a notable improvement in business sentiment and with the positive momentum hopefully continuing into 2021.”

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