Business confidence drops back to negative territory

Business confidence in the West Midlands has dropped back into negative territory after falling eight points during January, according to latest figures.

The Business Barometer from Lloyds Bank Commercial Banking shows that companies in the West Midlands reported higher confidence in their own business prospects month-on-month, up five points at 6%.

However, when taken alongside their views of the economy, down 21 points to -13%, this gives a headline confidence reading of -4%.

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

Almost two thirds (61%) of firms said current Covid-19 restrictions had caused a fall in turnover, but they expected the effects of the vaccine programme to boost trading prospects for 2021, with 50% saying the rollout had made them feel more confident about the year ahead.

However, only 14% expect trading levels to return to pre-pandemic levels in the next 12 months.

When it comes to jobs, a net balance of 14% of businesses in the region expect to reduce staff levels over the next year, up 20 points on last month.

Nationally, overall business confidence dipped in January as the third lockdown came into force, falling by three points to -7%. Firms’ economic optimism dropped dramatically month-on-month, decreasing by 34 points to -10%.

Amanda Dorel, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “Firms have faced significant challenges following the latest lockdown, which has resulted in confidence falling back into negative territory this month. However, it’s promising to see that a large number are feeling optimistic about their prospects brightening in the months ahead now the vaccine roll-out is underway.

“We will remain by the side of businesses across the West Midlands to help them navigate the challenges they face and help them make the most of opportunities that come their way.”

In the industry sectors confidence remained above pre-vaccine levels (chart 4). While some sectors reported declines, manufacturing slipped by nine points to  9%, services fell by four points to -9% and retail by five points to 6%. Confidence levels in the construction sector improved for a second month, rising four points to -1%.