West Midlands business confidence falls as firms take a more cautious look

Business confidence across the West Midlands weakened in August, with firms taking a more cautious view of their trading prospects and the wider economy, according to the latest Business Barometer from Lloyds.

The regional confidence index fell 10 points month-on-month to 47%, below the 12-month average of 53%. The latest figure is also well below the 66% recorded in March 2026, which was the highest level seen over the past year.

Firms’ optimism about their own trading outlook dropped 12 points to 53%, while confidence in the wider economy fell nine points to 40%.

The more cautious outlook was also reflected in recruitment intentions. A net balance of 33% of businesses in the region expect to increase staff numbers over the next 12 months, down 25 points compared with July.

However, businesses continue to identify areas where they see potential for expansion. Over the next six months, 43% of West Midlands firms identified investment in new technology, including AI and automation, as a key growth priority. Entering new markets was highlighted by a further 41% of businesses.

The latest figures form part of the Lloyds Business Barometer, which surveys around 1,200 businesses each month and has been running since 2002. The survey provides an early indication of economic trends across the UK and its regions.

Graham Fitzpatrick, Regional Director for the West Midlands, said: “Another fall in confidence shows that West Midlands businesses are feeling the pressure of a more uncertain operating environment.

“But sentiment can shift quickly, and the region has repeatedly demonstrated its ability to respond to changing conditions.

“We’ll continue to support the region’s businesses as they continue to seek growth.”
At a UK-wide level, business confidence moved in the opposite direction, rising four points in August to 53%. This was the highest reading since March, when confidence stood at 55%, and remained above the 12-month average of 47%.

The national improvement was supported by greater optimism about the wider economy, which increased by seven points to 49%. Economic optimism has now risen 18 points since June and sits above its 12-month average of 37%.

Some 64% of businesses surveyed said they were optimistic about the wider economy, five points higher than in July, while the proportion reporting a pessimistic outlook fell by two points to 15%. Businesses with a more positive view pointed to stronger customer demand and improving financial conditions as key factors.

Firms also became slightly more positive about their own trading prospects, with the relevant measure increasing two points to 58% — its highest level for three months and above the 12-month average of 56%.

Around two-thirds of businesses, 66%, expect output to increase over the coming year, up one point from July.

Meanwhile, the proportion expecting activity to decline fell one point to 8%.
Among businesses anticipating stronger activity, the main factors cited were increased customer demand, greater investment in capacity or technology and improving supply chain conditions.

Amanda Murphy, CEO Lloyds Business and Commercial Banking, said: “It’s encouraging to see business confidence rise for the second month in a row, reaching its highest level since March. While international firms remain more confident, it’s good to see domestic companies register a strong month-on-month increase.

“Overall, businesses are reporting stronger customer demand, greater optimism about the wider economy and growing confidence in their own trading outlook, all of which will be helping to support investment and growth plans.

“While businesses continue to operate in a challenging environment, easing cost pressures and fewer firms expecting to raise prices in the coming year, should allow them to focus less on managing headwinds and more on pursuing growth.”