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UK Business Confidence Slips to 4 Year Low

With rumblings of a potential banking crisis in China and the ever-present threat of protracted negotiations with the EU looming, it’s perfectly understandable that businesses would feel under a dark cloud. However, few could predict the hit to confidence that has manifested itself within the UK’s businesses.

According to Lloyds Bank’s Business in Britain Report, business confidence has slumped to a four year low. Expectations that sales, orders and profits would grow over the next six months slipped to an astonishingly low 12%, down from 38% that was reported in January. The remaining 88% of businesses all suggested that sales and orders would decrease or remain steady over the next 6 months.

More than a quarter of the businesses surveyed cited economic uncertainty as the main threat to prosperity, whilst 18% said that the biggest danger came from a drop in demand, potentially caused by the Brexit vote.

Manufacturing businesses weren’t exempt from this falling confidence, despite the fact that they enjoyed a brief pickup in orders following the Brexit vote. Indeed, all sectors reported a weakened outlook for demand, employment and investment, with services being the most affected, falling by an average 30 points in wholesale, leisure and hospitality.

Tim Hinton, managing director at Lloyds said that the dramatic sliding of confidence since January’s report should be viewed in context of recent economic and political shocks, saying: “The EU referendum vote has introduced a level of uncertainty for companies as the UK decides on the best model for its future relationship with the EU, and this is likely to continue for the foreseeable future.

“Whilst sentiment has fallen to a four-year low, it remains well above the lows reached during the global financial crisis of 2008-9.”

The report gathers the views of around 1,500 businesses, and has poured fresh water on the hopes of a sustained exports boost. Though businesses like ours selling stainless steel ORFS fittings saw an immediate boost thanks to the decreased value of the pound (which fell to a 31 year low), the report says hopes of a global export sales rise have fallen 15% to just 20%.

Employment also remained under pressure, with the number of firms suggesting they intend to recruit more staff over the next six months dropping for the fourth survey in a row. In total, the study found that the net balance of companies looking to increase headcount over the period fell by 14% to -1%.

Perhaps most worrying was the statistic that businesses looking to up their capital expenditure had fallen from 14% in January to 0% in the latest survey. It indicates that British businesses as hunkering down for what could be another long hard year for the economy.

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