Businesses in the United Kingdom reported a fall in confidence this month, degraded by 3 points to 25%, as worries regarding the cost of living and inflation drive sentiment. According to the latest business barometer from Lloyds Bank, the statistics showcase confidence beneath the long-term average of 28% for the first time since March 2021, when the economy was recovering from the second wave of covid.
In June, more than half of British business firms were affected by inflation after it touched the highest level in 40 years, at 9.4%. The upcoming major challenges are an economic slowdown (38%) and labour markets tightening (25%). Even though businesses are thriving to manage an overall positive perspective on the economy, the same has declined in the current months. This happened due to economic uncertainties gaining momentum, with optimism in the economy remaining positive but facing a significant fall by 10 points to 12%.
Although the scenario looks challenging, the assessment of businesses regarding their trading prospects stays relatively stable this month. The net balance for trading prospects for July raised by three points to 37%. The data showcased that the segment of firms wishing to improve their prices in the next year was raised to match the record high of 58% from April this year – up by two points last month. Also, an unimpacted 5% of firms expected to lower their prices.
Most of the firms (66%) informed that inflation had a bad impact, recommending that they have been able to pass some from all of their increasing prices to their consumers. In comparison, 9% of the companies indicated that they have a positive impact.
“Business confidence declined this month, suggesting that economic headwinds are becoming more forceful,” Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said.
“Despite this, firms’ assessment of their own trading prospects showed some resilience in the face of a challenging environment. Meanwhile, price pressures have shown no clear signs of a downward trend and there appears little sign yet that wage pressures are abating.”
“As many businesses feel the strain, they should look to lean on their support networks, including their banks to help them structure their finances to make sure they are in the best position possible for the months ahead. At Lloyds we remain by the side of businesses to deliver that support,” said the senior economist at Lloyds Bank Commercial Banking.
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