Member Article

North East business confidence dips but remains well into positive territory

Lloyds Bank’s Business Barometer for May 2021 shows:

• North East business confidence fell by 11 points in May but remains in positive territory at 26%
• A net balance of 12% of firms are expecting to increase staffing levels
• Overall UK business confidence increased for fourth month in a row as hiring intentions reach highest level since February 2020

Business confidence in the North East fell for the first time this year in May to 26%, down 11 points on April’s reading, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the North East reported lower confidence in their own business prospects month-on-month, down 10 points at 26%. When taken alongside their optimism in the economy, down 12 points to 26% this gives a headline confidence reading of 26%.

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

When it comes to jobs, a net balance of 12% of businesses in the region expect to increase staff levels over the next year, down 8 points on last month.

Overall UK business confidence rose four points in May to 33%, a fourth consecutive month of growth. The reading comes after non-essential retail and hospitality firms reopened their doors to customers. Businesses reported an increase in optimism about their own trading prospects, up two points month-on-month to 28% and their confidence in the economy grew by six points to 38%.

Firms’ hiring intentions also rebounded to pre-pandemic levels with 14% of UK businesses expecting to make new hires in the next 12 months, the highest reading since February 2020.

All UK regions reported a net positive confidence reading in May, with almost all areas recording an increase in confidence. Yorkshire and the Humber was the most positive region (up 12 points to 44%) followed by the South West (up 12 points to 42%) and the West Midlands (up 10 points to 41%). Wales reported the biggest month-on-month increase (up 18 points to 27%). Alongside the North East, two other regions reported small dips in confidence but remained in positive territory; London (down 8 points to 24%), and the North West (down five points to 38%).

Steve Harris, regional director for the North East at Lloyds Bank Commercial Banking, said: “Despite a slight dip, business confidence in the region remains in positive territory as the North East’s retail and hospitality and leisure sectors welcome back customers.

“Inward investment in the North East has picked up recently and the Local Enterprise Partnership’s announcement that it plans to establish a new investment fund is indicative of the strength and resilience of the region. We will continue to stand by businesses to help them recover and thrive over the summer period.”

From a sector perspective, manufacturing reported the sharpest increase in business confidence (up thirteen points to 53%). Construction confidence was up seven points to 35%, and retail gained five points to a four-year high of 44% with the easing of lockdown measures leading to hopes of stronger business conditions. Wider services confidence posted a more modest rise of one point to 26%.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “A fourth consecutive monthly increase in business confidence, and the highest in three years, leaves us hopeful for the UK’s economic recovery. The increase in confidence was buoyed by a further easing of lockdown restrictions and a rise in optimism about the wider economy. While we need to wait and see how the months ahead will unfold, the recent rise in positive outlook is an encouraging sign that firms are emerging from the COVID-19 crisis with renewed resilience and vigour.”

This was posted in Bdaily's Members' News section by George Hall .