Regional business confidence dips as Brexit uncertainty continues

Business confidence in the North East has fallen 13 points in the first half of the year but remains in line with the national average at 25 per cent, according to the latest Business in Britain report from Lloyds Bank.

As well as a fall in confidence – calculated as an average of respondents’ expected sales, orders and profits over the next six months – from 38 per cent to 25 per cent, fewer firms are also planning to recruit new staff or increase investment.

The net balance of firms looking to grow investment in the next six months fell by three points to 18 per cent, compared with January, while the net balance of businesses looking to hire more staff fell by six points to eight per cent.

However, the share of firms that reported difficulties hiring skilled labour fell 13 points to 39 per cent while the number expecting to increase pay rose by 12 points to 30 per cent.

The Business in Britain report, now in its 26th year, gathers the views of more than 1,500 UK companies, predominantly small to medium-sized businesses, and tracks a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

Mixed picture across the UK

Across the UK, business confidence was highest in London (31 per cent), followed by the South East (30 per cent) while the lowest level of confidence was in the East Midlands (14 per cent) and the North West (19 per cent).

Kelly Green, regional director for the North East, said: “There is no doubt that businesses are facing challenges at the moment, with Brexit uncertainty and concerns over global demand highest among them. As a result, confidence has fallen in the first half of this year.

“But the fact that confidence remains in line with the national average, and is the highest among all the Northern Powerhouse regions, suggests firms are resilient and becoming more comfortable operating in the current uncertainty.

“While investment and recruitment plans have not fallen as much, firms must still make sure that they are not missing out on the opportunities being created amid the current turbulence.”

Risks ahead

Uncertainty surrounding Brexit is now the single greatest risk to firms in the North East in the next six months, cited by 22 per cent of firms.

More than 31 per cent of businesses in the North East expect a negative impact on their business if no trade agreement is reached with the EU. 20 per cent expect a positive impact, while 44 per cent either do not expect any impact or said they didn’t know.

Elsewhere, 12 per cent of firms say weaker global demand is their greatest risk in the next six months, followed by weaker UK demand, which was cited by nine per cent.

Confidence begins to grow in sectors that rely on domestic demand

Nationally, business confidence was highest in the transport & communication and construction sectors, with the construction sector in particular registering a significant rise compared with January’s survey, rising 12 points to 26 per cent.

Confidence was lowest in retail & wholesale, and in hospitality & leisure, both of which saw confidence fall since January.