BUSINESS confidence in the East of England fell 20 points during May to 14%, the lowest of any UK region or nation, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the region reported lower confidence in their own business prospects month-on-month, down eight points to 15%. When taken alongside their optimism in the economy, down 34 points to 12%, this gives a headline confidence reading of 14%.
Despite the dip in confidence, East businesses identified a range of growth opportunities for the next six months, including diversifying into new markets (25%), evolving their offering with new products or services (25%) and investing in their teams (23%).
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 13% of businesses in the East expect to increase staff levels over the next year, down four points on last month.
Overall UK business confidence increased by five points during May to 38% – its highest level since February. Firms’ outlook on their future trading prospects rose three points to 42%, and their optimism in the economy increased seven points to 33%. The net balance of businesses planning to create new jobs also increased by 11 points to 37%.
Every UK region and nation reported positive confidence readings in May. London (up 23 points to 63%), Scotland (up 14 points to 42%) and the North West (up 12 points to 44%) reported the largest increases month-on-month, with London now the most optimistic region overall.
Dene Jones, regional director for the East of England at Lloyds Bank Commercial Banking, said: “With rising costs taking their toll, businesses in the East are facing some challenging conditions. But despite this, there is optimism among many businesses, with firms eyeing expansion opportunities and investing in their teams to help establish the skills they need for growth.
“That said, it’s crucial that the region’s businesses keep a close eye on cashflow and closely manage their working capital at this turbulent time to ensure they have the funds they need to invest to hand. This includes taking the time to optimise inventory levels, and review customer payments to identify any potential bottlenecks.”
From a sector perspective, retail confidence fell two points to 27%, remaining lower than the all-sector average of 38% in the last three months. The confidence level is also the lowest since March 2021 as pressure on household real incomes weigh on spending prospects. In contrast, there was a 21-point rise in construction to 54%, while manufacturing sentiment remained resilient, up two points to 45%. Confidence in the services sector reached a three-month high, increasing 4 points to 36%.
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “Business confidence improved this month and firms in general seem able to rebuild some of their margins through price increases. However, they also report several challenges ahead, including concerns around higher costs and an economic slowdown. More immediately, consumer-facing industries, such as retail, are not feeling the same confidence uplift amid the widespread reports of a squeeze on household incomes.”