Summer confidence slump for North East firms but growth still on the agenda

Martyn Kendrick, regional director for the North East at Lloyds

The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.

Companies in the North East reported lower confidence in their own business prospects month-on-month, down nine points at 68%.

When taken alongside their optimism in the economy, down 26 points to 43%, this gives a headline confidence reading of 55% (vs. 73% in July).

Looking ahead to the next six months, North East businesses identified their top target areas for growth as introducing new technology, such as AI and automation (48%), entering new markets (42%), and investing in their team, for example by investing in training (37%).

National picture

Overall, UK business confidence rose two points in August to 54%.

While firms’ confidence in the wider economy dropped three points to 44%, their optimism in their own trading prospects rose five points to 63%.

London was the most confident part of the UK in August (69%), followed by the East of England (64%).

Sector Insights

Manufacturing firms saw confidence up 14 points this month, to 62%. This level was previously seen in 2015. Retailers also saw an increase in confidence this month, with levels up 13 points to 57%, a five-month high. However, construction firms confidence fell by five points to 40%, a four-month low while confidence in service sector firms also fell eight points to 53%. 

Martyn Kendrick, regional director for the North East at Lloyds, said: “While confidence has moderated this month, businesses across the region still remain more positive than the national average.

“The region’s firms continue to set out plans for growth, whether that’s introducing new technology or investing in their people. These are the foundations for long-term success, and we’ll continue to provide on-the-ground support for businesses as they put these strategies into action.”

Hann-Ju Ho, Senior Economist, Lloyds Commercial Banking, said: “This continued upward trend in business confidence suggests UK firms remain optimistic about their own trading prospects while there is a modest cooling of confidence in the wider UK economy. Firms are focusing on what they can control, with many looking to pursue growth opportunities, including entering new markets and adopting new technologies.

“Wage expectations have seen a notable shift this month, but it remains to be seen whether this signals the start of a sustained trend or a temporary uplift, as they have been broadly stable in recent months.”