Business confidence in the North East fell 20 points during October to 10%, according to the latest Business Barometer from Lloyds Bank Commercial Banking – conducted between 3rd-17th October.
Companies in the region reported lower confidence in their own business prospects month-on-month, down 14 points at 27%. When taken alongside their optimism in the economy, also down 28 points to -9%, this gives a headline confidence reading of 10%.
Despite the fall in optimism during October, a three-month average of local businesses’ confidence scores reveals a more positive picture. The average sits at a net confidence score of 24%, factoring in monthly scores of August, September and October.
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
Businesses in the North East identified their top target areas for growth in the next six months as evolving their offering (42%), investing in sustainability (34%) and investing in their teams (33%).
A net of 25% of the region’s businesses expect to increase staff levels over the next year, down 11% points on last month.
Overall UK business confidence fell one point during October to 15%, in line with the average over the last three months. Firms’ outlook on their future trading prospects was up two points to 27%, and a net balance of 21% are planning to create new jobs, up four points on last month. However, businesses optimism in the wider economy dropped three points to 2%.
Five UK regions and nations recorded a month-on-month increase in optimism in October. Of those, London (up 16 points to 49%), the North West (up 14 points to 28%) and Wales (up nine points to 5%) saw the largest monthly increases, with London remaining the most optimistic region overall.
Steve Harris, regional director for the North East at Lloyds Bank Commercial Banking, said: “The challenging economic environment is clearly taking its toll on businesses of all shapes and sizes, and firms here in the North East are no different. However, what’s encouraging and hopefully signals more positive months ahead is business’ continued push for growth, by routes such as developing the products or services and investing in sustainability.
“At Lloyds Bank, our Clean Growth Financing Initiative rewards businesses targeting green growth with discounted lending to support these ambitions. Whatever their goals, we’ll remain firmly by the side of North East firms to help them navigate the road ahead and continue to scale up.”
Business confidence in the manufacturing sector fell for the fifth month in a row, to 13%, down 1 percentage point, the lowest confidence level since February 2021. Confidence in the retail sector declined by 6 percentage points to 9%, while confidence in the services sector also fell to 16%, both the lowest levels since early 2021.
However, the construction sector saw a 10 percentage point rise to 20%, although this level still remains weaker than in the first half of the year.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “While business confidence has marginally fallen this month, along with a drop in forward looking economic optimism, it is encouraging to see businesses still looking to increase their headcounts. However, cost pressures remain evident as businesses raise prices to protect their margins and wage pressure continue to be impactful. Given the recent turbulence in financial markets, it will be interesting to see how this will affect business confidence.”