Business confidence in the North East fell sharply during January to its lowest level in more than a year, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

North East firms’ confidence dropped 14 points to one per cent in January, lower than at any other point since the regional Business Barometer report launched a year ago.

A net balance of 11 per cent firms are now pessimistic about the UK economy, compared with a balance of nine per cent who were optimistic in December.

Meanwhile, companies reported lower confidence in their own trading prospects at 12 per cent, down eight points on the end of last year.

Together, this gives an overall confidence of one per cent, the joint lowest result nationwide, alongside Scotland.

Businesses’ hiring intentions also fell, with a net balance of four per cent of businesses in the region now expecting to hire more staff during the next year, down 14 points on December’s figures.

A net balance of eight per cent of businesses said they now felt that the UK’s exit from the European Union was having a negative impact on their expectations for business activity, up just one point on a month ago.

Across the UK, overall confidence rose two points to 19 per cent as firms’ optimism about the economy climbed three points to 10 per cent. Companies’ confidence in their own prospects edged up one point to 27 per cent.

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

Kelly Green, regional director for the North East at Lloyds Bank Commercial Banking, said: “This month’s figures indicate that the North East’s businesses are starting the year with a cautious outlook amid uncertain conditions.

“Although there’s been a fall in confidence in the wider economy, it’s a positive indication of the region’s resilience that we’re seeing a more moderate dip in firms’ own trading outlooks.

“Lloyds Bank’s commitment to lend up to £700m to North East firms in 2019 is just one of the ways we’ll be by the side of businesses as they target growth in the months to come.”

Regional picture

Confidence in Scotland and the North East was the lowest across the UK, both at one percent, behind the East of England at six per cent.

Businesses in London showed the most confidence, at 36 per cent, ahead of the West Midlands (31 per cent) and the South East (23 per cent).

Sectors

The construction and manufacturing sectors had both the highest confidence (30 per cent and 28 per cent respectively) and the strongest hiring intentions (26 per cent and 30 per cent respectively).

Meanwhile, the retail (14 per cent) and services sectors (19 per cent) had both the lowest confidence as well as the weakest hiring intentions (nine per cent and eight per cent respectively).

These pictures were also reflected in the sectors’ views about the impact of Brexit. Net balances of 15 per cent (services) and 13 per cent (retail) expected the UK’s exit from the EU to have a negative impact, compared with just three per cent in manufacturing. A net balance of nine per cent of construction firms expect it to have a positive impact.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking commented: “Despite businesses ending 2018 on a low, it’s good to see that, across the UK as a whole, they’ve started the year on a slightly more positive footing.

“The results for the manufacturing and construction sectors are particularly encouraging and we hope the picture will improve further as we move into February and beyond, if geopolitical uncertainties subside.”