Business confidence in the North East fell sharply in August, with the headline reading dropping to 45% from 75% in July, according to the latest Lloyds Business Barometer. The survey, which gathered data between August 3 and 17, showed firms' confidence in their own trading outlook fell 24 points to 56%, while optimism in the wider economy dropped 37 points to 33%.
Confidence below regional 12-month average
The North East headline confidence figure now sits below the region's 12-month average of 56%, with the highest reading of 75% recorded in July. The decline came during a period when new data showed surprise economic growth in the three months to the end of June.
According to the Lloyds Business Barometer, a regular survey that provides early signals on economic trends, North East firms' confidence in their own trading outlook was influenced by stronger customer demand, cited by 57% of businesses, and increased investment in technology, cited by 55%. Confidence in the wider economy was helped by reports of rising market demand, mentioned by 71% of firms.
Growth priorities and hiring intentions
Regional firms identified their top target areas for growth over the next six months as investing in their team, evolving their offering by introducing new products or services, and entering new markets. Nearly a third of businesses in the region expect to increase staff levels over the next year, though this is down on hiring intentions reported last month.
Martyn Kendrick, regional director for North East at Lloyds, said: "While we have seen confidence dip this month, it’s encouraging to see that North East businesses haven’t hit pause, and are remaining notably more positive about their own trading outlook than the wider economy."
He added: "Economic optimism may have softened, but businesses across the region are backing themselves to grow with many already taking practical steps to strengthen their position, from investing in technology to exploring new markets. We’ll continue to support North East businesses as they invest, adapt and plan for the future."
UK-wide confidence rises to highest since March
The North East reading came as overall UK business confidence was up four points in August to 53%, its highest since the start of the Iran conflict earlier this year and above the 12-month average of 47%. Increased economic optimism was the main driver, up 18 points since June.
Firms' outlook on their own trading improved two points to a three-month high of 58% in August, compared with a 12-month average of 56%. Researchers found 66% of businesses expect an increase in output over the next year, with 8% expecting a decrease.
Amanda Murphy, CEO of Lloyds Business and Commercial Banking, said: "It's encouraging to see business confidence rise for the second month in a row, reaching its highest level since March. While international firms remain more confident, it’s good to see domestic companies register a strong month-on-month increase."
She continued: "Overall, businesses are reporting stronger customer demand, greater optimism about the wider economy and growing confidence in their own trading outlook, all of which will be helping to support investment and growth plans. While businesses continue to operate in a challenging environment, easing cost pressures and fewer firms expecting to raise prices in the coming year, should allow them to focus less on managing headwinds and more on pursuing growth."
