Lloyds Bank has warned that business confidence has fallen to its lowest level since April 2025, with the headline reading dropping 12 points to 41% in September, according to the Lloyds Business Barometer. The decline follows August’s reading of 53%, which was the second highest recorded this year.
The bank, which has branches in Birmingham, said the overall figure remains 10 points above the long-term average, despite the sharp monthly drop. Optimism in the wider economy fell 18 points to 31%, compared to a 12-month average of 37%.
Smaller businesses hit hardest
Amanda Murphy, CEO of Lloyds Business and Commercial Banking, said: “While confidence among larger firms remains strong, smaller businesses have seen a fall in sentiment as they continue to navigate higher costs, inflationary pressures and global uncertainty.”
Murphy added: “Overall confidence remains above its long-term average, and most businesses still expect activity to grow over the coming year, underlining the resilience of UK firms. Ensuring smaller firms can share in future growth will be crucial in the months ahead.”
Of those surveyed, 52% said they were optimistic in the wider economy, down 12 points from August, while those who felt pessimistic increased six points to 21%.
Economic optimism drives decline
Hann-Ju Ho, Senior Economist at Lloyds Commercial, said: “September’s fall in business confidence was driven primarily by a significant decline in economic optimism, with businesses responding to a combination of higher global energy prices and increased global uncertainty.”
Ho continued: “Trading outlook also fell, suggesting that firms are becoming more cautious about the outlook for demand and activity over the coming year. While price expectations edged higher, they remain below levels seen a year ago, indicating that businesses are continuing to balance rising costs against the need to remain competitive.”
The drivers behind the fall included rising cost pressures, general inflation in the economy and global uncertainty. The overall 12-point decline was comparable to the fall recorded earlier this year following the start of the Middle East conflict, with businesses responding to higher energy prices as a result of renewed tensions in the region.
The report signals that while the UK’s business landscape remains above its historical norm, the combination of energy costs, inflation and geopolitical instability is weighing on sentiment, particularly among smaller firms.
