Business confidence in London fell 18 points during December to 38%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the capital reported lower confidence in their own business prospects month-on-month, down 13 points at 47%. When taken alongside their optimism in the economy, down 25 points to 28%, this gives a headline confidence reading of 38%.
London businesses identified their top target areas for growth in the next six months as investing in their team (47%), evolving their offer (35%) and introducing new technology (33%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 24% of businesses in London expect to increase staff levels over the next year, down 22 points on last month.
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Overall UK business confidence fell two points in December to 35%, the first decrease since August, driven largely by firms’ outlook on the overall UK economy which dipped by eleven points from 38% to 27%. Businesses’ optimism in their own trading prospects also decreased, but less markedly so – by five points to 43%.
Companies’ hiring intentions also dropped slightly with 29% of firms intending to increase staff levels over the next 12 months, down six points month-on-month.
Firms in West and East Midlands were the only regions to report an increase in confidence, up one point to 33% and up five points to 34% respectively. The North East was most confident, remaining at 48% for the second consecutive month, followed by the East of England (45%), London (38%) and the South West (36%).
Firms in the services industry reported a significant decrease in confidence, down 16 points to 30%, due to moderation in both trading prospects and economic optimism. Manufacturing confidence also eased back (38%, down seven points). However, retail and construction both bucked the trend with rises to 44% (up two points) and 37% (up two points) respectively.
Paul Evans, regional director for London at Lloyds Bank Commercial Banking, said: “The sharp drop in confidence will likely come as a concern to many given how important a month December is for trading. However, confidence still remains above the national average, presenting a strong platform to build from in 2024.
“It’s possible that last month’s Autumn Statement didn’t deliver the boost to confidence that the city had hoped for, or that high prices have kept a lid on Christmas retail and leisure spending. But what we do know is that firms in London are resilient and we’ll be by their side to capitalise on the fresh opportunities for growth the New Year will bring.”
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said, “This December data was collected following several key announcements, including energy prices rises and the UK economic outlook being revised down in the Autumn Statement. All of this will undoubtedly have had an impact on business confidence as we head into 2024.
“Businesses are also balancing cost pressures with a challenging labour market that will see increases to minimum wage in April 2024, as perhaps indicated in the wage growth figures, at a time when they are managing staff retention and recruitment decisions.
“However, over the course of the year confidence has steadily increased from an average confidence of 25% in the first three-months of 2023 and ending the year with a three month average of 39% – an indication of the positive trajectory business has seen this year. This provides a healthier position to begin 2024 with, compared to 2023.”
