Business Planning

Business confidence at odds with service sector growth data

Praseeda Nair | 19 September 2016 | 8 years ago

business_confidence
The number of businesses that expect to see sales, orders and profits rise over the next two quarters has fallen to 12 per cent
Increasing political and economic uncertainty in the UK following the EU referendum has led to a four-year low in business confidence, according to the latest figures in the Lloyds? Bank Business in Britain report.

The report’s confidence index built from an opinion survey of 1, 500 small to medium-sized firms across the country showed that while confidence was down in all areas, the UK service industry held the bleakest outlook on economic prospects. The sector showed an average decline of 30 points across the areas of hospitality, leisure, retail and wholesale.

According to the index, the drop in confidence was primarily a result of economic uncertainty and a weaker demand in UK products and services following a summer of upheaval in the British political system.

The number of businesses that expected to see sales, orders and profits rise over the next two quarters fell to 12 per cent down 26 per cent from January.

In a statement, Tim Hinton, managing director of mid markets and SME banking at Lloyds? Bank, said that until the UK’s new deal with the EU is made clear, confidence amongst businesses will remain low.

“The EUreferendum vote has introduced a level of uncertainty for companies as the UK decides on the best model for its future relationship with the EU and this is likely to continuefor the foreseeable future, he said.

Jon Pulford, regional director of SME Banking for the East Midlands at Lloyds? Bank Commercial Banking, continued to emphasise the Brexit effect, stressing that low confidence levels should be viewed in the context of the recent economic and political shocks, notably the EU referendum vote.

“Despite this, exporting confidence remains high with more regional firms looking to expand into new markets, particularly in Latin American and Africa to drive growth, Pulford added.

The Business in Britain data arrives after recent figures from the HIS Markit and CIPS PMI indicated a ‘shaking off? of the initial effects of the Brexit vote.

Figures showed that in August, in spite of low confidence levels, the UK service sector saw the largest month-on-month gain since the survey began 20 years ago, as job creation and business activity continued after a record drop in July.

Commenting on the recovery of activity, senior sales trader at Foenix Partners, Alex Lydall, said: The service sector is such a crucial part of the UK economy [?] with markets appearing to be dealing effectively in the immediate aftermath of the Brexit, the short-term sterling outlook could perhaps not be a bleak as many traders? anticipated.

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