East Midlands business confidence remains stable as investment intentions improve

A year of stability has encouraged businesses in the East Midlands to increase investment in the coming year, according to the latest Business in Britain report from Lloyds Bank.

Business confidence in the East Midlands – calculated as an average of respondents’ expected sales, orders and profits over the next six months – has remained the same as six months ago at 24 per cent.

However, the net balance of firms looking to grow investment in the next six months rose by 10 points to 10 per cent.

The region still faces challenges, with the share of firms that continue to report difficulties hiring skilled labour falling four points but remaining relatively high at 47 per cent.

Meanwhile, the number of firms expecting to increase wages increased by four points to 20 per cent, suggesting that companies are still taking a cautious approach to pay.

The Business in Britain report, now in its 26th year, gathers the views of more than 1,500 UK companies, predominantly small to medium sized businesses, and tracks a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

Mixed picture across the UK

Across the UK, business confidence was highest in the North East (38 per cent), followed by the North West (31 per cent). The East Midlands was the only region where business confidence remained the same (24 per cent), while the lowest level of confidence was in Yorkshire and the Humber (15 per cent), followed by Scotland (17 per cent).

Kelly Green, regional director for the East Midlands at Lloyds Bank Commercial Banking, said: “Although business confidence in the East Midlands has remained static, local firms have a lot to be positive about in the new year.

“In the next six months, firms in the region are looking to increase investment and continue hiring new staff, signalling that many are focusing on growth. But they will need to plan carefully to navigate any challenges that the year ahead might bring.”

 Risks ahead

Economic uncertainty is now the single greatest risk to firms in the East Midlands in the next six months, cited by 23 per cent of firms in the region, up from 12 per cent in July.

The proportion of firms reporting political uncertainty as their greatest risk increased to 13 per cent from 10 per cent.

Uncertainty around Brexit negotiations continue

The share of East Midlands firms that are confident about business interests being protected or promoted in Brexit negotiations fell to 53 per cent from 57 per cent previously, but remains higher than the share of businesses expressing a lack of confidence, which increased to 28 per cent from 21 per cent.

When asked about the impact of a ‘no trade’ agreement with the EU on their business, overall, 19 per cent of East Midlands firms said that ‘no deal’ would be positive and 42 per cent said that it would be negative.

Confidence begins to grow in sectors which rely on domestic demand

Nationally, business confidence was highest in manufacturing, while sectors more dependent on domestic demand, such as hospitality, leisure, and retail and wholesale also recorded gains.

The only sector that reported a significant fall was construction, in which confidence dropped from 31 per cent to 14 per cent.

Confidence Index      
Region Jan 2018 (%) July 2017 (%) Change (July – Jan)
North East 38 33 +5pts
North West 31 26 +5pts
West Midlands 28 22 +6pts
London 25 20 +5pts
East Midlands 24 24
South East 24 28 -4pts
Wales 20 34 -14pts
South West 19 27 -8pts
East of England 18 22 -4pts
Scotland 17 19 -2pts
Yorkshire & Humber 15 23 -8pts