Business confidence falls to a one-year low, according to study

Overall business confidence fell 13 points to a one-year low of 17 per cent and economic optimism fell by 12 points to five per cent, the lowest level since June 2016.

The share of firms reporting higher business confidence decreased by seven points to 38 per cent and those reporting lower confidence increased by six points to 21 per cent.

Economic optimism fell by 12 points from 17 per cent to five per cent, the lowest level since June 2016 and the second lowest level since 2012. The share of firms citing greater economic optimism fell by five points to 33 per cent, while the share reporting lower economic optimism rose by seven points from 21 per cent to 28 per cent.

The net balance of firms indicating an improvement in their own business prospects decreased by 14 points to 29 per cent in August. Forty-three percent reported stronger business prospects, down eight points from July, while those reporting weaker prospects rose by six points to 14 per cent.

Sentiment in the industrial sector, covering manufacturing and construction, fell to a three-month low of ten per cent. Consumer services confidence also dropped to a 14-month low of three per cent. In contrast, overall confidence in business and other services rose by five points to 29 per cent.

The net balance of firms expecting to raise their headcount over the coming year remained positive, increasing by two points to 27 per cent. The share of firms expecting to increase their headcount remained the same at 33 per cent, while six per cent expect to reduce staffing levels, down by two points from last month.

Profit margins remain under pressure, with the net balance unchanged at – eight per cent. The proportion of companies reporting higher margins compared with three months ago rose five points to 15 per cent, but this was offset by a five point rise in the share citing lower margins to 23 per cent.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, comments, ‘The August report shows that overall business confidence has fallen to the lowest level for 12 months, with sentiment weakest among consumer-facing firms. While confidence overall is now just under the long term average, firms’ hiring plans remain robust.’