BUSINESS confidence in the North-East was the highest of all UK regions during July, rising 20 points to minus three per cent month-on-month, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the North-East reported higher confidence in their business prospects month-on-month at seven per cent.

It’s the first-time firms have expected business activity to increase in the year ahead since March. When taken alongside their views of the economy overall, this gives a headline confidence reading of minus three per cent.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

The majority of firms continued to see demand negatively affected by coronavirus during July, but with the picture improving month-on-month – 57 per cent experienced a fall in demand for their products and services, although this was down 13 points on the month before. Meanwhile, 11 per cent experienced an increase in demand, up three points on June.

With the Job Retention Scheme beginning to wind down from August, just over a quarter (27 per cent) of North-East firms surveyed said they weren’t currently using the scheme.

When asked about social distancing measures, half (49 per cent) said they could, in theory, operate at full capacity while remaining Covid-secure, although a fifth (21 per cent) said they couldn’t operate fully within the rules.

Of the 63 per cent of businesses reporting disruption to their supply chain during July, a fifth (29 per cent) expected the situation to improve within three months, while just three per cent expected it would take more than 12 months to return to normal levels.

Paul Varley, regional director for the North East at Lloyds Bank Commercial Banking, said: “Confidence is something that’s been largely absent from the region, and across the UK, since before the lockdown in March.

“The North-East was the only area of the UK where businesses expect trading activity to increase over the next 12 months, which is also encouraging to see. However, it’s clear that major challenges remain, with firms still facing weak demand and supply chain disruption.

“We’ll continue to stand by the side of local businesses as they navigate the road to recovery.”

At national level, UK business confidence increased eight points to -22 p[er cent during July. The North-East was the most confident region, followed by the West Midlands and the North West . Wales and Scotland were the least confident.

In July, the retail sector increased 11 points to -12 per cent, manufacturing increased 14 points to -21 per cent and services rose 10 points to -26 per cent. However, construction fell eight points to -22 per cent after last month’s strong increase of 30 percentage points.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “While the results suggest the economy is starting to see some improvement, economic confidence still remains in deep negative territory. The Government announcement of the slight easing of social distancing measures has now enabled over half of businesses to reach their capacity and resume their usual activities. However, how businesses will continue to respond to the Job Retention Scheme will be key in the coming months.”