Companies in the region have reported the UK’s highest levels of confidence in their own business prospects.

When taken alongside their optimism in the economy, up 18 points to 63%, this gives a headline confidence reading of 58%, according to the latest Business Barometer from Lloyds Bank Commercial Banking, which questions 1,200 businesses monthly.

A net balance of 54% of businesses in the region expect to increase staff levels over the next year, up 18 points on last month.

Overall UK business confidence was unchanged from November’s reading at 40%. While confidence remained above the long-term average (28%), during the second week of sampling when the Omicron variant emerged, confidence fell to 32%.

Despite potential challenges from the new Covid-19 variant on the horizon, firms remained positive about their future trading prospects, up four points month-on-month to 43%. The net balance of businesses planning to create new jobs also increased by three points to 33%. Optimism in the economy overall remained positive at 38%, down just three points on November’s result.

Every UK nation and region maintained a positive overall confidence reading in the December barometer, with four reporting a higher reading than last month. Alongside the North East, the North West (up 14 points to 48%), Yorkshire and Humber (up four points to 35%) and East of England (up 12 points to 50%) all had stronger confidence readings month-on-month, with the North East and London (57%) the most optimistic overall.

Steve Harris, regional director for the North East at Lloyds Bank Commercial Banking, said: “Despite challenging conditions, business optimism in the North East has been consistently strong this year and remained positive at the time the survey was conducted.

“Yet with clear challenges on the horizon, not least the rise of the Omicron variant, business leaders are looking ahead with caution, particularly those in the hospitality and leisure industries who are again grappling with tighter restrictions.

“We’ll continue to back North East businesses and will be by their side as they respond to the ongoing challenges of the pandemic.”

In the industry sectors, construction recovered to 39% from November’s seven-month low of 28%, following a minor easing in supply-chain disruptions. Despite a slight fall in confidence in manufacturing to 40%, trading prospects in the sector have remained higher than the whole economy throughout this year.

There were also small declines for retail (43%) and services (39%) ahead of the festive period. There have been some marked differences in these sectors in recent months, with notable strengths in the professional services sector (including finance) and in IT/communications. However, the current three-month average sentiment among hospitality firms is at its lowest level (24%) since the first quarter of the year (4%). This has been fuelled by a significant monthly drop of 48 points to 6% between November and December.

Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “It is a challenging end to 2021 as businesses are now having to adapt to the new Omicron variant and resultant restrictions across the UK. Business confidence remains resilient and above the long-term average due to a rise in trading prospects, while pay and price expectations continue to be elevated.”

 

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