BUSINESS confidence in the North East fell 18 points during January to 40%, the biggest drop of any UK region.

The latest Business Barometer from Lloyds Bank Commercial Banking found that companies in the North East reported lower confidence in their own business prospects month-on-month, down 16 points at 38%.  When taken alongside their optimism in the economy, down 19 points to 44%, this gives a headline confidence reading of 40%. 

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

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A net balance of 44% of businesses in the region expect to increase staff levels over the next year, down 10 points on last month but still the highest in the UK.

Overall UK business confidence remained steady in January, dropping just one point from December’s reading of 40% to 39%. Firms remained positive about their future trading prospects, despite a two-point dip month-on-month to 41%, and were optimistic about the economy overall, reporting a reading of 38%, up one point on December’s result. The net balance of businesses planning to create new jobs in the next twelve months decreased marginally by four points to 29%.

Every UK nation and region maintained a positive overall confidence reading in January, with four reporting a higher reading than last month. Yorkshire and the Humber (up 13 points to 48%), Scotland (up 13 points to 37%), the West Midlands (up nine points to 39%) and the South West (up eight points to 37%) all had stronger confidence readings month-on-month, with Yorkshire and the Humber now the most optimistic region.

Steve Harris, regional director for the North East at Lloyds Bank Commercial Banking, said: “The rise of the Omicron variant at the end of last year was a setback for many firms across the region, particularly those in the hospitality and leisure industry who had hoped for a busier Christmas trading period.

“And while there are still fierce headwinds, not least with rising prices, the end of Plan B restrictions will go some way to helping businesses feel optimistic about what the year ahead could bring.

“We’ll continue to support the region’s recovery and help firms unlock their ambitions, be it to grow their products and services, create new jobs or expand into new markets.”

Industry sector performance was mixed during January with confidence among manufacturers increasing by three points to 43%, reaching its highest level for three months due to an easing of supply chain pressures.

Retail confidence also rose (up by one point to 44%) while confidence among firms in the IT/communications sector remains particularly strong at 72%.

The impact of Omicron over the festive period meant the service sector extended its recent run of modest decreases in January, dropping one point to 38%.

Positively, hospitality has recovered some of December’s decline, rising from 6% to 38%.

Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “January’s survey shows a continued resilience with minimal fluctuation as economic optimism remains at a historically strong level.

“A larger decline in confidence was potentially prevented by the reduction in Covid infection rates from early January.

“However, businesses remain cautious about the pandemic and are facing into challenges from rising cost pressures although many are raising their prices in response.“

 

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