A recent survey by Lloyds Bank showed a slight decline in UK business confidence during July and August after reaching an eight-year peak. Lloyds’ Business Barometer, which measures the balance between positive and negative business outlook, fell 3 percentage points to +47%, a three-month low. The decline comes amid growing concerns about the future of the macroeconomic future, which has reached a six-month high.
Despite the decline, companies are reportedly more optimistic about their prospects than the broader economy. Commenting on the results, Lloyd’s economist Han-Ju Ho said: “The more mixed picture for economic optimism points to some companies exercising caution. While we still expect economic expansion, it will be weaker than the first half.” “It may be slow in 2024.”
The timing of the survey matches expectations from official gross domestic product (GDP) data, which shows the British economy growing by 0.6% in the second quarter of 2024. This would confirm a stronger than expected performance for the first half. This year when the country recovered from the shallow recession.
On the other hand, the Bank of England recently cut its growth expectations for the third quarter to 0.3%, bringing it in line with Britain’s long-term growth rate. The revised forecast comes amid a stronger-than-expected slowdown in growth for September, indicated by an S&P Global survey of purchasing managers released last week. The survey revealed that some companies are postponing investment and hiring plans pending clarity on the new Labor government’s proposals regarding taxes and employment laws.
The Labor Party has indicated that the tax rise ahead of the July election could be much higher than initially planned. Additionally, they intend to introduce legislation that would increase employment protections for workers with less than two years of service.
In line with these economic uncertainties, the Lloyd’s survey showed a slight decline in the employment balance, falling 1 point to +36% in September. The survey, which ran from 2 to 16 September, collected responses from 1,200 UK companies with annual sales of more than £250,000. At the time of research the exchange rate was $1 to £0.7478.
Reuters contributed to this article.
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