Business in Britain - A survey of opinions and trends


Welcome to the latest half-yearly Lloyds Bank Business in Britain survey, which has been offering insights on the recent performance and expectations of domestic businesses, especially small and medium-sized companies, for over two decades. Our survey is based on the responses of 1,500 firms, drawn from all industries and all parts of the country.

Clearly, the big event of the year so far has been the Referendum in June, in which the British people voted to leave the EU. While exit negotiations have not yet formally started, the vote has introduced some uncertainty for companies. The key message from the latest survey is that business confidence has declined since the start of the year.

 It seems clear from the survey that economic growth is likely to slow, following a relatively robust performance before the vote. All of the key metrics in our survey, including the outlook for demand, employment and investment, have weakened. This was the case in all sectors and in the majority of regions. 

Nevertheless, it is important to put this into context. While sentiment has fallen to a four-year low, it remains well above the lows reached during the global financial crisis of 2008/9, and the banking sector today is in a significantly stronger Capital position than in 2009.

We look forward to supporting you and your strategic plans and wish you every success in the remainder of 2016 and beyond.

Executive Summary 

 Business confidence – a metric based on firms’ outlook for their sales, orders and profits in the next six months – fell to 12%, the lowest level for four years. The fall takes it back to during the height of the European sovereign debt crisis, but it remains well above the low reached during the 2008/9 global financial crisis. 

The latest survey results signal the potential for a slowdown, but not necessarily a sharp contraction, in economic growth. 

The survey was conducted in the middle of July, ahead of the Bank of England’s announcement of policy stimulus, although a reduction in interest rates was anticipated by the majority of survey respondents. 

Export prospects have weakened, particularly with Europe and Asia. The majority of companies indicated that the pound’s current value against the US dollar is favourable, while views on the euro exchange rate were evenly balanced. 

Prospects for hiring and capital spending have cooled. The fall to marginal negative territory in the net balance of firms expecting to increase their staff numbers could signal a slowdown in employment growth, while increased economic uncertainty is expected to weigh on investment. 

The proportion of firms reporting difficulties in recruiting skilled labour has fallen to a two-year low of 38%, consistent with a decline in the share expecting average pay to rise in the coming six months. The outlook for profits and general prices has also eased. 

The fall in business confidence was replicated across all sectors, particularly in the service sectors such as retail & wholesale, hospitality & leisure and business & other services. Sentiment also fell in manufacturing, despite sterling’s depreciation, which may reflect general sluggishness in domestic and global demand conditions. 

The regional picture was varied and may have been affected by the outcome of the EU referendum. Confidence levels were lowest in London and Scotland, which voted for ‘Remain’. Sentiment levels were highest in Wales and Yorkshire.

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