Coronavirus: UK business confidence still near record low

·3 min read
UK, London, blurred motion of incidental business people walking to work with view of the financial district behind
UK business confidence levels rose three percentage points to -30% in June. Photo: Getty

UK business confidence still stands near record lows despite overall sentiment rising slightly in June.

In June, confidence levels rose three percentage points to -30%, according to the Lloyds Bank Commercial Banking Business Barometer.

This is the highest level since March and the first recorded increase since January but is still significantly lower than pre-coronavirus levels, sitting firmly in negative figures.

Economic optimism increased by nine points to -33%, according to the survey which looked at the views of 1,200 companies on their business prospects and optimism about the UK economy.

READ MORE: UK borrowing to hit record £275bn to tackle crisis

However, business prospects for the coming year dropped two points to -27%.

The easing of lockdown restrictions is boosting confidence as over three quarters (78%) of businesses expected to reopen by the end of June, with business owners welcoming the softening of social distancing rules ⁠— 23% of firms said they would not be able to operate at full capacity with two-metre social distancing measures in place.

UK business confidence Source: Lloyds Bank Business Barometer (June 2020), BVA BDRC
UK business confidence. Graph: Lloyds Bank Business Barometer (June 2020), BVA BDRC

Some 68% of firms said that the coronavirus pandemic had had a negative impact on their business, which remains unchanged from last month, with 63% still seeing disruption to their supply chain in June.

Firms’ confidence in their ability to hire new staff improved slightly by four percentage points to -25%, but only 16% of businesses anticipate increasing employment over the next year.

Meanwhile, 41% are expecting a reduction, while 37% think a pay freeze is coming.

In June, the construction sector came back strongly, rising 30 percentage points to -14%. The retail sector went up by two points to -23% and manufacturing saw an improvement at -35%. Although these were the highest levels seen since March, other services fell to -36% mainly due to the impact of the coronavirus pandemic on the hospitality and education sectors.

READ MORE: Mortgage approvals plummet to all-time low

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “While the results suggest the economy may be starting to see some improvement, trading conditions remain difficult for most firms as the majority are still experiencing disruption to supply chains.

“Hopefully the recent government announcement of further relaxation of restrictions and the slight easing of social distancing measures will enable more businesses to reach their capacity and resume their usual activities, which we would expect to be reflected in further improvements to optimism next month.”

On Tuesday, the UK prime minister will pledge to “build back better, build back greener, [and] build back faster” as he announces details of the government’s COVID-19 economic recovery plan.

Boris Johnson is set to outline plans to bring forward £5bn ($6.1bn) worth of capital investment projects, including £1.5bn to spend on hospitals, £1bn to build new schools, £900m for “shovel-ready” local projects, and £100m for roads.

More details of the prime minister’s ‘New Deal’ are likely to come next week when Chancellor Rishi Sunak delivers a full update on the health of the UK economy. A National Infrastructure Strategy will be published in the autumn.

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