Lloyds Bank’s headline confidence index has dipped to 43 from 53 in July, according to figures released today. This was mostly driven by a fall in firms’ expectations of orders and profits over the next six months.
Lloyds Bank notes that the index is still above its long-term average of 30 and that July marked a record high.
“Although business confidence has slipped a little since June 2014, it is important to remember that the UK recovery remains on track,” said Tim Hinton from Lloyds Bank.
The outlook for orders has worsened, with 54 per cent of businesses expecting orders to improve during the first half of the year and eight per cent anticipating a decline. The resulting 46 per cent overall net balance represents a 10 point decrease from July.
Firms are less confident about future sales with 56 per cent of businesses expecting sales will climb in the next six months, while a ten per cent expect a drop, leading to a 46 per cent overall balance, a 12 point decrease from the middle of the year.
The growing pessimism over sales and orders has taken its toll on expectations for profits. After rising for five consecutive surveys, the net balance of firms expecting profits to rise dropped by 10 points from July to 36 per cent.
A part of the confidence dip is due to a weaker export market.
The net balance of firms expecting an increase in exports over the next six months fell by 10 points to 41 per cent. A large part of the decrease was due to firms’ expectations about Eurozone exports. The net balance of companies that expect to increase their exports to Europe declined by 15 points to 22 per cent.
Despite weaker confidence, hiring intentions remain relatively robust. The net balance of firms planning to recruit further over the next six months fell two points from July to 20 per cent.