British business confidence fell in March as high policy uncertainty weighed heavily on firms’ economic outlook.
The balance of firms reporting they were optimistic fell by 14 percentage points to reach 20 per cent ahead of the government's Brexit negotiations, according to a survey by Lloyds Bank.
However, overall sentiment is still above the longer-run average, despite being pushed down slightly to a balance of 35 per cent of firms saying they were confident.
More than half of firms thought their own prospects would improve over the coming year, with only three per cent thinking their business will see a decline. Firms in business confidence surveys are generally more optimistic about their own prospects than the wider economy.
This corroborates a separate survey carried out by the European Commission which found economic sentiment had increased slightly in the UK.
The perceived strength of firms’ own business caused hiring intentions to grow strongly. The balance of firms expecting to add staff rose by 13 percentage points to reach the highest level for almost two years.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Although our latest survey shows that overall business confidence fell in March, results are consistent with a continued robust pace of economic growth.”
Confidence in the past year has been heavily influenced by political events, with a spike in policy uncertainty in July after the Brexit vote led to the resignation of former Prime Minister David Cameron.
Economic sentiment reached a deep trough at the same time, but has since recovered to pre-referendum levels.
Ho said: “Firms’ responses may have been influenced by uncertainty in the run up to the government’s plans to activate Article 50 by the end-March deadline. Attention is now likely to turn to the start of negotiations of the exit terms and any prospective transitional arrangements”.
However, both policy certainty and economic sentiment remain at levels weaker than the longer-term averages.