London businesses sweat over UK recession risk as experts warn on cost of living pressures
Uncertainty over whether the UK economy will tip into recession this year has led London businesses to sweat over their finances this year, a closely watched survey out today reveals.
Optimism among the capital’s companies slid 19 points in February to 18 per cent, arresting a steady upward rise in confidence, according to Lloyds Bank’s business barometer.
Concerns about whether the wider UK can withstand a much-tipped spending slowdown from households and businesses sparked by inflation eating into their finances pushed confidence lower.
London firms’ confidence in the UK economy slid 34 points this year to minus one per cent, while optimism in their own business prospects dropped four points to 37 per cent.
February’s slide has brought the capital’s businesses’ confidence levels broadly in line with the countrywide average, which edged one point lower to 21 per cent.
Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “Despite the dip in confidence, London firms have optimism in their own business prospects, something that will help shape their growth plans for the year ahead.”
A recent batch of better-than-expected data has raised hopes that the UK may avoid a much-warned recession this year, helping to gradually lift business confidence over the past few months.
“Business confidence has lost a little momentum this month, following the strong gains seen recently,” Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said.
“While inflation appears to be tapering, pressures on consumers will need to ease further to help make it a more stable environment for businesses to operate.”
Numbers from the ONS earlier this month revealed GDP narrowly avoided a technical slump at the end of last year, while inflation fell for the straight month to 10.1 per cent in January, a bigger than projected drop.
Analytics firm GfK last Friday revealed consumer confidence leapt seven points to minus 38 this month, smashing experts’ forecasts.
Signs of underlying resilience in the economy are encouraging companies to keep hiring, signalling unemployment is unlikely to rise sharply over the coming year.
“The overall hiring intentions of companies improved for the third month in row, with 43 per cent (up three points) anticipating an increase in their workforce. An unchanged 23 per cent plan to reduce headcount, leaving the net balance up three points at 20 per cent,” Lloyds said of the UK-wide business barometer.