Business confidence for the next six months is higher in Yorkshire than anywhere else in the UK, according to a report by Lloyds Bank.
The region’s businesses remain confident despite rising fears that falling UK and global demand will be the biggest threats to fortunes in 2016.
The latest Business in Britain report from Lloyds Bank saw Yorkshire overtake the South East.
Since the last report in July 2015, business confidence in Yorkshire, an average of respondents’ expected sales, orders and profits over the next six months, has remained unchanged, staying at 46 per cent.
The South East saw a huge 18 point drop from 52 per cent in July to 34 per cent in January 2016.
Gloucester, Oxford, South Midlands rated second behind Yorkshire, gaining two points from July to register 45 per cent on the confidence index.
Eight of the 11 regions saw a decline in confidence, with just two registering an uptick.
Despite the rise in confidence more than a third of firms, 35 per cent, in Yorkshire identified weaker UK demand as the main threat to their business over the next six months – a rise from 29 per cent in July.
This was followed by a rise in the proportion of businesses that cited weaker overseas demand as the biggest threat to their business – a rise from 13 to 15 per cent.
Leigh Taylor, area director, SME banking in Yorkshire, at Lloyds, said: “Business confidence has remained unchanged as companies in Yorkshire see slowing demand as a big threat to their business in 2016, both at home and abroad.
“Global economic conditions are causing concern in the short term, with Sterling’s strength against the Euro causing issues for exporters.
“That said, the confidence level remains close to recent highs, especially on the back of three years of economic growth.”
Historical data balances shows that there has been a bounce in business confidence over the past three years.
In January 2012 the overall confidence balance registered at eight per cent, but a series of jumps saw it hit 53 per cent half way through 2014.
Since then confidence has slowed. The index registered a 10 point drop in January 2015 to 43 per cent. There was no change in July last year but the latest survey has seen a five point drop to 38 per cent.
“Businesses have good reasons to remain confident as the long-term health of the UK continues to improve,” said Mr Taylor.
The net balance of exporters expecting an increase in total exports across the globe fell by 20 points to 28 per cent, reflected by relatively large decreases in firms’ intentions to export to Europe, US and Canada.
Exporters stated that they were more concerned about the negative impact of the strength of the pound against the Euro than the US dollar.
More than two fifths of firms, 41 per cent, in Yorkshire said that the value of the pound against the Euro was having a negative impact on their exports, while 17 per cent said the same for the value of the pound against the dollar.
Only three per cent of Yorkshire firms expect to increase exports to the US and Canada, a drop of 20 points on the July report.
However there has been an increase in confidence in the Middle East, with the region up 11 points to seven per cent.
Mr Taylor warned that businesses should be prepared for further economic changes on the horizon.
He said: “Businesses in Yorkshire should continue to be prepared for interest rate rises and currency fluctuations, with the recent decision by the US Federal Reserve a reminder that this benign environment is not here to stay.”
Retail and wholesale buck the trend and remain confident
Every sector saw a fall in business confidence for the next six months with the exception of retail and wholesale.
The biggest decline was in the manufacturing sector where confidence dropped 14 points to 37 per cent – its lowest level since mid-2013, reflecting the expected difficulties for exporters.
While the retail and wholesale sector saw an increase of four points from 43 per cent to 47 per cent.
The construction industry saw a six point drop to 44 per cent though this is still better than a year ago when it was 42 per cent.
Similarly transport and communciation saw a six point drop from 38 per cent last July to 32 per cent. In January 2015 sector confidence was at 47 per cent.