Business confidence has been dragged to a four-year low amid rising concerns over economic uncertainty and a slowdown in demand following the EU referendum result.
In Yorkshire, firms across the region said economic uncertainty and weaker UK demand are the biggest threats to their fortunes, according to the latest Business in Britain report from Lloyds Bank.
The report’s confidence index - an average of respondents’ expected sales, orders and profits over the next six months – has declined by 19 points to 27 per cent in Yorkshire since the last survey in January.
The most commonly identified threat seen by companies in Yorkshire over the next six months was economic uncertainty, which was cited by more than a third (34 per cent) of firms, followed by weaker UK demand, which was mentioned by 23 per cent.
This compares with the last Business in Britain survey which saw weaker UK demand identified by more than a third (35 per cent) of Yorkshire businesses as the biggest threat.
Leigh Taylor, regional director for SME Banking in Yorkshire at Lloyds Bank Commercial Banking, said: “Business confidence in Yorkshire has taken a hit since January, but this should be viewed in the context of the recent economic and political shocks.
“The EU referendum vote has introduced a level of uncertainty for companies across Yorkshire as the UK decides on the best model for its future relationship with the EU and this is likely to continue for the foreseeable future.
“That said, Yorkshire businesses are still looking to increase trade with Europe, bucking the trend taking place in other UK regions.”
The net balance of Yorkshire exporters expecting an increase in total exports across the globe increased by 11 points to 39 per cent, reflecting the large increases in firms’ intentions to export to Europe, and both North and Latin America, compared with January’s report.
Exporters’ desire to continue selling to the US and Canada increased the sharpest (by 36 points) boosted by the fall in the value of sterling against the dollar.
The latest survey shows a marked divergence in confidence across the UK. While all English regions and Scotland have seen a large decline in confidence since the start of the year, Wales bucked the trend and reported an improvement.
The data also shows that confidence levels were below the national average in the south of England and Scotland, but above average in Wales, the Midlands and the North of England.
Lloyds said the differences in sentiment may have been partly driven by the reaction to the outcome of the EU referendum result, with confidence levels the lowest in London and Scotland, which voted for ‘Remain’.
Business confidence fell in every sector. The sectors that were the most badly hit were the service sectors which declined on average by 30 points including retail and wholesale, hospitality & leisure, and business & other services.
Sentiment also fell in construction, although the level remains relatively high.
Tim Hinton, managing director, mid markets and SME Banking at Lloyds Banking Group said: “Whilst sentiment has fallen to a four-year low, it remains well above the lows reached during the global financial crisis of 2008/9.”
Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, added: “All of the key metrics in the Business in Britain survey, including the outlook for demand, employment and investment, have weakened since January’s report. This indicates that economic growth is likely to slow in the next six months, following a relatively robust performance in the first half of the year.”