'˜Confidence falls sharply and uncertainty is biggest threat'

The report said that business confidence has fallen by 15 per cent in Yorkshire, the worst performance in the UK apart from the West Midlands, where confidence fell 16 per cent. In sharp contrast Scottish confidence rose 15 per cent, in the South West it rose 13 per cent and in the South East it was up five per cent. The report’s Yorkshire confidence index - an average of respondents’ expected sales, orders and profits over the next six months – fell to 17 per cent in January 17, down from 32 per cent in September 2016. The most commonly identified threat to Yorkshire firms over the next six months was economic uncertainty (29 per cent), followed by weaker UK demand (18 per cent) as firms wait for further details of Britain’s EU exit.

Firms also cited political uncertainty (nine per cent), weaker overseas demand (six per cent), input costs (6 per cent), access to skills (six per cent) and regulation (six per cent) amongst the biggest threats to their business.

Leigh Taylor, regional director for SME Banking in Yorkshire, Lloyds Banking Group, said: “Business confidence in Yorkshire has dropped significantly since September, a sign that we are entering 2017 with an uncertain business outlook.

“Firms are worried about economic uncertainty and falling demand, which we may see addressed in the coming months as the UK’s exit from the EU becomes clearer.”

The net balance of Yorkshire firms anticipating stronger export sales in the next six months decreased to 34 per cent from 41 per cent in September. Despite the downturn, firms anticipate stronger exports to Asia Pacific and the Middle East.

However they expect weaker exports to the US, Latin America, Africa and Europe. Yorkshire firms said the current exchange rate is favourable for export sales as the pound is at its weakest since its last big depreciation in 2009 during the global financial crisis.

The weaker pound also contributed to the national trend in firms’ pricing intentions, with most planning to increase prices. However, in Yorkshire the net balance of firms expecting to increase their prices in the coming six months fell to 15 per cent from 20 per cent. One bright spot was that the region’s firms expect to raise staffing levels over the next six months. A net balance of five per cent plan to recruit new staff, down from 6 per cent in September.

The number of firms saying they are experiencing difficulties in recruiting skilled labour fell to 30 per cent from 36 per cent.

“Businesses are planning to export to new territories as they widen their targets in the first half of next year,” said Mr Taylor.

“While figures are down on September, it is positive that firms are still planning to take on new staff.

“While this year may present more challenges for businesses, including understanding the impact that leaving the EU will have, Yorkshire business owners are resilient and continuing to do what they do best – getting on with growing their businesses.”

The Business in Britain report from Lloyds Bank, now in its 25th year, gathers the views of more than 1,500 UK companies, predominantly small to medium-sized businesses.

The report tracks the overall “balance” of opinion on a range of important performance and confidence measures.