Member Article

North East business confidence falls in January but vaccine rollout brings hope for 2021

Lloyds Bank’s Business Barometer for January 2021 shows:

• Overall confidence of firms in the North East fell 7 points in the past month to -3%
• 50% of firms are confident the Covid-19 vaccination roll-out will boost trading prospects in 2021
• Optimism falls in seven of 11 UK regions and nations as firms deal with latest lockdown restrictions

Business confidence in the North East fell seven points during January to -3%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the North East reported lower confidence in their own business prospects month-on-month, down four points at 7%. When taken alongside their views of the economy, down nine points to -13%, this gives a headline confidence reading of -3%.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

More than half of firms (52%) said current Covid-19 restrictions had caused a fall in turnover but they expected the effects of the vaccine programme to boost trading prospects for 2021, with 50% saying the rollout had made them feel more confident about the year ahead. However, only 24% expect trading levels to return to pre-pandemic levels in the next twelve months.

When it comes to jobs, businesses in the North East are equally split on whether they will increase or reduce staff levels over the next year. A month ago, a net balance of 13% expected to reduce staff levels during the next 12 months.

Nationally, overall business confidence dipped in January as the third lockdown came into force, falling by three points to -7%. Firms’ economic optimism dropped dramatically month-on-month, decreasing by 34 points to -10%.

Almost all UK nations and regions saw a month-on-month dip in confidence during January, with the biggest falls reported in Scotland (-32% vs -9% in December), Wales (-20% vs -1% in December) and the South West (-8% vs 5% in December). However, firms reported a month-on-month increase in confidence in London (up five percentage points to 3%), the South East (up seven percentage points to -4%) and North West (up eight percentage points to -5%). Yorkshire business confidence remained steady month-on-month at -4%.

Steve Harris, regional director for the North East at Lloyds Bank Commercial Banking, said: “While business confidence across the North East has dipped back into negative territory, it’s encouraging to see that firms are feeling optimistic about the effect the vaccine roll-out will have on their trading prospects.

“Despite the new lockdown restrictions, there has been no real change to the number of businesses expecting to reduce staff levels, from last month. While the coming months will bring challenges for many firms, we continue to stand by the region’s businesses and will help them overcome any headwinds they face.”

In the industry sectors confidence remained above pre-vaccine levels. While some sectors reported declines, manufacturing slipped by nine points to 9%, services fell by four points to -9% and retail by five points to 6%. Confidence levels in the construction sector improved for a second month, rising four points to -1%.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “It has been a challenging start to the New Year for UK businesses adapting to a third national lockdown alongside the new EU trade arrangement taking effect. Nevertheless, while confidence remains below average, it is encouraging that business sentiment is still the second highest since the low of May 2020. Overall, the vaccine rollout programme has lifted confidence and that will hopefully buoy business optimism in the coming months.”

This was posted in Bdaily's Members' News section by Hamish Cruickshank .