Business confidence slumps in August
Business confidence dropped to a one-year low in August, while firms also voiced concerns over the economy in the latest research frim Lloyds Bank Commercial Banking.
With business confidence slumping 13 points to 17% in the month, economic optimism also fell by 12 points to 5% in the bank’s Business Barometer.
That leaves economic optimism at its lowest point since June 2016 and second lowest level since 2012, suggesting that uncertainty is having an impact on many small firms.
The number of firms reporting higher business confidence fell to just under two in five, while 21% said confidence was lower than in previous months.
It was a similar situation regarding economic optimism as those reporting lower optimism rose and those with greater optimism decreased.
The number of businesses reporting that their own prospects had improved between May and August also dropped by 14 points to 29%.
Sentiment among manufacturing and construction firms dropped to a three-month low of 10%, while confidence in the consumer services sector was at a 14-month low of 3%.
Despite the negativity noted across the sectors, the net balance of businesses saying they plan to improve their headcount remained positive, growing by two points to 27%.
Firms also reported that their profit margins are facing renewed pressures, as the net balance remained unchanged from three months previously.
Although a five point increase was noted in those reporting higher margins, it was offset by a five point increase in those saying their margins were lower.
This is key, as businesses across many parts of the UK – including the West Midlands and the North West – are facing an above average risk of insolvency according to data from insolvency and restructuring body R3.
Cash flow issues, late payment problems and accessing finance are all listed as reasons for this, which is why firms must act promptly at the first sign of any difficulty.
Not only does this increase the likelihood of successfully implementing a restructuring process or sourcing alternative finance, but it also means a business can protect its long-term prospects.
By Phil Smith