Business confidence in Yorkshire falls in January

This is the first back-to-back increase since September 2021, bringing business confidence to a six-month high and moving closer to the long-term average of 28 per cent.

Confidence increased across half of the UK’s regions and nations, with the biggest increase seen in London. Other regions saw strong growth, including the North West, North East and Wales as well as in Northern Ireland.

But confidence in Yorkshire fell 10 points to 12 per cent. East Midlands, South West and South East also saw a drop in confidence.

The overall increase in UK business confidence was driven by a more optimistic assessment of the wider economy, with 47 per cent (up four points) of firms expressing greater optimism and 30 per cent (down five points) being more pessimistic.

Firms’ predictions of their own trading prospects also saw a gain with 46 per cent expecting stronger trading. However, 19 per cent anticipated weaker business activity, leaving the net balance unchanged at 27 per cent.

The overall hiring intentions of companies slightly improved and wage expectations eased in the first month of 2023. In addition, a smaller proportion (six per cent, down two points) of firms anticipate making wage increases of five per cent or greater in the year ahead.

Rising costs fell for the first time in five months, with firms’ expectations for prices of their own goods or services down three points to 55 per cent from the record high of 58 per cent in December 2022.

Overall, 61 per cent of businesses (down from 62 per cent) expect to charge more for their goods or services next year, while six per cent (up from four per cent) plan to lower prices. As a result, the net balance declined by three points.

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “Business confidence continues to improve following the December boost. Firms are clearly more optimistic about the wider economy and this is driving the increase, helped by precursory signs that wage and other cost pressures may be easing.

“It is still a tough environment for businesses, with high energy bills remaining a concern during the winter months, but there are grounds for optimism for 2023 if inflation starts to trend lower.”

For the second month in a row, confidence in the manufacturing and service sectors increased. Business confidence in construction dipped, while retail confidence fell for the second month in a row, the lowest level since February 2021.

Paul Gordon, managing director for relationship management at Lloyds Bank Business & Commercial Banking, said: “After a challenging 2022, it’s heartening to see confidence rising for the second consecutive month.

"This is the first back-to-back increase since September 2021. There is no doubt that the business environment remains challenging and uncertainty still remains, but this improvement in optimism is very welcome as we start 2023.

“With pay expectations tempering, trade expectations set to improve, and a clearer way forward on energy price support, this may give businesses a bit more certainty and the confidence they need to inspire investment and promote growth.”