Business confidence dropped to a three-month low in September, in yet another sign that firms are beginning to adapt to the sombre mood musing coming out of government ahead of the Budget.
Confidence fell by three points to 47 per cent, its lowest for three months, but the fall was down from an eight-year high and remained well above the long-term average of 29 per cent.
The dip followed a period of sustained positivity for businesses as sentiment reached 50 per cent in July and August 2024 – the highest since November 2015 – as firms looked forward to a period of political stability and improved EU trading relations under the new Labour government.
A decline in economic optimism drove the fall, according to the data from Lloyds Bank’s Business Barometer. While 57 per cent of businesses felt confident about the economy, 19 per cent were less positive; a nine-point swing towards negativity.
Despite this, firms felt more optimistic about their own trading prospects, which increased by two points to 56 per cent in September.
Haan-Ju Ho, senior economist at Lloyds Bank, said: “Although overall confidence fell this month, that fall was from an eight-year high, and businesses remain positive about their own trading prospects.
The joint-highest result this year could suggest that respondents still see a positive future for their own companies, which is also reflected in the largely unchanged employment figures.
“The more mixed picture of economic optimism points to some businesses maintaining a degree of caution. While we still expect economic expansion, it may occur at a slower rate than in the first half of 2024.”
The dip in optimism comes off the back of several consumer confidence readings showing that shoppers were feeling more pessimistic about the future. Many attributed it to the government’s dour tone since Rachel Reeves announced the £22bn fiscal backhole at August’s spending audit and Keir Starmer warned of a “painful” budget this October.