According to a recent survey conducted by Lloyds Bank, British businesses have shown a decline in confidence for the first time in three months. Despite some

indications of resilience in the economy, firms are less optimistic about the overall economic outlook and their trading prospects. The Lloyds Bank Business Barometer fell to 28% in May, marking its first decline since February but still in line with the survey's long-term average.

Hann-Ju Ho, senior economist at Lloyds Bank, noted that while the UK has managed to avoid a contraction in GDP, indicating underlying resilience, the economic environment remains challenging. Stubborn inflation and increased wage pressures contribute to the ongoing difficulties.

The survey revealed a decrease in businesses' optimism about the wider economy, with the gauge dropping six points to 22%. Additionally, trading prospects for the next twelve months declined for the second consecutive month. Notably, other surveys, such as the S&P Global Purchasing Managers' Index, highlighted the rapid pace of price increases by services firms, which could further exacerbate inflationary pressures.

Over half of the companies surveyed by Lloyds expressed their intention to raise prices in the next twelve months. To combat high inflation, the Bank of England has raised interest rates twelve times since December 2021 and is expected to continue increasing the Bank Rate in the coming months.

While wage growth saw a marginal decrease, it remained elevated compared to pre-COVID levels. Nearly a third of businesses anticipate at least a 3% increase in pay. Other industry surveys have even reported larger pay increases, with the highest median pay settlement recorded since September 1991.

Lloyds Bank also noted a slight decrease in hiring intentions, with the gauge falling back to 24% in May from the ten-month high of 27% in April. Photo by Ozeye, Wikimedia commons.