British Business Confidence Eases Amid Economic Concerns

By David Milliken

LONDON (Reuters) – British business confidence declined slightly this month after reaching an eight-year high in July and August. Concerns about the broader economic outlook rose to a six-month high, according to a survey from Lloyds Bank released on Monday.

The overall business barometer from Lloyds, indicating the difference between positive and negative sentiment among firms, fell by 3 percentage points to a three-month low of +47%. Businesses maintained a more optimistic view about their own prospects compared to the wider economy.

Lloyds economist Hann-Ju Ho noted, "The more mixed picture for 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 the first half of 2024."

Upcoming official gross domestic product (GDP) data, scheduled for release at 0600 GMT, is expected to confirm that Britain's economy grew by 0.6% in the second quarter of 2024, concluding a stronger-than-expected first half as the country recovers from a shallow recession.

Earlier this month, however, the Bank of England reduced its growth forecast for the third quarter, predicting a quarterly expansion of 0.3%, around the UK's long-term growth rate.

An S&P Global survey of purchasing managers indicated a larger-than-anticipated slowdown in growth for September, although the index continued to be above levels observed in the euro zone.

S&P reported that certain businesses are postponing investment and hiring plans pending clarity on the new Labour government's tax policy and changes to employment law.

The Labour party has mentioned that taxes might need to increase beyond prior plans established before July's election, and it is set to propose legislation aimed at enhancing employment protection for staff with less than two years of service.

The employment balance in the Lloyds survey fell by 1 point to +36% in September. The survey incorporated feedback from 1,200 British companies with annual sales exceeding 250,000 pounds ($334,325), conducted between September 2 and September 16.

($1 = 0.7478 pounds)