This month, business confidence has dropped to a three-month low, according to the latest findings from the Lloyds Banking Group business barometer.

The survey, conducted between September 2 and 16, highlighted a decline of 3 percentage points, bringing overall confidence down to 47 percent.

This recent downturn follows a period of optimism, where confidence had peaked at 50 percent—marking the highest level since November 2015—in both July and August.

In parallel, economic optimism also fell, reaching 38 percent, the lowest since March.

Hann-Ju Ho, a senior economist at Lloyds Bank Commercial Banking, remarked, “The mixed signals regarding economic optimism suggest that some businesses are proceeding with caution. While we anticipate economic growth, it might occur at a slower pace than in the first half of 2024.”

Factors contributing to the decline in confidence include negative messaging from the Labour party regarding public finances and uncertainty surrounding anticipated reforms in workers’ rights.

Nonetheless, many companies maintain a positive outlook towards their individual businesses. The survey indicated that business owners’ confidence in their trading prospects increased by 2 percentage points to 56 percent, matching the high for the year. Additionally, 63 percent of respondents expected stronger output, up one percentage point from the previous month.

Positive hiring intentions persist, with 53 percent of respondents planning to increase staffing levels over the next year, a figure consistent with last month.

“Despite the decline in overall confidence, it is important to note that this drop occurred from an eight-year peak, and businesses remain optimistic about their trading outlook,” Ho emphasized.

He added, “The joint-highest result this year suggests that respondents still foresee a hopeful trajectory for their companies, which is evident in the stable employment figures.”

A notable portion of businesses also expressed intentions to raise prices next year, with this figure increasing by 11 percentage points to 65 percent, largely reflecting small businesses’ efforts to protect profit margins.

Output forecasts varied across different sectors; while the manufacturing and construction sectors experienced declines, there was a slight increase in retail and a more significant rise in the dominant services sector.

Paul Gordon, managing director for relationship management at Lloyds Bank Business and Commercial, stated, “These findings indicate that businesses are navigating through a challenging phase, yet it is crucial to acknowledge that the underlying metrics remain robust.”

“We continue to observe strong confidence levels in key sectors and regions, while firms exhibit greater self-assurance, as indicated by this year’s joint-highest trading prospects results.”