UK business confidence drops to 15-month low as inflation surges

UK business confidence tumbled to the lowest level since 2021's coronavirus lockdown as the impact of the cost-of-living crisis began to filter through to companies.

Lloyds Banking Group's gauge of confidence fell 10 points to 28 per cent in June, a 15-month low, the bank said on Thursday (Jun 30). Firms also reported they have moderated their own hiring intentions.

Companies had been proving more resilient to than households to the fastest inflation rate in 4 decades, with business sentiment holding up even this year even as consumer pessimism reached a record.

The decline in the Lloyds survey suggests that is starting to change. While the headline reading remains close to its long-term average, the report showed businesses are feeling more gloomy about the outlook for their trading prospects.

"Firms remain broadly positive but face several challenges ahead, including concerns around higher costs and slowing demand," said Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking. "If these trends continue, businesses may have less scope to pass on higher costs to support their margins." BLOOMBERG