LONDON (Reuters) – British business confidence fell this month to its lowest since March 2021 as companies worried about inflation, while pay pressures also increased, according to a survey on Friday.
Lloyds Bank said its monthly business barometer fell in July to 25% from 28% in June, which was the series’ long-run average.
A joint record 58% of companies expected to raise prices in the coming year, the survey showed – something that is likely to catch the eye of Bank of England officials who are deciding how much to raise interest rates on Aug. 4.
The survey reinforced the mix of slowing growth but rampant price pressures in Britain’s economy, which economists increasingly believe will cause the BoE to raise borrowing costs next week by 50 basis points rather than 25.
“Business confidence declined this month, suggesting that economic headwinds are becoming more forceful,” said Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking.
“Meanwhile, price pressures have shown no clear signs of a downward trend and there appears little sign yet that wage pressures are abating,” he added.
While business confidence is weaker, it has not fallen by anything like the same amount as consumer sentiment, which July’s GfK survey showed was the joint lowest since records began in 1974.
The survey showed 17% of companies expected average pay growth of 4% or more in the year ahead, the highest figure since the series started in 2018.
Two-thirds of the companies surveyed said inflation – which hit a 40-year high of 9.4% in June – was hurting them.
Lloyds said confidence in the manufacturing sector was hit hardest in July. The survey of around 1,200 businesses took place during the first half of July.
(Reporting by Andy Bruce; editing by David Milliken)
