South East: Confidence plummets as customer demand weakens

Business confidence in the South East fell 11 points during September to minus 10%, meaning the region returned to an overall pessimistic outlook, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the South East reported lower confidence in their own business prospects month-on-month at -8%. When taken alongside their views of the economy overall, this gives a headline confidence reading of -10%.

The drop comes after the South East became the first region in the UK to return to a net positive outlook during August, when overall confidence registered at 1%.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

When asked about the impact COVID-19 was having on their business, the majority of firms continued to see demand negatively affected by coronavirus during September, with the picture worsening month-on-month. 64% experienced a fall in demand for their products and services, up six points on the month before. Meanwhile, only 12% experienced an increase in demand, down 5 points on August.

September’s data suggests many businesses expect to make redundancies following the end of the furlough scheme next month. When asked about job retention among firms with furloughed staff, just 18% expect to bring back more than 90% of their employees.

42% of South East firms surveyed said they aren’t currently using the Job Retention Scheme.

When asked about the impact of social distancing measures, 65% of businesses said they could, in theory, operate at full capacity while remaining COVID-secure, although 28% said they couldn’t operate fully within the rules.

Of the 55% of businesses reporting disruption to their supply chain during September, 40% expect the situation to improve within six months, while 8% expect it will take more than 12 months to return to normal levels.

Phil Kirk, regional director for the South East at Lloyds Bank Commercial Banking, said: “The end of special measures like Eat Out to Help Out and the imminent closure of the furlough scheme will have weighed on the outlook for South East firms this month.

“Looking ahead, the introduction of tighter restrictions could further affect demand dynamics and dampen trading prospects over the next six months – especially for late night bars, hospitality businesses reliant on office worker footfall, and sports venues.

“We’ll remain by the side of the region’s businesses as they navigate the challenges ahead.”