Business confidence in the East Midlands dropped again in March, due to concerns over issues such as the impact of the war in Ukraine and inflation.
The latest business barometer from Lloyds Bank Commercial Banking suggests business leaders are feeling more worried than in recent months, though there was still some optimism that things would continue to pick up for the general economy as the pandemic eased.
The Office for Budget Responsibility has warned that inflation, which is expected to hit a 40-year high later this year, will lead to the biggest fall in living standards in any single year since records began in the mid-1950s.
There are concerns industry will be hit by a combination of rising materials prices, spiralling energy costs, staff shortages and higher wage demands, and consumers holding back on spending.
According to the Lloyds survey the region's businesses have lost a bit more confidence in their own prospects, although were slightly more optimistic about the general economy.
Many said they still hoped to grow over the next six months, bringing out new products or services, investing in operations and investing in training and staff development.
The business barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
Around two in every 15 businesses in the region still expect to increase staff levels over the next year, which was down on previous months.
Dave Atkinson, regional director for the East Midlands at Lloyds Bank Commercial Banking, said: “East Midlands businesses haven't been immune to the ongoing challenges arising from surging prices and the war in Ukraine, both of which sadly show no signs of resolution in the near future.
“All companies across the region will now be looking to steady the ship ready to deal with the challenges ahead.
“We’ll work with local businesses to make sure they can look to the future with more optimism and give them the support they need to tap into these growth opportunities.”
He said the impact of the war in Ukraine appears to have had the greatest impact on businesses in manufacturing and retail, followed by the service sector and construction.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “March’s data shows UK businesses are facing significant challenges from the impact of Russia’s invasion of Ukraine in increasing economic uncertainty and ongoing inflationary pressures.
“Following encouraging improvements at the start of the year, March’s fall in confidence is therefore disappointing, but not surprising.
“There are positives with the fact that confidence remains above the long-term average and it appears for now that growth will moderate. But it is difficult to gauge what the full impact will be and therefore businesses have become more cautious.”
