Business confidence in the United Kingdom weakened in June as companies continued to face rising costs, persistent inflation and ongoing geopolitical uncertainty, according to the latest Lloyds Bank Business Barometer.
The survey showed overall business confidence fell by three points to 44% during the month, leaving it below the 12-month average of 47%. Economic optimism also declined, dropping four points to 31%, reflecting growing concerns about the outlook for the wider economy.
Lloyds said businesses remain particularly concerned about rising production costs, with higher energy prices continuing to weigh on operations. The bank linked some of those pressures to the conflict in the Middle East, which has entered its fifth month. Although oil prices have eased in recent weeks, many businesses continue to report concerns over energy-related expenses.
The manufacturing sector recorded the sharpest decline in confidence. Optimism among manufacturers dropped by 10 points to 33%, highlighting the impact of higher energy costs on industries that rely heavily on fuel and electricity. Confidence among retailers also weakened, falling eight points to 45%.
Small and medium-sized businesses have continued to cite energy costs as one of their biggest challenges, particularly as they do not benefit from the same level of price protection available to households.
Despite continued concerns over inflation and operating costs, there were signs of improvement in the labour market. Lloyds reported that hiring intentions increased for the first time in three months. Among the 1,200 businesses surveyed, 55% said they planned to expand their workforce, while 14% expected to reduce staffing levels, a three-point decline from the previous month.
Amanda Murphy, Chief Executive of Lloyds Business and Commercial Banking, said businesses continue to face pressure from higher costs and uncertainty in global markets. However, she noted that internationally focused companies remain relatively optimistic as supply chain conditions improve and customer demand strengthens.
Lloyds Senior Economist Hann-Ju Ho said the survey suggests economic uncertainty is affecting industries differently, with some sectors proving more resilient than others while others continue to experience significant challenges.
Recent economic data has pointed to a mixed picture for the UK economy. Official figures from the Office for National Statistics showed gross domestic product contracted by 0.1% in April, while job vacancies have fallen to their lowest level in five years. Private sector activity has also slowed, according to recent business surveys.
Political uncertainty has added another layer of concern for businesses following the resignation of Prime Minister Sir Keir Starmer earlier this month. Andy Burnham is expected to take office in the coming weeks, though he has yet to announce detailed tax, spending or economic policies or name a new chancellor.
Business groups will be watching closely for further policy announcements as companies seek greater certainty while managing ongoing inflation, higher operating costs and an uncertain global economic environment.
