According to Lloyds Bank Business Barometer, the latest wave of the coronavirus pandemic has caused a sharp drop in business confidence across the UK, falling to -7% in January from -4% in the previous month. On a positive note, however, this is the second highest reading for business confidence seen since May 2020.

Despite the rollout of the COVID-19 vaccines, businesses are once again worried about the economic fallout from the new variants of the virus and the government’s decision to impose fresh lockdowns. Trading prospects fell from -3% in December to -5% in January while optimism surrounding the overall economy fell from -5% to -9%.

Businesses also indicated greater pessimism regarding employment prospects, which fell from -10% to -12% in January. While 33% of businesses surveyed foresee a reduction in their workforce, 21% of respondents hoped to increase their employee count in the current year.

In addition to the ongoing coronavirus crisis, businesses in the UK have also faced challenges due to Brexit, with 6% highlighting serious disruptions while 16% experienced slight delays due to delays in supply chains or higher costs.

Senior economist at LLoyds Bank Commercial Banking, Hann-Ju Ho, remarks, “While confidence remains below average, it is encouraging that business sentiment is still the second highest since the low of May 2020. Overall, the vaccine rollout programme has lifted confidence and that will hopefully buoy business optimism in the coming months.”