We've approved 80% of all business loan and overdraft requests.
Find out how we can help your business >
With a network of corporate offices across the UK and the world, you can rest assured that we are not only nearby when you need us, but we also have the local knowledge to help your company’s success.
Actionable Insight from the world of financeVisit the website.
Whatever your business goals and ambitions, we are committed to developing a strong working relationship with you and providing you financial solutions, based on understanding your needs.
Terms and Conditions for Products & Services
Our team of economic research experts provide in-depth analysis and reports on topical economic, financial and industry issues.
More information on Lloyds TSB online services
More information on Bank of Scotland online services
ECONOMIC PROSPECTS IMPROVE, BUT OVERALL SENTIMENT IS WEAKER
UK business sentiment regarding economic prospects improved for a second straight month in July, but these modest rises should be seen in the context of the very large fall in May. As such, the net balance for economic prospects, which rose 4 points to -8%, remains relatively weak by historical standards. Companies’ sentiment regarding their own prospects, moreover, fell in July to a 7-month low of 30%, as weak economic prospects filter down to perceptions about their own business outlook.
We normalise and average both these balances to derive our Business Barometer Index (BBI) which declined to -0.79 in July from -0.69 in June. The BBI is a leading indicator of economic activity and anticipated the double-dip recession, as sentiment weakened prior to and around the turn of the year. The latest results from our survey suggest that underlying economic activity is set to weaken in the third quarter, after showing some signs of improvement in Q2 (chart A). This may not, however, be reflected in official GDP growth statistics which are distorted by the effects of the extra bank holiday for the Diamond Jubilee, which artifically depressed Q2 growth, with the likelihood of a similar temporary uplift in the headline official growth numbers in Q3. Policymakers, however, will focus on the underlying picture which the Business Barometer suggests will worsen in the third quarter, despite some additional positive impact from the Olympic Games.
Inputting the Business Barometer Index into a probit model to gauge the probability of recession suggests that the start of the 2008/9 recession was correctly anticipated, as was the latest economic downturn in late 2011 and early 2012 (chart B). The model indicates that the probability of recession subsided in March and April, but spiked higher in May as the euro crisis intensified again. It has since hovered around the 50% level, suggesting economic weakness is set to remain.
MANUFACTURING CONFIDENCE FALLS SHARPLY
The other parts of the survey show that hiring trends weakened in July. The net balance for staff levels rose sharply in June to 30%, but subsequently fell to a 7-month low of 10%. The decline was broad-based across regions and sectors, but was particularly severe in manufacturing (down 40 points to -2%), likely related to weaker demand from Europe and indications of broader global slowdown. The overall net balances for average domestic prices and profit margins were unchanged in July at 5% and -19%, respectively, but they have both trended lower in recent months. Price trends have weakened particularly in the manufacturing and retail sectors, but have held up better in other services.
A more comprehensive assessment of the sectoral and regional picture is provided by calculating a composite net balance which equally weights the results for economic prospects, own business prospects, staff levels and profit margins. The composite net balance for manufacturing fell to a nine-month low of -3% in July and has also declined in retail over the latest month (down 5 points to 3%). For other services, it rose 2 points to 8%, but even in this sector the recent trend remains downward. Regionally, the composite net balance in July fell in the North and Midlands and rose slightly in the South. The recent trend has been downward in all the three regions, though to a lesser degree in the South.
Note: This month’s Lloyds Bank Business Barometer was conducted during 2-12 July 2012. The sample size was 305 companies with turnover above £1 million from all sectors and regions. Responses are re-weighted to reflect the composition of the economy.
This document is confidential, for your information only and must not be distributed, in whole or in part, to any person not involved with the proposed transaction without the prior consent of Lloyds TSB Bank plc (“Lloyds Bank”). Whilst Lloyds Bank has exercised reasonable care in preparing this document and any views or information expressed or presented are based on sources it believes to be accurate and reliable, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. In particular, whilst we have sought to identify appropriate products and to provide guidance as to how those products might operate under various accounting standards we are not, and should not be considered to be, giving an accounting opinion or advice and you should conduct your own independent enquiries and seek your own professional advice in this respect. Any transaction which you may enter into with us will be on the basis that you have made your own independent evaluations based on your own knowledge and experience and any professional advice which you may have sought in relation to all aspects of the transaction including legal, regulatory, tax or accounting.
All terms contained herein, including pricing, are indicative only and subject to change without notice. This material has been prepared for information purposes only and Lloyds Bank, its directors, officers and employees are not responsible for any consequences arising from any reliance upon such information. If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your Lloyds Bank Sales representative for clarification.
Lloyds Bank, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc and Lloyds TSB Scotland plc. Lloyds Bank and Lloyds TSB Corporate Markets are trading names of Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ.
Registered in Scotland no. 327000. Authorised and regulated by the Financial Services Authority under registration numbers 119278, 191240 and 169628 respectively.