Get under the skin of the UK economy with the Lloyds Bank Business Barometer
Read time : 5 mins Added: 22/07/2022
The Lloyds Bank Business Barometer(PDF,928KB) report is a monthly survey of 1,200 UK companies. It is a temperature check on how UK businesses are operating and their current confidence level in the economy. It gives insights into emerging financial and economic trends to help businesses plan and forecast more accurately. The report is split into sections and each metric enables business owners to better understand what is happening in their sector and region.
The report can be a useful tool for small businesses to sense check their financial and operational business approach against the general sentiment of other business owners. With inflation on the rise and the interest rate increasing, all businesses must understand the wider economic picture to inform their budgeting, forecasting and decision making.
Understanding the Business Barometer report, section by section
The summary section of the report provides key headlines from the current month, telling a story about the trend in business confidence alongside common concerns for UK business owners. The headline figure shows the overall confidence level which can be tracked against previous months. This information helps business owners to understand how other businesses view the latest situation which can be useful for long-term decision making such as hiring staff or signing large contracts with suppliers.
In addition, the report will also include other indicators of confidence such as how business owners are feeling about international or national impacts like Brexit and COVID-19. The report can help you judge whether you are focusing your planning and forecasting efforts in the right areas for success. Each month the questions asked may include current hot topics such as how inflation might be impacting growth or how increasing interest rates are contributing to higher costs of running a business.
The business confidence section plots the trend over the past 20 years, enabling business owners to measure the latest confidence figure against the long-term average. The visual presentation of the current data against the trend can help business owners quickly see whether current sentiment is positive or negative relative to the 10-year trend. Knowing that your competitors and other UK businesses are feeling confident of stronger trading prospects might enable you to take more calculated risks with new projects, investments, or price increases.
Staffing levels can be a tricky decision in times of economic uncertainty. Do you try to ride out the downturn or do you let staff go, risking the possibility of additional hiring costs when things pick up again, as well as the overarching moral dilemma especially given the current cost of living challenges that are likely to be affecting your staff.
The Business Barometer looks at employment and pay expectations for the coming year. This information can be used to validate HR forecasting, helping your business to make the decision to retain staff despite the current challenging environment. It can be useful to understand whether other companies are planning recruitment campaigns or recruitment freezes because both activities can have a significant impact on the candidate pool available to you.
The information about pay expectations is another measure that can help you to benchmark against your industry and location. Staff retention is a key activity in ensuring your business can grow and increase profitability. Understanding the expected trajectory of salaries can be hugely useful when creating your budgets for the coming year. The trend chart looks at wage growth over the past 3-4 years, enabling businesses to assess where they sit in the marketplace. If other businesses are planning larger pay awards than you have budgeted for, this could impact your ability to fill vacancies quickly and on budget.
When the economic situation is tough with businesses and consumers feeling the pressure of rising costs, the idea of increasing the price of your product or services can be daunting. Will a price increase make you uncompetitive, causing you to lose customers or will you be able to pass your rising costs onto your customer?
Access to business sentiment around price increases can be useful and the data can feed into your sales and production forecasting activities. If your planning is broadly in line with other businesses, the report may give you confidence that you can retain your relative price point position in the market even when you intend to raise prices. See when to raise prices for more guidance.
It's always helpful to factor in regional variations in sales and costs when looking at how you are performing relative to your competitors. The report breaks the UK into 12 distinct areas. This means you can benchmark your confidence levels against firms in the same region. With significant regional variations, it's vital to compare your business with your geographic neighbours.
Each region has its own business characteristics, and this can significantly impact how owners and managers feel about the current situation. For example, in the South West, there's a large farming community who will be impacted more by rising costs and availability of manual labour than perhaps a London-based service industry might be. Having information from other businesses in the same region as you can help business owners to make better decisions about expansion or divestments plans, such as where you might locate additional premises.
The report breaks down the economy into four main sectors - manufacturing, construction, retail, and services. Comparing your business confidence to others in the same sector can help you to understand your current position relative to your industry competitors rather than the UK as a whole. Having sector knowledge can help you to make decisions about challenges that only your sector is facing with more certainty. For example, the retail sector might be impacted more than other sectors by higher costs of living which puts pressure on household spending power.
Finally, the month-on-month trends page enables you to see at a glance, how the various measures are moving over the past 18 months. Charts, where you have bigger peaks and troughs, show a higher level of volatility in the data. A set of charts that is showing a broadly positive outlook could help you take operational decisions about your future business activities. Conversely, the trend is more negative, this may cause you to delay some decisions until the situation improves.
Measure your company against the Business Barometer each month
The Business Barometer is an easy-to-read guide to help you compare your business with the national picture. Follow Lloyds Bank on Facebook, Twitter and LinkedIn for more insights, or visit the Business Barometer page of our website. The report is published monthly on the last day of each month. Alternatively, subscribe to have insights delivered direct to your inbox.