Lloyds Business Barometer records four-point drop to 51% as trading outlook softens, while economic optimism rises and national confidence hits four-month high
Business confidence among London companies fell four points in July 2026 to 51 percent, dropping below the capital’s 12-month average of 58 percent, according to the latest monthly Business Barometer published by Lloyds.
The July reading marks a pullback from June’s 55 percent figure and sits well below London’s highest recorded confidence level of 69 percent, reached in August 2025.
Breaking Down London’s July Figures
The headline confidence reading of 51 percent reflects diverging trends within London’s business community during the month:
- Trading outlook fell 14 points to 57 percent — businesses became notably less confident about their own commercial performance in the near term
- Economic optimism rose 6 points to 44 percent — confidence in the broader economy improved despite the softening trading outlook
- Staffing intentions fell 12 points, with a net balance of 39 percent of London businesses expecting to increase staff levels over the next 12 months
The combination of weaker trading confidence alongside rising economic optimism suggests London businesses are distinguishing between their own immediate circumstances and a more positive view of the wider economic direction — a pattern that sometimes precedes a recovery in business activity in the months that follow.
Where London Businesses Plan to Invest
Despite the confidence dip, London firms are maintaining forward-looking investment intentions. When asked about their top growth priorities for the next six months, businesses identified:
- Investing in their teams through training and development — cited by 48 percent
- Introducing new technology including AI and automation — cited by 45 percent
- Entering new markets — cited by 44 percent
The high proportion of businesses prioritising technology investment reflects a broader pattern seen across the capital this year. Earlier research from Barclays found that 71 percent of London businesses are already using agentic AI in some part of their operations — suggesting the July Lloyds data is consistent with a sustained capital-wide push toward digital capability building.
The emphasis on staff training alongside technology investment also indicates that London businesses are approaching AI adoption as a complement to their workforce rather than a replacement for it — prioritising capability development in parallel with automation.
The National Picture in July
While London’s confidence fell, the overall UK reading moved in the opposite direction. National business confidence rose five points in July to 49 percent — its highest level in four months.
The national improvement was driven primarily by increased economic optimism, which rose 11 points to 42 percent against a 12-month average of 37 percent. Three specific factors were cited by businesses feeling more positive:
- A decline in global energy prices
- The Bank of England holding interest rates
- An interim peace agreement announced in the Middle East during the survey period
Businesses’ own trading outlook at national level remained unchanged at 56 percent, with 65 percent of firms expecting stronger output over the year ahead — up one point from June. The main factors cited among those expecting improvement were stronger customer demand, increased investment in capacity and technology, and improved supply chain conditions.
Why London Is Diverging From the National Trend
London’s four-point confidence fall in a month when national confidence rose five points represents an unusual divergence between the capital and the broader UK economy.
Several factors may explain this pattern. London’s business base is more heavily weighted toward financial services, professional services, and technology — sectors that can be more directly affected by global uncertainty, interest rate expectations, and international trade conditions than the domestic-facing businesses that make up a larger share of activity in other UK regions.
The 12-point drop in staffing intentions is also notable. A net balance of 39 percent of London businesses still planning to hire represents a positive absolute figure, but the scale of the month-on-month fall suggests some employers in the capital are taking a more cautious approach to headcount expansion than they were in June.
For London’s growing self-employed and sole trader community, the confidence environment connects directly to practical pressures including the approaching Making Tax Digital deadline. More detail on the compliance challenges facing London’s small businesses is available in earlier reporting on more than half of London’s small businesses not being ready for the Making Tax Digital deadline.
About the Business Barometer
The Lloyds Business Barometer surveys 1,200 businesses across the UK every month and has been running continuously since 2002, making it one of the longest-running monthly business confidence surveys in the country. Its consistent methodology allows meaningful comparison across months and years.
The survey provides early signals about economic trends at both regional and national level, making it a closely watched indicator for policymakers, economists, and business organisations tracking the UK’s economic direction.
All data sourced from the Lloyds Business Barometer July 2026, published 1 August 2026. Survey conducted by Ipsos, 1–16 July 2026, covering 1,200 businesses with annual sales of at least £250,000.
