UK business confidence has fallen to its lowest level in four months ahead of Rachel Reeves’ first budget as chancellor, the latest Lloyds Business Barometer found.

The survey, which ran from 1 to 15 October, showed that confidence fell three points to 44% in October, but remained higher than the long-term average of 29%.

The dip followed a period of sustained positivity from businesses — in July and August confidence reached 50%, which was the highest level reported since November 2015.

Firms’ trading prospects and optimism about the economy weakened by three points to 35% in October, but hiring intentions increased, Lloyds said.

Some 55% of businesses felt more confident about the economy than three months ago, down from 57%, while 20% were less positive (up from 19%). Companies’ trading prospects pulled back slightly after rising to a year-high in September. The net balance also fell three points to 53%, the lowest result since June.

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The survey data added that firms still have positive hiring intentions, picking up marginally from September. An unchanged 17% said they expected to reduce their workforce within the next year but 54% of respondents said they planned to hire more staff which brought the overall net balance up to 37%.

Hann-Ju Ho, senior economist at Lloyds Commercial Banking, said: “Although overall business confidence dipped in October, it follows a sustained period of significant optimism, and business sentiment remains above historical levels. Encouragingly, many businesses remain confident in their own trading prospects, and the increase in hiring intentions suggests more employers want to grow their workforce.

“Businesses’ broader economic outlook continues to reflect this rounded picture, and as they move into the final part of the year, they will look to manage these considerations effectively.”

Confidence rose in four of the 12 UK regions, with highest levels in the North East, London and North West.

Confidence in the North East bounced back in October to 63%, pushing it into the top spot. It was followed by London and the North West, even though optimism for these regions fell slightly.

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A strong performance in the East Midlands moved it up to fourth place, while lower sentiment in Scotland and Northern Ireland left them at, or near, the UK average.

Confidence in Yorkshire & the Humber dipped, while improving in Wales and the East of England. A sharp fall in the West Midlands seemed to be a departure from its recent trend, while there were also declines in the South West and South East.

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