British business confidence has seen a slight decline this month after hitting an eight-year high in July and August, according to a survey released by Lloyds Bank on Monday. The Lloyds Business Barometer, which gauges the difference between firms with positive and negative outlooks, fell by 3 percentage points to a three-month low of +47%.

Despite the drop, businesses expressed more optimism about their own prospects than about the broader economic landscape. Lloyds economist Hann-Ju Ho noted that the mixed signals in economic optimism suggest a degree of caution among businesses. "While we still expect economic expansion, it may occur at a slower pace than in the first half of 2024," he commented.

Upcoming official GDP data is expected to show that the UK economy grew by 0.6% in the second quarter of 2024, marking a recovery from a shallow recession earlier this year. However, the Bank of England has recently revised its growth forecast for the third quarter downward, projecting a quarterly expansion of only 0.3%, aligning with Britain’s long-term growth rate.

An S&P Global survey of purchasing managers also indicated a larger-than-expected slowdown in growth for September, though the index remains robust compared to eurozone levels. The S&P report highlighted that some businesses are postponing investment and hiring decisions until there is more clarity regarding the new Labour government's tax policies and employment law changes.

Labour has indicated that tax increases may be necessary beyond what was anticipated before July's election, and it plans to introduce legislation aimed at enhancing job security for employees with less than two years of service.

Additionally, the Lloyds survey revealed a decrease in the employment balance, which fell by 1 point to +36% in September. This survey was conducted with 1,200 British companies with annual sales exceeding £250,000, between September 2 and September 16.