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UK business confidence falls, consumer confidence recovers in August

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UK business confidence falls, consumer confidence recovers in August

Business confidence in the U.K. weakened in August as companies became less optimistic about the economy and the benefits of the country leaving the EU, but consumer confidence ticked higher during the same month, according to separate surveys.

Lloyds Bank's business confidence barometer declined by 6 points from July to 23%, led by dimmer prospects for trading activity for the year ahead and the economy.

"Business confidence was resilient in the first half of the year, but has eased back recently. This reflects changes in perceptions of Brexit risks, which underscores the importance of current EU-U.K. negotiations," said Hann-Ju Ho, senior economist for commercial banking at Lloyds Bank.

Confidence that Brexit would have a positive impact on business expectations slid to a net balance of negative 4% in August from positive 3% in July, the lowest reading since December 2017, on a comparable basis. Brexit concerns were the highest in the wholesale, hospitality and leisure, and public sectors.

Confidence in the construction sector tumbled 12 points to 36%, while consumer services fell 6 points to 22%. Optimism in other services declined 6 points to 18% but was stable in manufacturing at 38%.

The survey also showed that U.K. companies are pulling back plans to increase staff levels in the coming year, while expectations for average pay growth eased.

Meanwhile, the GfK Consumer Confidence index climbed 3 points to negative 7 in August from negative 10 in both the prior month and the year-ago period.

"We are just months away from the Brexit crunch but there is no sign (yet) of any crash in consumer confidence," said Joe Staton, client strategy director at GfK. "Yes, the core index continues to muddle along in negative territory, but Armageddon seems a distant prospect."

The increase was driven by rises in four of the index's measures in August, including an 8-point rise in the major purchase index to 6 from July, while expectations for the general economic situation for the next 12 months are steady at negative 26.