Business confidence slipped over the past month as firms wrestled with stubborn inflationary and cost pressures, with the Middle East war now into its fifth month, according to a survey published today.

The index of sentiment among private-sector companies compiled by Lloyds Bank’s Business Barometer fell by 3 points to 44 per cent in June, leaving it below the 12-month average of 47 per cent. Economic optimism also dropped, down 4 points to 31 per cent.

The lender said businesses were most worried about the rising cost of production, a concern likely tied to the higher energy prices triggered by the Gulf conflict. Over the weekend the United States and Iran traded strikes, each accusing the other of breaching the terms of the ceasefire agreement.

The decline in confidence was most pronounced among manufacturers, where optimism tumbled by 10 points to 33 per cent, a reflection of the sector’s heavy energy use. The reading among retailers fell by 8 points to 45 per cent. Energy costs have remained the single biggest brake on SME growth for much of the past year, with smaller firms warning they have no price-cap protection of the kind afforded to households.

Although inflationary worries persist, oil prices have eased sharply in recent weeks. The price of a barrel of Brent crude, the international benchmark, has fallen back below the levels seen before the conflict broke out at the end of February.

Amanda Murphy, chief executive for Lloyds Business and Commercial Banking, said: “While cost pressures and global uncertainty continue to weigh on business confidence, international firms are much more confident, with many seeing signs of supply chain disruption easing and strengthening customer demand.”

There was better news on jobs. Lloyds said companies’ hiring intentions rose for the first time in three months. Some 55 per cent of the 1,200 firms surveyed said they wanted to expand their workforce, against 14 per cent planning to cut headcount, a fall of 3 points over the month.

Hann-Ju Ho, senior economist at Lloyds Commercial Banking, said: “Overall, while some sectors are holding up, the data suggests that uncertainty is still feeding through unevenly and weighing more heavily on parts of the economy than others.”

The figures may signal that the UK labour market is in the early stages of stabilising after two years of weakening. Data from the Office for National Statistics showed vacancies have fallen to their lowest level in five years.

Growth has also taken a knock from the war. GDP contracted by 0.1 per cent in April, the latest ONS figures show, and the closely watched purchasing managers’ index revealed that activity in the private sector dropped to a 14-month low.

The fall in confidence over the past month may equally be tied to the latest bout of political and policy uncertainty in Westminster, after Sir Keir Starmer resigned as prime minister earlier this month, clearing the way for Andy Burnham to enter No 10 as soon as mid-July.

Mr Burnham has yet to flesh out his tax and spending plans or name his chancellor. Ed Miliband and Wes Streeting are regarded as the most likely picks to replace Rachel Reeves in No 11. Starmer’s probable successor has signalled a preference for lowering VAT on the hospitality industry and overhauling the business rates regime.