Confidence among UK businesses continued to decline in January, marking the fifth consecutive month of falling corporate sentiment, according to the latest Lloyds Bank Business Barometer.

The barometer, which tracks business confidence and economic outlook, dropped by two points to 37%, its lowest level in a year.

Despite this, it remains above the long-term average of 29%.

The decline in optimism is largely attributed to the effects of a £25 billion ($31 billion) tax increase announced in October, contributing to growing economic uncertainty.

The survey, which involved 1,200 companies from January 3 to January 17, also revealed a weakening gauge of hiring plans and a reduction in the number of firms intending to raise prices, marking the lowest level in five months.

However, the survey noted some signs of hope, particularly regarding business prospects for the upcoming year.

Companies appear to be adjusting to the economic slowdown, with some improvement in trading expectations.

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, commented that while confidence has been declining gradually, the outlook for business performance has shown some positive signs.

The findings are likely to be closely watched by the Bank of England, which is expected to cut interest rates in response to weakening economic momentum.

Finance Minister Rachel Reeves recently attempted to boost business morale by reaffirming government support for key infrastructure projects, including the expansion of Heathrow Airport.

The Lloyds Bank Business Barometer, which has been running since 2002, reflects a cautious outlook for the UK economy as companies adjust to ongoing challenges.