Business confidence in Wales has soared into positive territory, as economic prospects for the country brighten, a survey of business leaders has found.

Sentiment tracked by ICAEW’s Business Confidence Monitor (BCM) for Wales put confidence at 18.4 on the index for Q1 2024, a significant increase from -6.7 in the previous quarter. Confidence in Wales has reached its highest point for two years and is also well above the country’s historical average.

ICAEW said the lift in confidence was likely a reflection of businesses’ optimism that the tide has turned and prospects are set to improve, therefore driving up optimism.

As set out in a series of recommendations made to all political parties ahead of the upcoming General Election, the Institute has called for a new vision for a prosperous and productive UK economy that supports businesses in the next parliament.

Robert Lloyd Griffiths OBE, ICAEW Director for Wales, said:

“It’s very pleasing to see that business confidence in Wales has performed such a marked turnaround and is at its highest point for two years.

“The rise in confidence suggests that the tide has turned and that companies’ prospects are set to improve but the UK economy is less resilient than it should be, leaving it vulnerable to shocks and less agile to embracing innovation. Building an economy with resilience at its core, an end to weak productivity and making the UK the best place to run a business, must be among the top priorities of the Welsh and Westminster governments.”

Annual domestic sales growth for Welsh businesses was the weakest in the UK in the quarter, although businesses anticipate a comfortable increase in the next 12 months. Similarly, exports growth was also lower than the national average, but this is expected to increase in the next year.

The BCM found that regulatory requirements were the most widespread growing challenge for Welsh businesses in Q1 2024, with almost half of firms reporting this issue, compared with less than one third in the last quarter. Meanwhile, more than a third of Welsh businesses cited customer demand as a growing difficulty.

Wales had the slowest rate of employment growth in the UK and companies expected only a minor improvement during the next year. The nation’s employment growth was likely impacted in part by the availability of non-management skills, which nearly a quarter of businesses cited as a major challenge.

Selling price inflation in Wales rose year-on-year to the joint highest rate in the UK, alongside the East of England. Input price inflation also increased, though is expected to decrease in the coming year.

Meanwhile, profits grew modestly, by 1.5% in the year to Q1 2024. However, Welsh companies forecast that profits growth will increase to 4.2% during the upcoming year.

Nationally, business confidence more than tripled to 14.4 on the index, surpassing the pre-pandemic average for the first time in two years, as economic conditions improved. The boost was likely underpinned by positive sales and exports projections for the next 12 months, ICAEW said.