Business confidence in Wales fell two points during September to 34%, but remains above the year-to-date average of 27%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
Companies in Wales reported lower confidence in their own business prospects month-on-month, down 10 points at 34%. When taken alongside their optimism in the economy, up seven points to 34%, this gives a headline confidence reading of 34%.
Welsh businesses identified their top target areas for growth in the next six months as investing in their teams 39%, investing in new technology 29% and evolving their offer 27%.
A net balance of 22% of businesses in the region expect to increase staff levels over the next year, down 22 points on last month.
Overall UK business confidence fell five points in September from 41% to 36%. Firms’ outlook on their own trading prospects remained strong at 41% despite a five-point drop on last month, and their optimism in the UK economy also remained robust at 30%, down by seven points on August’s reading.
Businesses hiring intentions remained upbeat with 26% of firms reporting plans to increase their staff levels over the next year, down five points on last month.
Companies in London reported the highest levels of business confidence for the second consecutive month at 44% (down eight points month-on-month). Firms in Yorkshire reported the second highest reading at 40% (up eight points month-on-month), followed by those in the North West at 38% (up four points month on month).
The fall in business confidence this month centred around the retail and services sectors, following strong sentiment in August. Retail confidence fell to 32% (down 12 points) dragged down in particular by trading prospects, while services confidence declined to 36% (down eight points). Construction confidence also fell to 36% (down eight points). However, manufacturing was stronger, with confidence rising to a three month high of 36% (up six points)
Sam Noble regional director for Wales at Lloyds Bank Commercial Banking, said:
“Despite a slight drop in business confidence across Welsh firms, it’s a testament to their resilience to see it remain firmly in the positive territory as we head into the final quarter of the year.
“Whatever their sector, companies must keep a close eye on working capital to ensure they can capitalise on any opportunities for growth that arise, whether that be investments in new technology or upskilling their teams. The array of financial products available to Welsh firms, such as asset-based lending and invoice finance, can help them mitigate fluctuations in costs and demand.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said:
“While the gains in business confidence we saw in August have not been maintained, it’s important to see the wider trend clearly reflected in the data which paints a very different picture to this time 12 months ago, when the economy was in significant difficulties.
“Despite some month-to-month movements, if you look at the year in quarterly time periods, confidence has steadily risen from 20% in the first quarter, 26% in the second and now an average of 27% in the third.
“Although the economic environment remains uncertain with inflation and interest rate pressures playing their part, the recent decision by the Bank of England to leave interest rates unchanged is likely to help businesses feel more upbeat about the future, which may underpin confidence in the last three months of the year.”