Demand for external finance from Welsh businesses is growing amid a need for greater liquidity and working capital.
Barclays' Q1 2026 Business Prosperity Index suggests that although overall confidence in the UK economy lags the national average, Welsh businesses are far more upbeat when it comes to confidence in themselves.
Across the country, Barclays' latest Business Prosperity Index paints a mixed picture for Welsh businesses:
- Cash inflows declined by 4.4 per cent this quarter, underpinned by a 6.2 per cent fall among larger UK Corporate Bank clients, and a 0.3 per cent fall among Business Bank clients.
- Average savings balances fell at double the rate of the national average, with larger UK Corporate Bank clients reducing savings by 11.1 per cent year-on-year in Q1, whereas smaller businesses in Barclays Business Bank saw savings grow by 1.8 per cent. This aligns with the broader trends recorded across the UK as smaller firms built up precautionary savings amid geopolitical uncertainty.
- Despite the backdrop, demand for external finance grew significantly, indicated by the 9.9 per cent growth in loan balances and 9.6 per cent growth in loan volumes.
- Perceptions of the UK economy, while still positive on balance, are below the UK average. Around 48 per cent of Welsh businesses lacked confidence in the strength of the UK economy, compared to 52 per cent reporting confidence.
- However, Welsh businesses are far more positive when it comes to their own prospects, with 78 per cent confident in their business, 26 base points ahead of confidence in the UK economy more broadly.
Greer Hooper, Head of Region for Wales at Barclays, said:
“It's clear that ongoing geopolitical headwinds are challenging Welsh businesses to think about their short-term financial needs. Business leader confidence is noticeably lower for the UK economy than it is in their own prospects, suggesting an inner confidence amidst uncertainty.
“Overall, our data gives us cause for optimism that businesses are tightening financial discipline, managing cash carefully and prioritising investment where it strengthens resilience, productivity and long-term competitiveness.”
Key findings from the Q1 Index at a UK level show:
- Geopolitical tensions have hit confidence and investment, with one in five (20 per cent) pausing investment in light of geopolitical tensions.
- Meanwhile 68 per cent expect to increase cybersecurity investment over the next 12 months, but almost half (46 per cent) believe the adoption of new technologies is increasing their exposure to cybersecurity risks.
- Six in 10 (61 per cent) now proactively use agentic AI, with cloud, cyber and AI together accounting for 44 per cent of planned technology budgets over the next year.
In a quarter that included the intensifying of the Middle East conflict, Barclays anonymised client data from around 900,000 UK SMEs and a quarter of UK corporates, comparing Q1 2026 to Q1 2025, showed the diverging ways smaller and larger firms are responding.
- SMEs within Barclays Business Bank saw a modest uptick in inflows (+0.2 per cent) while continuing to build savings buffers (+1.5 per cent) and cut borrowing (‑13.1 per cent).
- Larger corporates within Barclays Corporate Bank saw a significant drop in cash entering (-7.0 per cent) and leaving businesses (-6.1 per cent) as they reduced savings (-5.2 per cent)
- Larger firms have simultaneously increased longer term borrowing (+6.9 per cent) and reduced shorter-term overdraft borrowing (-11.8 per cent), suggesting future investment plans remain intact
Businesses of all sizes are split on their pricing strategy in response to rising costs, with 37 per cent passing them on to customers and 32 per cent absorbing the impact within margins.
Meanwhile over four in five (81 per cent) expect revenues to increase next quarter as 83 per cent are confident in their prospects over the next year. Looking ahead, more than half (54 per cent) are planning to increase investment in the next 12 months.
