In today’s increasingly unpredictable economic climate, recent global trade uncertainty has added to the concerns of business leaders across the world. But for those in the UK, there is a mood of cautious optimism in the air.
New Business Prosperity research from Barclays has this week revealed that despite widespread concerns over new US tariffs, UK businesses (particularly larger firms) are adapting, and in fact predict a net positive impact on exports, supply chains and profits.
Conducted last month, the survey of 1,000 micro, small, medium and large businesses across the UK found that while 79% remain concerned about global trade, 86% feel confident about their own prosperity over the next three to five years. Interestingly, intentions to invest remain high despite this widespread uncertainty, and productivity is still a top priority.
And for Welsh businesses, that focus is even more concentrated.
63% of business leaders in Wales revealed that their planned level of investment is higher than it was in the last twelve months – the highest of any region we surveyed. There’s a clear push for productivity at play, but what’s driving it?
A focus on productivity and employee engagement
Data suggests there’s a close link between investment plans and efforts to boost productivity, with 39% of Welsh businesses reporting that productivity is more important now compared to this time last year, while 56% see it as equally important.
Given the uncertainty of the current economic climate, we can say that’s possibly driven by the need to remain competitive, with 48% of businesses in Wales citing the need to enhance customer reputation as the main reason for improving business productivity.
‘Softer’ business areas are therefore seeing an increased investment focus, such as training and development for existing staff (41%) and marketing spend (31%). And that’s with significant budgets, too. 13% of Welsh businesses said that they plan to invest an average of 4.1% to 5% more this year, across all areas of their business.
Indeed, productivity gains are essential to help offset the increasing cost pressures on businesses. The focus on upskilling staff through training and development is one positive way for firms to combat skilled labour challenges.
Interestingly, for business leaders in Wales, driving operational efficiency was less of a priority in relation to productivity than in other regions. Just 14% said it was important, significantly lower than the total survey average of 42%.
Key productivity enablers are instead focused on employee engagement, with Welsh businesses outlining plans to improve work-life balance (31%), upskilling and training (30%) and encouraging a more open and supportive work environment (30%).
Projected business confidence remains stable
Despite the challenges posed by global trade uncertainties, Welsh businesses continue to display an encouraging level of confidence. Almost one in four (39%) businesses hit the targets they set for the last quarter, while a notable 17% managed to exceed expectations, amid an undoubtedly difficult macroeconomic backdrop.
Looking ahead, this resilience looks set to continue, with an impressive 31% of Welsh businesses feeling “very confident” about their prosperity over the next year, rising to 33% when considering the next three years. Even on a five-year basis, 35% of businesses expressed feeling “fairly confident” about their future, suggesting that current headwinds have not managed to dampen long term aspirations.
Unsurprisingly, like many other regions we surveyed, tariffs are a significant area of concern. Nearly a third (29%) of Welsh businesses identified tariffs and sanctions as the primary drivers of rising operational costs, while 30% said they were “very concerned” about the impact of global trade uncertainty on their prospects.
However, such concerns do not seem to have put the brakes on current trading. Instead, almost a quarter (24%) of Welsh businesses reported a moderate increase in international trade activities this year, with 76% increasing trade with ECA markets. This suggests that Welsh businesses are continuing to expand their trading horizons and that the threat of tariffs has not yet held them back.
Unlocking future growth
Overall, our data shows that Welsh businesses are not only navigating the challenges of a complex global environment, but are exhibiting encouraging levels of resilience and optimism. While concerns around tariffs are not insignificant, they are not the sole preoccupation of these businesses. Instead, many are either investing or making plans to invest to drive productivity and optimise their operations.
Most of these businesses also believe that the government could do more to support their growth, mainly by reducing business taxes (39%), and a remarkable 28% – the highest of any region surveyed – think creating more favourable conditions for start-ups and entrepreneurs would be the key to unlocking growth for the region.
At Barclays, we are proud to support these businesses as they continue to drive prosperity and innovation across Wales, and our research has identified encouraging signs of growth for the region.
To continue supporting business investment for growth, our £22bn Barclays Business Prosperity Fund is available for new and existing Business Banking customers and UK Corporate Banking clients across the UK to apply for lending and refinancing on existing projects.
To find out more, please visit: https://home.barclays/insights/business-prosperity-index/
