Business confidence in Wales fell five points during September to -4%, the lowest of all UK nations and regions, according to the latest Business Barometer from Lloyds Bank Commercial Banking – conducted between 1st-15th September, before the Chancellor’s economic announcement. 

Companies in the country reported higher confidence in their own business prospects month-on-month, up 16 points at 18%.  When taken alongside their optimism in the economy, down 29 points to -27%, this gives a headline confidence reading of -4%.

Despite the fall in optimism during September, a three-month average of local businesses’ confidence scores reveals a more positive picture. The average sits at a net confidence score of 9%, factoring in monthly scores of July, August and September.

The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. The overall ‘balance’ of opinion weighs up the percentage of firms that are positive in outlook against those that are negative, and gives a net balance on a scale of -100 to 100.

Despite the drop in confidence, Welsh businesses identified their top target areas for growth in the next six months as evolving their offering (33%), investing in their teams (29%) and investing in sustainability (28%).

A net balance of 4% of Welsh businesses expect to reduce staff levels over the next year, up one point on last month.

Overall UK business confidence stayed the same as in August during September at 16%. Despite the net balance of businesses planning to create new jobs increasing by one point to 17%, firms’ outlook on their future trading prospects dropped one point to 25%, and their optimism in the wider economy also fell by one point to 5%.

Three UK regions and nations recorded a month-on-month increase in optimism in September. London (up 12 points to 33%), the South East (up 15 points to 15%) and Scotland (up 10 points to 15%) all reported higher confidence readings with London now the most optimistic region overall. Only Wales (down five points to -4%) recorded a negative overall confidence reading in the last month.

Dave Atkinson, regional director for Wales at Lloyds Bank Commercial Banking, said:

“Welsh businesses are clearly feeling the effects of the considerable economic headwinds and challenging trading conditions they are currently facing. The country’s renowned tourism and leisure sector, in particular, is facing pressure as consumers cut back on unnecessary spending to save money.

“However, it’s encouraging to see that more than a quarter of firms have identified investing in sustainability as a focus growth area. At Lloyds Bank, we offer specific finance for these types of investments through our Clean Growth Financing Initiative, which provides discounts on our normal commercial lending as an incentive to help Welsh businesses make the most of the sustainable opportunities available.”

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said:

“It is encouraging to see business confidence stabilising after a three-month decline. Firms’ assessment of their own trading prospects also remained steady and continues to show some resilience during turbulent times. Yet, cost pressures remain, as more businesses look to raise prices to help protect their margins while wage pressures show little sign of abating at this stage. With the recent volatility in financial markets as well as the Government’s Growth Plan and energy cap announcements, it will be interesting to see how these measures affect business confidence.”

Business confidence rose by two points in both the retail and service sectors (15% and 17% respectively), however both these figures are close to 12-month lows. Manufacturing and construction firms saw their lowest levels of business confidence this year, down two points in manufacturing to 14% and down 16 points to 10% in construction. This was driven by overall falling optimism in the economy.