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Welsh Business Confidence Falls for Second Consecutive Month

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Business confidence in Wales fell for a second consecutive month during July, down nine points to 12%, according to the latest Business Barometer from Lloyds Bank Commercial Banking. 

Companies in Wales reported lower confidence in their own business prospects month-on-month, down five points at 15%.  When taken alongside their optimism in the economy, down 13 points to 9%, this gives a headline confidence reading of 12%.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

A net balance of 17% of businesses in the region expect to increase staff levels over the next year, up 12 points on last month – the biggest rise of anywhere in the UK.

Overall UK business confidence dipped three points to 30% in July but remains well above the year-to-date average of 19%. Businesses in the North East (40%), East Midlands (38%) and North West (38%) were the most optimistic overall.

In July, four regions reported an increase in confidence: the North East (up 13 points to 40%), North West (up nine points to 38%), East Midlands (up seven points to 38%) and West Midlands (up one point to 30%), while the remainder reported a drop.

Alongside Wales, Scotland (down 14 points to 28%) and the East of England (down 11 points to 25%) reported the biggest falls in confidence but all retained an overall positive reading.

The overall number of UK firms expecting planning to create new jobs in the next twelve months rose one point to 18% in July, the highest reading since November 2018 and the sixth consecutive month that employment expectations have risen.

Amanda Dorel, regional director for Wales at Lloyds Bank Commercial Banking, said: 

“The Welsh Government’s more cautious easing of coronavirus restrictions means businesses are having to wait longer to reopen fully than those elsewhere in the UK, which means some tourism and hospitality firms will have to wait a little bit longer to fully capitalise on this peak time of year.

“However, with 7th August pencilled in for the country’s so-called “Freedom Day” there is hope on the horizon, demonstrated by the long-term intentions of many to grow their teams in the next 12 months.

“We will be helping our customers to prepare for this expansion and to ensure they’re well equipped to make the most of the opportunities that come their way.”

Confidence fell slightly in the broad economic sectors in line with the overall economic picture. Manufacturing and retail confidence declined for a second month from previously elevated levels. Nevertheless, at 33% (down from 35%) for manufacturing and 32% (down from 36%) for retail, confidence remains at historically strong levels. Construction and services sector confidence also dipped to 33% (from 35%) and 28% (from 31%), respectively.

In the subsectors, confidence was particularly strong in hospitality (63%, up from 38%), and transport (53%, up from 37%), reflecting the further opening of the economy, as well as in business services & finance. Employment and pay growth expectations were also especially strong in these subsectors as well as in construction.

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

“A sixth consecutive monthly increase in employment expectations alongside an increase in pay growth predictions continues to highlight the resilience of UK businesses despite a slight dip in overall business confidence. With COVID-19 restrictions having now been significantly eased in parts of the UK we can have further confidence in firms’ outlook for the UK economy.”