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Welsh Business Confidence Improves But Remains in the Red

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Business confidence in Wales increased 17 points during May to -35%, according to the latest Business Barometer from Lloyds Bank.

  • Overall confidence for firms in Wales increased 17 points in the past month to – 35%
  • Firms’ confidence in their own business prospects was -27%, compared with – 39% in April
  • More businesses re-opened their doors in May but more than a quarter (25%) still not trading

Companies in Wales reported higher confidence in their own business prospects month-on-month, albeit still a negative recording at -27%. When taken alongside their views of the economy, this gives a headline confidence reading of -35%. The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

In an illustration of the impact COVID-19 is having on the region’s business, the majority of firms continued to see demand negatively affected during May, but with the picture improving slightly since April. Three quarters (76%) experienced a fall in demand for their products and services in May, down one point on the month before. Meanwhile, 7% experienced an increase in demand, up two points on April.

The number of firms in the region operating at less than 50% capacity decreased by a point to 27%. A quarter of firms (25%) weren’t operating at all, down from a third (34%) in April.

Of the 63% of businesses reporting disruption to their supply chain during May, more than a quarter (28%) expected the situation to improve within three months, while just 5% expected it would take more than 12 months to return to normal levels.

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

While Welsh firms are still firmly in the grip of the economic disruption caused by COVID-19, we can take positives from the green shoots of recovery seen in their confidence levels this month. Having seen record lows in April for the Welsh region, many businesses are beginning to open their doors again in some capacity.

We have supported businesses in every part of the country in recent weeks through emergency funding and will continue do so, with firms’ liquidity likely to be an important issue as the economy starts to open up again.

National overview

Across the UK, business confidence held steady month-on-month, dipping just one point to -33%. The North East and London both saw confidence rise compared to April, scoring the joint-highest confidence reading at -20%. The South West had the lowest confidence at -51%, compared to -35% the month before.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said:

Despite the results partly capturing the period since the government’s announcement of an initial easing of restrictions, trading conditions remain difficult for most firms. Nevertheless, a further relaxation of constraints will enable more businesses to resume their activities.

National sector summary

From a regional perspective, despite all being in negative sentiment, six of the 12 regions reported a higher confidence in May. The North East was the least negative region at -20%. The South West was the most negative region at -51% followed by the South East at -45%.

In May, the construction sector saw the sharpest decline, falling 24 percentage points to -44%. However, all the three other major sectors saw a modest increase. The retail sector increased eight points to -25%, while manufacturing rose to -27% and services saw a small increase of four points to -18%.