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Welsh Business Confidence Supported by Strong Outlook for Sales

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Businesses in Wales are confident of their prospects for the next 12 months, boosted by increased sales and exports, a new survey of chartered accountants has found.

The Business Confidence Monitor (BCM) for Q4 2021 for Wales, published this week by chartered accountancy body ICAEW, showed that business confidence is firmly in positive territory at +31.3.

Businesses reported that both their domestic sales and exports had increased over the past year, at 3.2% and 4.4% respectively. The growth in exports was at the fastest rate of any UK region or nation, and both domestic sales and exports were forecast to grow faster than the UK average in the next year.

The high rate of confidence was most likely related to the increase in sales, ICAEW said. Because of the healthier sales environment, the percentage of companies experiencing customer demand as a growing challenge had reduced considerably, from its pandemic peak of half of all businesses in Q4 2020 to a third in Q4 2021.

Employment and challenges

Businesses predicted that employment levels would increase significantly over the next year, which should also help to push average total salaries up.

Salaries are also set to increase because companies are finding issues with labour supply, as they try to recruit quickly to meet demand.

Just under a third of companies reported difficulties in hiring staff to non-managerial roles as a growing issue. Staff turnover was seen as a growing source of difficulty for a quarter of businesses, more than double the rate in the same quarter last year.

The number of Welsh businesses who have experienced transport problems has increased over recent quarters, and now stands at a historical high. Firms have had challenges with logistics and capacity shortages, while getting to grips with new post-Brexit trading requirements.

Businesses also said they were experiencing rising costs from supply chain disruption and higher prices. Input prices are 2.7% higher, year-on-year in Q4 2021 and companies expect them to increase further by 3.5% in the 12 months ahead, which would particularly affect Wales’s manufacturing sector.

Companies said they would pass price rises onto customers and forecast this to happen at a faster rate than the UK average.

Robert Lloyd Griffiths OBE, ICAEW Director for Wales, said:

“Businesses in Wales are confident for their prospects over the next year, although sentiment has fallen slightly as challenges continue.

“Though companies are bouncing back from the pandemic, transport problems are at the highest levels we’ve ever seen in Wales and energy and raw material costs are pushing up prices. We hope to see these problems reduce and for the New Year to bring stability for our businesses to continue to recover.”

Nationally, business confidence weakened after hitting record-breaking levels in the previous two quarters. This fall in optimism likely reflected problems businesses have experienced, both at home and abroad, from rising costs, supply chain disruptions and recruitment challenges