By Robert Lloyd Griffiths OBE,

Director for Wales,  

ICAEW (Institute of Chartered Accountants in England and Wales)

 

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Business confidence defines the forward-looking expectations of our businesses. It influences decisions to invest and recruit. It’s what helps economies to grow.

ICAEW’s Business Confidence Monitor (BCM) began back in 2004 and is one of the largest and most comprehensive quarterly surveys of its kind. The latest survey results for Wales, published in January, put sentiment at -13.6, up from -25.2 previously, and above the national UK reading of -23.4. These figures do give me a sense of some cautious optimism here in Wales, albeit that high inflation, rising costs and political turbulence at home and abroad continue to impact confidence.

Welsh businesses reported that both domestic and export sales growth were in positive territory, at 6% and 6.1% respectively. Export growth had outpaced the rest of the UK, though there is concern that both rates may be set to slow.

At 6.1%, input price inflation is at the highest rate recorded in Wales since the survey began, but this is expected to soften. Consequently, the increase in selling prices is rising at a near-record rate for the country, though this is also set to reduce.

Access to finance surged as a growing challenge for businesses and is a difficulty for a fifth of firms, most likely because of interest rate rises and financial market difficulties. Meanwhile, customer demand was a challenge for a third of firms, while bank charges became a more prominent challenge for Welsh businesses.

Nevertheless, staffing problems continued to be the most widespread challenges for firms, with 40% of Welsh businesses cited staff turnover as an issue and 39% citing non-management skills as an issue. Given historic rates of rising inflation and labour market challenges, it is unsurprising that salaries are growing at a record rate.

Capital investment plans in Wales are favourable to those elsewhere, rising 3.2% in the latest survey period with a 3.3% increase planned for the year ahead. This is in contrast to the UK-wide trend.

As I often find myself saying, we must focus on the positives because that’s what provides a sense of hope for the future, but we’ll continue to call on the Welsh and UK Governments to focus on a plan of resilience and renewal to boost business confidence and deliver economic growth. That will benefit us all.