Wales has recorded the lowest business confidence reading of all UK nations and regions according to the latest business barometer from Lloyds Bank.
The commercial bank’s business barometer for March 2022 found that Welsh firms’ confidence in their own trading prospects fell 27 points to 0%, with their optimism in the economy dropping 41 points to -10% as impacts of Russia’s invasion in Ukraine are felt in the UK.
This gave Wales its first negative business confidence reading since February 2021, falling 34 points last month to -5% — the lowest of all UK nations and regions.
Overall UK business confidence dropped 11 points during March to 33%, with eight out of 11 nations and regions recording a lower reading last month compared to February.
A net balance of 6% [the percentage of firms with a positive outlook against those that are negative] of 6% of Welsh businesses expect to reduce staff levels over the next year. This was down 19 points from February, when a net balance of 13% had planned to make new hires.
Despite this, businesses in Wales reported plans to target new growth opportunities in the next six months, including evolving their offering with new products or services (28%), investing in their teams (27%), and diversifying into new markets (20%).
The regional director for Wales at Lloyds Bank, Dave Atkinson, said: “Welsh businesses have undoubtedly been significantly affected by the impact of rising prices here in the UK.
“Ongoing cost-of-living pressures have led to more cautious consumer spending, which has had a knock-on effect for businesses across the country, particularly those in the tourism and hospitality industry which plays such a key role in the Welsh economy.”
He added: “We don’t know how long these challenges will remain, but we have seen the resilience of our Welsh business community throughout the past two years and we expect this to continue. We’ll be by the side of firms to help them navigate these challenges and look ahead with optimism once more.”
The business barometer’s measure of overall business confidence is the average of responses about how businesses regard the economic outlook and their own trading prospects.
The results were from a survey conducted with 1,200 businesses — including 86 businesses in Wales — between 1 and 15 March 2022 to offer early signals about UK economic trends.
Lloyds Bank also found that manufacturing and retail firms have been most impacted by Russia’s invasion in Ukraine.
Both sectors saw drops in confidence of 19% last month from February’s highs (to 35% and 28% respectively).
The manufacturing sector’s confidence levels are at their lowest since last summer, while retail has fallen to a one-year low.
In the other sectors, services dropped by six points (32%) while construction dropped eight points to 43%, but remained higher than at the start of the year.
Senior economist for Lloyds Bank Hann-Ju Ho said: “March’s data shows UK businesses are facing significant challenges from the impact of Russia’s invasion of Ukraine in increasing economic uncertainty and ongoing inflationary pressures. Following encouraging improvements at the start of the year, March’s fall in confidence is therefore disappointing, but not surprising.
“There are positives with the fact that confidence remains above the long-term average and it appears for now that growth will moderate. But it is difficult to gauge what the full impact will be and therefore businesses have become more cautious.”
