Confidence among businesses in Wales continued to grow for a second consecutive month in November. The latest report from Lloyd's Bank Business Barometer found that business confidence rose 12 points from October to 17% - the second highest increase in the UK after Scotland.
Welsh firms reported higher confidence in their own business prospects month-on-month, up 24 points at 36%. Taken alongside their optimism in the economy, down one point to -3%, this gave a positivie headline confidence reading of 17%.
Welsh businesses identified their top target areas for growth in the next six months as investing in their team (35%), evolving their offering (29%), and investing in sustainability (28%).
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A net balance of 16% of Welsh firms expect to increase staff levels over the next year, up four points on last month – the highest reading since May this year.
The barometer was conducted between November 1 and 15, before the Chancellor made his Autumn Statement announcement on November 17. It provides early signals about UK economic trends both regionally and nationwide.
Overall UK business confidence fell five points during November to 10%, with all regions and nations reporting a positive confidence reading apart from the South East. Firms’ outlook on their future trading prospects was down two points to 25%, and their optimism in the wider economy dropped four points to -2%.
Despite a seven-point dip, UK businesses remained positive about hiring intentions with 14% of firms aiming to create new jobs in the next 12 months.
Aside from the South East, all UK regions and nations reported an increase in optimism last month. Scotland (up 19 points to 24%), Wales (up 12 points to 17%) and the South West (up nine points to 5%) saw the largest monthly changes, with Scotland now the most optimistic overall.
Dave Atkinson, regional director for Wales at Lloyds Bank Commercial Banking, said: “Despite the economic turbulence of the past few months, it’s good to see firms in Wales confident in their own trading prospects growing as we enter the Christmas period – a vital time for many businesses, especially those in the hospitality and leisure sectors who’ll be hoping for a busy trading season.
“For many businesses, higher costs could make the season more difficult than in previous years. By managing their working capital, Welsh businesses can put themselves in the best possible position to tackle these challenges and any others that come their way.”
In the retail sector, business confidence increase to 15% (up from 9%) reflecting a renewed optimism in trading prospects ahead of the festive season. However, business confidence in the manufacturing sector fell for the sixth month in a row, to 4%, down 9 points, the lowest confidence level since early 2021.
The construction sector held gains made in October, remaining unchanged at 20%, although still weaker than the first half of the year.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Given the recent political and economic landscape, it comes as little surprise that economic optimism and business confidence have fallen this month. Pay growth expectations remain high by historical standards, which could signal ongoing difficulties ahead for businesses to fill vacancies. Looking ahead, it will be interesting to see if the clearer policy picture provided by the Autumn Statement will lead to business confidence moving in a more positive direction as we go into 2023.”
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