Business confidence in Wales remained positive in December as firms showed cautious optimism for the New Year.
According to the latest figures from Lloyds Bank’s Business Barometer, confidence in Wales rose one point during December to 18% as companies anticipate inflation, supply chain disruption and labour shortages easing.
However, firms in Wales were much more optimistic in the economy (up nine points to 6%) than in their own business prospects month-on-month (down five points at 31%).
Read more: Tata Steel to pause operations at peak times this winter to reduce strain on grid
On their top target areas for growth over the next six months, 36% of Welsh businesses said they would look to evolve their offering, while 24% said they would invest in their teams and 22% would invest in sustainability.
A net balance of 5% of Welsh businesses expect to reduce staff levels over the next year, down 21 points on last month.
The Business Barometer surveys 1,200 companies each month including 100 Welsh businesses. The latest survey was conducted between 28 November and 12 December.
Across the UK, business confidence rose seven points this month to 17%. The proportion of businesses that felt positive about the wider economy was up 10 points month-on-month to 8%, while their outlook on their own future trading prospects increased by two points to 27%.
Companies across the UK were also optimistic about job creation, with 16% of firms planning to hire more staff in the next 12 months - up two points from November.
All regions and nations in the UK reported a positive confidence reading in December, for the first time since July, with eight out of 11 recording a month-on-month increase in confidence.
The North West (up 31 points to 40%), North East (up 24 points to 34%) and South East (up 23 points to 14%) saw the largest monthly increases, with the North West now the most optimistic overall.
The manufacturing sector reversed a six-month trend of falling confidence, with a nine-point rise to 13%. Confidence in construction and services also increased by nine points to 29% and 18% respectively. However, retail confidence fell slightly, by two points to 13%.
Dave Atkinson, regional director for Wales at Lloyds Bank Commercial Banking, said: “It’s good to see overall confidence among Welsh businesses stabilise this month, at the end of what has been another turbulent year. Firms will be looking to maintain this cautious optimism as we enter 2023, with hopes that rising inflation will finally plateau, and supply chain disruption and labour shortages will ease too.
He added: “Of course, businesses would be wise to keep a close eye on cash flow over the coming months to help mitigate the impact of some of these challenges. We will be firmly by their side to help them kick off the new year in rude health.”
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence has received a boost in the run up to Christmas as firms anticipate a better festive trading period than last year. While firms report being hopeful for a more successful 2023, inflation and the risk of an economic downturn remain the biggest concerns for businesses, with rising costs evidenced by the number of firms expecting to raise prices.
“Wage growth is expected to remain high for now as retaining existing staff and attracting new talent will continue to be priorities for many businesses going into next year.”
Read more:
Business rates in Wales will be frozen for the 2023-24 financial year
- Welsh accountancy firm founded over 70 years ago bought by national group
- The Welsh firms adapting and innovating in the face of the economic crisis
- The challenges facing scale-up firms
- The new £50m equity fund for the Cardiff Capital Region
