Confidence among Welsh businesses tumbled last month as the economic climate and cost of doing business crisis takes hold.
Business confidence in Wales fell to 1% last month, the latest Business Barometer from Lloyds Bank Commercial Banking has revealed.
The was down 29 points down from July when business confidence had risen seven points to 30%.
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Welsh firms reported lower confidence in their own business prospects month-on-month, down 37 points at 4%.
When taken alongside their optimism in the economy - down 17 points to 2% - this gave a headline confidence reading of 1%.
However, despite the fall in optimism in August, the three-month average score of local business confidence across June, July and August, showed a more positive picture at 18%.
The Business Barometer, which questions 1,200 business monthly including 98 businesses in Wales, provides early signals about UK economic trends both regionally and nationwide.
The overall 'balance' of opinion weighs up the percentage of firms that are positive in outlook against those that are negative, and gives a net balance on a scale of -100 to 100.
Welsh businesses identified their top target areas for growth in the next six months as investing in their team (39%), evolving their offer (28%) and diversifying into new markets (22%).
A net balance of 3% of businesses in the region now expect to reduce staff levels over the next year, down 18 points on last month.
Overall business confidence across the UK fell nine points during August to 16%, its lowest level since March 2021.
Firms' outlook on their future trading prospects was down 32 points to 5%, and their optimism in the wider economy dropped six points to 6%.
The net balance of businesses planning to created new jobs also decreased five points to 16%.
Only three out of 11 nations and regions recorded a higher reading than July.
The three regions were the North West (up 26 points to 44%), South West (up to 12 points to 23%) and Yorkshire (up nine points to 23%), with the North West now the most optimistic region overall.
Business confidence also declined across all four sectors in August.
Confidence within the retail sector declined the most (down 18 points at 13%), with the service sector also seeing a significant nine-point decrease (15%).
Other sectors saw moderate decreases, with manufacturing down by four points (16%) and construction (a fall of two points at 26%), in line with recent trends.
Dave Atkinson, regional director for Wales at Lloyds Bank Commercial Banking, said: "The decline in confidence this month shows the impact that ongoing economic challenges are having on businesses across the country. But despite plans among some firms to reduce staffing levels in the next 12 months, many are still focused on developing their existing teams, with two in five businesses identifying this as their top area for growth over the next six months."
He added: "To ensure they have the working capital required to invest in training and development and other opportunities for growth, firms should be keeping a careful eye on cash flow and ensuring they have the financial tools in place to succeed."
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: "Business confidence declined for a third consecutive month as firms continue to face economic challenges in the period ahead and as inflation concerns intensify. Despite edging lower this month, the outlook for both wage and price pressures remains elevated.
"However, there are some brighter points as the demand for staff remains positive, and firms reported lower concerns about staffing issues and the pandemic.”
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