Businesses in Wales are less confident in their own trading prospects, but more optimistic about the economy, a new report has found.
According to the latest Business Barometer from Lloyds Bank Commercial Banking for October, Welsh firms reported lower confidence in their own business prospects month-on-month, down six points to 12%, but a greater optimism in the economy (rising 23 points to -4%).
This gave a positive headline business confidence reading of 5% - up nine points from September.
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Welsh businesses identified their top target areas for growth in the next six months as evolving their offering (36%), diversifying into new markets (33%) and investing in sustainability (27%).
A net balance of 12% of Welsh businesses expect to increase staff levels over the next year, up 16 points on last month.
The barometer was conducted between 3rd and 17th October and provides early signals about UK economic trends both regionally and nationwide.
Overall UK business confidence fell one point during October to 15%, in line with the average over the last three months. Firms’ outlook on their future trading prospects was up two points to 27%, and a net balance of 21% are planning to create new jobs (up four points on last month). Businesses optimism in the wider economy dropped three points to 2%.
Five UK regions and nations recorded a month-on-month increase in optimism in October. Along with Wales, London (up 16 points to 49%) and the North West (up 14 points to 28%) saw the largest monthly increases, with London remaining the most optimistic region overall.
Dave Atkinson, regional director for Wales at Lloyds Bank Commercial Banking, said: “Following two consecutive months of decline it’s great to see Welsh business confidence rebound in October. It’s positive too that firms see sustainability as a route to growth, something that will be even more in the spotlight as we approach COP27.
“It’s not been an easy economy for businesses to operate in, not least with the cost of doing business pushing up costs. To help manage this it is important companies keep a close eye on their cashflow and take advantage of the financial tools available to them, such as asset-based lending and invoice finance. We’ll be by the side of businesses as they focus on opportunities for growth in the coming months."
In the manufacturing sector, business confidence fell for the fifth month in a row, to 13%, down 1 percentage point, the lowest confidence level since February 2021.
Confidence in the retail sector declined by 6 percentage points to 9%, while confidence in the services sector also fell to 16%, both the lowest levels since early 2021.
However, the construction sector saw a 10 percentage point rise to 20%, although this level still remains weaker than in the first half of the year.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “While business confidence has marginally fallen this month, along with a drop in forward looking economic optimism, it is encouraging to see businesses still looking to increase their headcounts. However, cost pressures remain evident as businesses raise prices to protect their margins and wage pressure continue to be impactful. Given the recent turbulence in financial markets, it will be interesting to see how this will affect business confidence.”
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