Business confidence in Wales has fallen into negative territory following disappointing sales growth and uncertainty from the autumn Budget, a survey of business leaders has found.
Sentiment tracked by ICAEW’s Business Confidence Monitor (BCM) for Wales, published today put confidence at -12.1 on the index for Q4 2024, well below the UK average of 0.2. Having been identified as the most confident in the UK during the previous quarter, Welsh companies are now some of the least optimistic in the country.
Although domestic sales growth remained steady, performance continues to lag both the Welsh and UK historical averages. However, despite the low confidence reading, Welsh businesses forecast that domestic sales growth will increase over the next year to 5.1%, slightly ahead of the UK average projection of 4.9%, and a likely reflection of optimism among firms in services sectors.
Exports grew ahead of Wales’s historical average, but Welsh businesses had the weakest export growth expectations of any UK nation and region for the coming year, which has likely resulted in a further knock to confidence. This outlook is compounded by the recent poor performance and persistent input cost pressures, particularly in the country’s important manufacturing and engineering sector.
Customer demand emerged as the biggest concern, reported by 42% of firms, a result of below-average domestic sales growth and a weak exports outlook, the BCM found. Not far behind was the tax burden, which emerged as a principal concern for 41% of Welsh companies, which ICAEW said could be attributed to tax changes, such as national insurance contributions, outlined in the Budget.
ICAEW said the government should prioritise measures to boost the wider business environment to ensure Britain was the best place to invest and to start, run and grow a business.
Robert Lloyd Griffiths OBE, ICAEW Director for Wales, said:
“The outlook for Welsh businesses remains challenging, with many companies anticipating continued economic uncertainty. However, there is a glimmer of hope as businesses forecast an improvement in domestic sales growth over the next year which could outpace the national average.
“We hope governments in Cardiff and Westminster will prioritise measures to boost the wider business environment and provide businesses with the clarity and stability they need.”
Input price inflation increased in the year, and though companies forecast price expansion will moderate significantly it is set to remain above the UK average. Selling prices continued to grow but at a slower rate, and this trend is expected to continue in the year ahead.
Employment growth in Wales also slowed significantly and amounted to the weakest increase in the UK, with projections indicating a continued sluggish trend over the coming year. Companies are taking a cautious approach towards capital investment, and plan to significantly reduce the rate of increase in the coming year, with R&D budgets also set to decline.
Nationally, UK business confidence fell by the largest amount in two years to hover just above zero, amid record tax concerns and a slowdown in domestic sales growth.
