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Business confidence in Wales falls sharply in February

Business confidence in Wales fell 33 points during February to 1% according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in Wales reported lower confidence in their own business prospects month-on-month, down 28 points at 15%.  When taken alongside their optimism in the economy, down 39% points to -13%, this gives a headline confidence reading of 1%.

Businesses in Wales identified their top target areas for growth in the next six months as evolving their offer (39%), introducing new technology (33%) and investing in their team (32%).

The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.

A net balance of 15% of businesses in the region expect to increase staff levels over the next year, down 14 points on last month.

Overall UK business confidence decreased by just one point to 21% in February. Firms remained positive about their own trading prospects with a net balance of 31% expecting business activity to increase in the coming 12 months.

Firms also reported plans to create new jobs with 20% of businesses intending to make new hires over the next 12 months – up three points from January.

All UK regions and nations reported a positive confidence reading in February, with six areas reporting a month-on-month increase in confidence. Of those, the West Midlands (up 30 points to 48%) and Yorkshire and Humber (up 22 points to 34%) saw the largest monthly increases.

Dave Atkinson regional director for Wales at Lloyds Bank Commercial Banking, said: “Business confidence in Wales has taken a hit in recent weeks with economic headwinds disrupting firms. Yet, despite the challenges around rising prices and skills shortages, businesses in the country are showing world-class resilience and setting their sights on avenues for growth in the coming months.

“We’ll continue to stand side by side with Welsh businesses and offer the practical support and guidance they need to overcome any challenges.” 

Retail confidence bounced back, rising for the first time in three months to 21% (up 14 points), led by improvements in both trading prospects and economic optimism. However, business confidence fell in construction (down eight points to 19%) and services (down five points to 20%) although this remains higher than in the latter part of 2022.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: ““Business confidence has lost a little momentum this month, following the strong gains seen recently. Firms are feeling more cautious about the wider economy. However, confidence in their own trading prospects continues to strengthen, helped by tentative signs that wage and other cost pressures may be reducing.

“While inflation appears to be tapering, pressures on consumers will need to ease further to help make it a more stable environment for businesses to operate.”