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Confidence boost for Welsh businesses following end of restrictions

Welsh flag (Adobe Stock)

Business confidence in Wales rose for the first time since May, up seven points during August to 19%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in Wales reported marginally higher confidence in their own business prospects, up one point from July’s reading to 16%. Optimism in the economy increased significantly after coronavirus restrictions came to an end during August, up 13 points to 22%. Taken together, this gives a headline confidence reading of 19%.

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

A net balance of 8% of businesses in the region expect to increase staff levels over the next year, down nine points on last month.

Overall UK business confidence rose six points in August, reaching 36%, the highest level recorded since May 2018. When asked about their overall trading prospects businesses reported a six-point increase on July’s reading at 34% and firms’ confidence in the economy also increased six points to 39%.

All UK nations and regions had a positive confidence reading in August. The most confident regions were the North West (64%), North East (46%) and London (41%). All bar three areas reported a growth in confidence in August, with the East Midlands (down 10 points to 28%), West Midlands (down three points to 27%) and Yorkshire and Humber (down two points to 26%) reporting marginal falls.

Amanda Dorel, regional director for Wales at Lloyds Bank Commercial Banking, said: “It’s promising to see confidence on the rise once again in Wales with businesses no doubt boosted by the easing of restrictions earlier in August. New initiatives designed to create more opportunities for Welsh businesses, such as the Food & Drink Wales’ Retail Plan and the Welsh Government’s New Exporters Programme will also be welcomed by firms turning their attention to growth.

“Now businesses can start to tentatively look to the future with more confidence, we are working with them to help them make the most of any new opportunities that come their way.”

In sector terms, there was notable strength in sectors benefiting from the further easing of Covid restrictions. Services confidence saw the greatest month-on-month increase, rising by 8 points to 36%, the highest level since January 2018. Confidence in both manufacturing and construction also picked up (both up 7 points to 40%), led by rises in trading prospects for the year ahead. The increase in manufacturing confidence came despite ongoing supply disruptions, although the level remains below the high in May. Retail confidence posted a smaller 2-point rise to 34%, remaining below the recent peak in May.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence reaching its highest level in over four years tells a positive story about the country’s economic recovery. This confidence is driven by the continued success of the vaccine rollout, the removal of lockdown restrictions and adjustments to self-isolation rules.

“Staff shortages remain a challenge, but as the economy moves back towards pre-pandemic levels we can be optimistic that the momentum for business confidence and economic optimism can be sustained in the months ahead.”