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March sees slight uptick but Welsh business confidence set to remain low

Business confidence in Wales continues to be low despite a slight uptick in the first half of March.

Overall confidence rose four points during March to 2%, according to the latest Business Barometer from Lloyds Bank Commercial Banking. Confidence had fallen significantly in February amid widespread flooding across the nation.

The new research, taken between the 2nd and 16th March, showed that Welsh businesses’ confidence in their own prospects grew by 7%. When taken alongside their views of the economy overall, this gives an overall confidence of 2%.

Responding specifically to the impact of the Coronavirus, 59% of businesses stated that they had already been affected or expected to be impacted, ahead of Boris Johnson’s initial call for the public to stay at home on March 16th.This decline illustrates the impact that the outbreak was having on business confidence before many initiatives launched by the Government to help combat the virus were announced.

Across the UK, overall business confidence fell by 17 percentage points to 6% in March, the lowest level since October 2019. However, the report showed that, for the second week of the survey, a much sharper fall in overall UK confidence was recorded at -3%. It matches the lowest dip seen by the barometer since December 2011 and is otherwise the lowest dip since March 2009 during the global financial crisis.

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

Amanda Dorel, regional director for Wales at Lloyds Bank Commercial Banking, said: “This is a testing time for Welsh businesses, many of which were only just beginning to recover from the devastating floods in February.

“Though firms’ confidence was beginning to recover in the first half of March, Coronavirus was also starting to impact on sentiment. Given that confidence levels were already low, we can expect a subdued picture in the coming months as tough trading conditions continue to weigh on businesses’ outlook.

“We are here to help our customers through interruptions they may face and, as part of our anticipated £18bn of support for businesses this year, we’ve set aside £2bn of arrangement fee-free finance to help small firms affected by COVID-19.

“We’re also advising firms on how they can access the Coronavirus Business Interruption Loan Scheme (CBILS). We remain committed to supporting our customers in the weeks and months ahead in any way we can.”

Businesses in the North East had the highest confidence at 23%, ahead of the South West at 16%, and London at 12%.

Those in the South East were the least confident, with an overall confidence of -10%, 16 points below the national average.

Sector overview

In March, overall business confidence fell across all four sectors surveyed. Confidence in the retail sector saw the sharpest decline, falling 21 percentage points to 9%. The manufacturing sector also saw a big decline from 31% to 11%, services was down 18 points to 1%, while the construction sector fell by 15 points to 14%.

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “The results in March demonstrate the impact of the shutdown of large swathes of the economy to combat the pandemic even in advance of the Government’s stringent measures announced in recent days. Sentiment has returned to historic low levels after improving in recent months. We will continue to monitor what businesses are telling us, and hope that they can take steps to minimise the impact of current economic downturn.”