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New data shows business confidence bouncing back in Wales

Business confidence in Wales rose 25 points during March to 26%, according to the latest Business Barometer from Lloyds Bank/Bank of Scotland Commercial Banking – conducted between the 1st – 15th March ahead of the Chancellor’s Spring Budget on Wednesday 15th March.

Companies in Wales reported higher confidence in their own business prospects month-on-month, up 18 points at 33%.  When taken alongside their optimism in the economy, up 32 points to 19%, this gives a headline confidence reading of 26%.

Welsh businesses identified their top target areas for growth in the next six months as evolving their offer (35%), investing in their team (32%) and diversifying into new markets (27%)

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

A net balance of 20% of businesses in the region expect to increase staff levels over the next year, up five points on last month.

Overall UK business confidence climbed 11 points to 32% in March, with firms reporting their highest confidence levels since May last year.

On average, firms felt positive about their own trading prospects with 39% of firms expecting business activity to increase in the next 12 months, up eight points on last month and 25% said they would increase staff levels by this time next year, up five points month-on-month.

Every UK region and nation had a positive confidence reading in March, with eight out of 11 regions recording a month-on-month increase in confidence. For the second month in a row the West Midlands reported the highest levels of business confidence at 48% (unchanged month-on-month), followed by Scotland (up 24 points), London (up 20 points), and the North East (up two points) all at 38%.

David Atkinson, regional director for Wales at Lloyds Bank Commercial Banking, said:  

“Welsh businesses reported the biggest month-on-month surge in confidence of all UK nations and regions. It’s brilliant to see that a growing number of businesses are expecting their business activity to increase over the next 12 months.

“As we begin to move into Spring, firms in the tourism and hospitality sectors in particular will be looking forward to a potentially busy Easter and making the most of the three upcoming Bank Holidays in May. To take advantage of busier periods, companies should keep a close eye on working capital and stock levels, ensuring that they’ll have the flexibility to manage peaks in demand.”

There was a broad rise in business confidence across the sectors, particularly in construction (47% up 28 points) and manufacturing (37% up ten points) both at a ten-month high and retail (32% up 11 points) the highest since February 2022.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence has seen a surge this month with economic optimism and trading prospects bolstering firms. With hiring intentions improving, we may see employment growth picking up in the coming months. Tentative signs of easing wage pressures suggest that businesses’ difficulties in finding staff may have started to ease.

“Although the measures in the Budget were widely trailed, it is yet to be seen what the full impact of the Chancellor’s announcement, along with the surprise rise in inflation and recent increase in interest rates, will have had on business confidence.”