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New data shows business confidence in Wales is falling

Welsh flag (Adobe Stock)

Business confidence in Wales fell 14 points during May to 37%, 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 16 points at 35%. When taken alongside their optimism in the economy, down 11 points to 39%, this gives a headline confidence reading of 37% (vs. 51% in April).

Looking ahead to the next six months, Welsh businesses identified their top target areas for growth as investing in their team, for example through training (40%), evolving their offering (38%), and entering new markets (33%).

The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. The data for this edition was collected between 1–16th May, before the UK general election was announced.

In May, overall UK business confidence reached its highest level since 2015 – rising by eight points to a net balance of 50%.

Businesses showed increased optimism in both their trading prospects (up nine points month-on-month to 54%) and the economy (up seven points to 46%). Firms’ trading outlook was the most optimistic in seven years, while economic optimism was the highest recorded since September 2021.

Scotland and the South East of England were the most optimistic of the UK nations or regions in May (both 57%), followed by the West Midlands (56%).

Similarly, there were particularly strong results reported in the construction and services sectors this month. Prospects in the construction sector jumped to 58% (up 20 points), the highest for 14 months, while in services, expected output increased to 57% (up 12 points). On the latter, it is the highest level since the survey was expanded in 2018. Expected business activity in the retail sector also improved to 49% (up three points).

Although trading prospects in manufacturing eased slightly to 49% (down three points), the underlying trend over the last three months remains positive.

Sam Noble, regional director for Wales at Lloyds Bank Commercial Banking, said:

“Despite a dip in confidence, Wales’ businesses are still highly ambitious, with leading capabilities across a number of the UK’s high-growth sectors.

“This month alone has seen Cardiff named as home to one of five hubs to develop the future of semiconductor manufacturing. Whatever lies ahead, and whatever new opportunities present themselves, we’ll continue to be by the side of the country’s firms to help them achieve their goals.”

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said:

“These results highlight a notable improvement in business confidence. Optimism about the economy increased to 46% this month – the highest result since September 2021, when the country was emerging from the Covid-19 pandemic, but before the energy crisis after the invasion of Ukraine.

“The regional picture has also improved – we’ve now seen increases in seven of the UK’s 12 regions, where there was previously a more mixed picture. Results in the South East, Scotland and the West Midlands were particularly strong. Across the sectors, there were strong, broad-based improvements in services and construction.”