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Positive start to the year as business confidence grows in Wales

Business confidence in Wales rose by 16 points during January to 34%, the highest reading since 2021, according to the latest Business Barometer from Lloyds Commercial Banking.

Companies in Wales reported higher confidence in their own business prospects month-on-month, up 12 points at 43%.  When taken alongside their optimism in the economy, up 20 points to 26% this gives a headline confidence reading of 34%.

Welsh businesses identified their top target areas for growth in the next six months as evolving their offer (42%), investing in their team (39%), and diversifying into new markets (29%).

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

A net balance of 29% of businesses in the region expect to increase staff levels over the next year, up 34 points on last month.

Overall UK business confidence climbed in January, with firms reporting their highest confidence levels since July last year.

Business confidence increased by five points to 22% and the net balance of businesses feeling optimistic about the economy doubled on December’s reading to 16%.

Ahead of National Apprenticeship Week (6-12th February) 30% of businesses across the UK reported that they are looking at opportunities to grow by investing in staff development and training. A net balance of 17% of firms reported plans to create new jobs in the next twelve months.

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

“The past few years have been incredibly challenging for Welsh businesses so it’s encouraging to see that firms across the country are feeling confident in their own trading prospects as we kick off the new year. It’s also great to see so many committed to investing in their people through training and development over the next few months.

“We’ll continue to stand side-by-side with Welsh businesses and support them as they build back and focus on their growth ambitions.”

For the second month in a row, confidence in the manufacturing and service sectors increased, with manufacturing rising to 28% (up 15 points) and services up to 25% (up seven points).  Business confidence in construction was down two points to 27%, while retail confidence fell for the second month in a row to 7% (from 13%), the lowest level since February 2021.

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

“Business confidence continues to improve following the December boost. Firms are clearly more optimistic about the wider economy and this is driving the increase, helped by precursory signs that wage and other cost pressures may be easing.

“It is still a tough environment for businesses, with high energy bills remaining a concern during the winter months, but there are grounds for optimism for 2023 if inflation starts to trend lower.”