Business confidence in Wales fell six points during December to 24%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in Wales reported higher confidence in their own business prospects month-on-month, up five points at 40%. When taken alongside their optimism in the economy, down 15 points to 9%, this gives a headline confidence reading of 24%.
Welsh businesses identified their top target areas for growth in the next six months investing in teams (40%), hiring new employees, entering new markets (36%), and introducing new technology (34%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 33% of businesses in Wales expect to increase staff levels over the next year, up one point on last month.
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Overall UK business confidence fell two points in December to 35%, the first decrease since August, driven largely by firms’ outlook on the overall UK economy which dipped by eleven points from 38% to 27%. Businesses’ optimism in their own trading prospects also decreased, but less markedly so – by five points to 43%.
Companies’ hiring intentions also dropped slightly with 29% of firms intending to increase staff levels over the next 12 months, down six points month-on-month.
Firms in West and East Midlands were the only regions to report an increase in confidence, up one point to 33% and up five points to 34% respectively. The North East was most confident, remaining at 48% for the second consecutive month, followed by the East of England (45%), London (38%) and the South West (36%).
Firms in the services industry reported a significant decrease in confidence, down 16 points to 30%, due to moderation in both trading prospects and economic optimism. Manufacturing confidence also eased back (38%, down seven points). However, retail and construction both bucked the trend with rises to 44% (up two points) and 37% (up two points) respectively.
Sam Noble, regional director for Wales at Lloyds Bank Commercial Banking, said:
“Businesses across Wales have encountered a year of challenges so it’s not surprising to see confidence levels dip as we reach the end of the year.
“However, given the Chancellor’s Autumn Statement announcing a 100% upfront tax deduction for UK capital expenditure on plant and machinery, there are opportunities that will boost investment and growth over the next year. We’re a resilient nation and many firms are already looking ahead with optimism. We’ll continue to be by their side as they develop strategies that will help them maximise the new opportunities that 2024 will bring.”
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said:
“This December data was collected following several key announcements, including energy prices rises and the UK economic outlook being revised down in the Autumn Statement. All of this will undoubtedly have had an impact on business confidence as we head into 2024.
“Businesses are also balancing cost pressures with a challenging labour market that will see increases to minimum wage in April 2024, as perhaps indicated in the wage growth figures, at a time when they are managing staff retention and recruitment decisions.
“However, over the course of the year confidence has steadily increased from an average confidence of 25% in the first three-months of 2023 and ending the year with a three month average of 39% – an indication of the positive trajectory business has seen this year. This provides a healthier position to begin 2024 with, compared to 2023.”
