Business confidence in Wales has hit its highest ever level, a survey of chartered accountants has found.
ICAEW’s Business Confidence Monitor for Q3 2021, published today (Friday), said that the high level of confidence was likely underpinned by expectations of a strong economic recovery, the easing of restrictions and the vaccine programme, and more demand.
Welsh businesses said they expect domestic sales to increase by 7.9% over the next year, a higher figure than the UK-wide figure. [1] Meanwhile, exports are also set to grow but at the rate of 2.7%.
However, the likelihood of confidence remaining positive is highly dependent on the COVID-19 situation not deteriorating further, ICAEW said. Decisions on interest rates, the winding down of support schemes, such as furlough, could also have an impact on future business sentiment.
Challenges faced by businesses in Wales
One in four Welsh businesses reported staff turnover has become a growing challenge, while one in five said they were struggling to find people with non-management skills.
Some 27% of firms said transport problems were a growing challenge, a likely reflection of limited freight capacity and new trading regulations and controls following the UK’s departure from the EU.
Just 31% of Welsh businesses cited customer demand as a challenge in this quarter, a decrease from its peak of 50% in Q4 2020.
Welsh businesses expect to increase staff numbers by 2.6% over the next 12 months, with salaries expected to increase by 2.2%. During the pandemic jobs were protected by the furlough scheme but employment looks set to rise as demand picks up.
Input costs have risen by 1.8% over the past year and Welsh businesses expect them to increase by 1.7% in the next 12 months, possibly a reflection of supply shortages and bottlenecks experienced by Welsh manufacturers as demand has picked up. Businesses expect to increase selling prices by 1.3%, similar to price increases before the pandemic.
Businesses expect profits to increase by 7%, and plan to spend on research and development and staff training.[2]
Beverley Waters, ICAEW Regional Director for Wales, said:
“Confidence among Welsh businesses has hit a record high, thanks to the expectations of a strong economic recovery underpinned by the easing of coronavirus restrictions, the vaccine programme and more customer demand.
“However, while our firms expect profits to increase, they are also seeing challenges with recruitment and transport.
“This is a crucial time for the Welsh economy and as businesses continue to rebound it’s vital they are not burdened with additional costs, along with the winding down of the furlough scheme and possible interest rate rises, which could really threaten their recovery.”
Nationally business confidence reached a record high for the second quarter running. This was underpinned primarily by expectations of strong sales growth in the year ahead, especially in the domestic market where a record rise of 7.4% is predicted.
