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Welsh business confidence posts improvement

Business confidence in Wales rose nine points during July to -32%, according to the latest Business Barometer from Lloyds Bank.

Companies in Wales reported higher confidence in their business prospects month-on-month, although the reading remained firmly in the red at -28%hen taken alongside their views of the economy overall, this gives a headline confidence reading of -32%.

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

The majority of firms continued to see demand negatively affected by coronavirus during July, but with the picture improving month-on-month. Almost two-thirds (64%) experienced a fall in demand for their products and services, down three points on the month before. Meanwhile, one in 10 (10%) experienced an increase in demand, up five points on June.

With the Job Retention Scheme beginning to wind down from August, more than half (52%) of Welsh firms surveyed said they weren’t currently using the job retention scheme.

Of the 43% of businesses reporting disruption to their supply chain during July, 26% expected the situation to improve within three months, while a small minority (3%) expected it would take more than 12 months to return to normal levels.

When asked about social distancing measures, two-fifths (40%) of businesses said they could, in theory, operate at full capacity while remaining COVID-secure, although similar numbers (37%) said they couldn’t operate fully within the rules.

Amanda Dorel, regional director for Wales at Lloyds Bank Commercial Banking, said: “A slight uptick in business confidence is welcome news as we enter a critical period in the ongoing economic recovery. The relaxation of ‘stay local’ measures and the re-opening of the leisure and hospitality sectors is timely as we enter the peak weeks of summer trading, which businesses will be keen to make the most of.

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“2020 is set to be unique in every sense and business owners will likely need to plan for many scenarios depending on the level of demand that materialises in the weeks ahead. We’ll continue to be by their side to ensure they can remain in as strong position as possible.”

National overview

At a national level, UK business confidence increased eight points to -22% during July. The North East was the most confident region at -3% followed by the West Midlands (-7%) and the North West (-15%). Wales and Scotland were the least confident with -31% and -37% respectively.

In July, the retail sector increased 11 points to -12%, manufacturing increased 14 points to -21% and services rose 10 points to -26%. However, construction fell eight points to -22% after last month’s strong increase of 30 percentage points.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “While the results suggest the economy is starting to see some improvement, economic confidence still remains in deep negative territory. The UK Government announcement of the slight easing of social distancing measures has now enabled over half of businesses to reach their capacity and resume their usual activities. However, how businesses will continue to respond to the Job Retention Scheme will be key in the coming months.”