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Welsh firms identify top growth opportunities as confidence grows

Welsh flag (Adobe Stock)

Business confidence in Wales rose seven points during July to 30%, 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 13 points at 41%.  When taken alongside their optimism in the economy, up two points to 19%, this gives a headline confidence reading of 30%.

Welsh firms identified their top target areas for growth in the next six months as diversifying into new markets (40%), investing in their teams (40%) and evolving their offering with new products or services (31%).

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

A net balance of 15% of Welsh businesses expect to increase staff levels over the next year, up three points on last month.

Overall UK business confidence fell three points during July to 25%. Firms’ outlook on their future trading prospects was up, three points to 37%, but their optimism in the wider economy dropped nine points to 12%. The net balance of businesses planning to create new jobs also decreased, seven points to 21%.

Every UK region and nation reported a positive confidence reading in July, with four out of 11 recording a higher reading than last month. Along with Wales, the East of England (up 15 points to 46%) and West Midlands (up eight points to 38%) saw the biggest increases month-on-month, with the East now the most optimistic region overall.

Dave Atkinson, regional director for Wales at Lloyds Bank Commercial Banking, said: “It’s great to see Welsh business confidence rise this month. With the summer holidays underway and the country basking in hot weather, increased footfall and demand in the coming weeks should help to shore up confidence among businesses in our tourism and hospitality sectors in particular.

“In the face of rising costs, Welsh companies should focus on effective working capital management to enable them to make the most of the opportunities ahead. This will allow them to remain agile and to drive profitability during a crucial trading period.”

Business confidence declined across all four of the sectors in July, reflecting lower optimism about the economy. Confidence within manufacturing declined the most this month (20%/-12), with firms citing moderating trading prospects and a notable drop in economic optimism, but also issues with inflation and supply bottlenecks. There were small falls in confidence for construction (28%/-2), retail (25%/-6) and services (24%/-1).

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence declined this month, suggesting that economic headwinds are becoming more forceful. Despite this, firms’ assessment of their own trading prospects showed some resilience in the face of a challenging environment. Meanwhile, price pressures have shown no clear signs of a downward trend and there appears little sign yet that wage pressures are abating.”