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Welsh firms optimistic about the economy but confidence falls on trading prospects

Businesses in Wales reported their optimism in the economy had vastly improved in April, up 15 points month-on-month to a near two-year high 19%, according to the latest Business Barometer from Lloyds Bank Commerical Banking.

Yet despite this, companies in Wales reported lower confidence in their own business prospects, down 16 points at -1%. When taken alongside their optimism in the economy, this gives a headline confidence reading of 9%, the same reading as March.

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

When it comes to jobs, a net balance of 10% of Welsh businesses expect to increase staff levels over the next year, up four points on last month.

Nationally, UK business confidence surged 14 points in April to 29%, the highest reading since September 2018. The result follows the reopening of outdoor hospitality venues and non-essential retail and personal services providers in England and comes ahead of further restrictions easing in Wales and Scotland. Firms’ confidence in their own business prospects rose by 14 points to 26% and their optimism in the economy increased by 15 points to 32%.

Most UK regions and nations reported a month-on-month increase in confidence during April, with firms in the South West (up 22 points to 30%), London (up 20 points to 32%), the East Midlands (up 20 points to 40%) and Yorkshire and the Humber (up 20 points to 32%) reporting the largest surges. No nation or region reported a fall in confidence and nowhere had a net-negative confidence reading for the first time since July 2019.

Amanda Dorel, regional director for Wales at Lloyds Bank Commercial Banking, said: “Businesses in Wales are more optimistic about the economy than they have been in more than a year, but confidence in their own trading prospects has fallen sharply in April. As lockdown restrictions continue to ease, and the hospitality and tourism industry gears up to reopen and enjoy a hopefully busy summer, we may see this balance shift and firms feel more positive about their own business prospects.

“A healthy hospitality and tourism sector is vital to the Welsh economy and its reopening should be a big boost to firms and our nation’s economy.”

Confidence increased in all sectors, with manufacturing and retail confidence levels at three-year highs. Manufacturing stood out as the most positive sector (40%), likely reflecting strong global demand and notwithstanding ongoing supply chain issues. Meanwhile, retail confidence jumped to 39%, while construction confidence also increased to 28%. Services confidence rose to 25%, which was also the highest it has been since 2018.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “A third consecutive monthly rise in business confidence alongside the highest level of confidence for two-and-a-half years tells us a positive story about the UK’s continued economic recovery and leaves us optimistic about the road ahead. While uncertainties remain regarding the evolution of the pandemic, this month’s improvement in sentiment reflects a further easing of COVID-19 restrictions, while progress in vaccine deployment is raising hopes that the negative impact of the health crisis will continue to fall in the months ahead as the economy reopens.”