Welsh business confidence falls after recent recovery

Business confidence in Wales fell 15 points during February to -2%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Across the UK, overall confidence was unchanged on last month at 23%, with Wales recording the lowest levels of confidence.
Companies across the nation reported low confidence in their business prospects at -3%, marking a significant drop from January’s figures (13%). The figures represent the first negative confidence recording since August.

While businesses’ hiring intentions remained steady at 3% (down one point from January), the Barometer raises concerns about growth ambitions across the Welsh economy.

Amanda Dorel, regional director for Wales at Lloyds Bank Commercial Banking, said:

“While confidence had been rising steadily in recent months, buoyed by an upturn in the economy, the events of February may have had an effect on the national mood.

“In addition to the major impact that flooding and high winds have had on the agriculture and tourism sectors, many businesses will have seen productivity drop due to widespread travel disruption.

“It’s vital that businesses have the funding and resources they need and we are working closely with business owners up and down the country, providing both immediate and long-term support as we anticipate lending up to £1.1billion to Welsh businesses this year.”

The wider picture

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

Across Wales, a net balance of 5% of businesses said they felt that the UK’s exit from the European Union was having a negative impact on their expectations for business activity, although this compares to 17% in January.

Meanwhile businesses in London had the highest overall confidence at 29%, ahead of the West Midlands at 28%, and the East Midlands at 27%.

National overview

In February, overall business confidence fell slightly in the services sector from 19% to 21% but remained significantly above the 4% level at the end of 2019. Confidence in the manufacturing sector bounced back by 10 points to 31%, while the construction and retail sector increased by two and six points 29% and 30% respectively.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said:

“The buoyed sustained results signal a return to economic growth for the first quarter of 2020 after a relatively flat final quarter end to 2019. The third consecutive rise in trading prospects and a swing to positive sentiment on the expected impact of leaving the EU are all tentative signs of improvement after the soft end to last year.”