Business confidence in Wales has risen to its highest level since December 2021, according to new data. The latest Business Barometer from Lloyds Bank Commercial Banking showed confidence among Welsh firms climbing nine points to 36% in August.
Firms reported higher confidence in their own business prospects month-on-month, up two points at 44%. When taken alongside their optimism in the economy, up 14 points to 27%, this gave a headline reading of 36%.
Welsh businesses identified their top target areas for growth as investing in their teams (55%), evolving their offer (31%), and diversifying into new markets (31%). While a net balance of 44% of Welsh firms said they expect to increase staff levels over the next year, up six points on last month.
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The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. Across the UK, business confidence in August also rose sharply to its highest level since February 2022, jumping 10 points on July’s reading to 41%.
The barometer found that all 11 regions and nations reported a positive business confidence reading in August. Optimism in the UK economy also increased in August by 16 points to 37%, and the number of businesses expecting an increase in their trading prospects rose by three points to 46%.
Businesses in London reported the highest levels of business confidence at 52% (up 20 points month-on-month), its strongest reading in 14 months. Firms in the South East reported the second highest reading at 47% (up 17 points month-on-month), followed by those in the South West at 46% (up 12 points month on month).
The construction, retail and service sectors all saw a rise in business confidence in August. Services gained 12 points to reach a 22-month high of 42%, while retail firms were up nine points to 44%, an 18-month high.
Construction firms’ confidence also increased by 11 points to a four-month high of 42%. In contrast, manufacturing confidence fell for a second consecutive month with a 4-point decline to 30%, taking it to the lowest level since April 2023.
Dave Atkinson, regional director for Wales at Lloyds Bank Commercial Banking, said: “It’s fantastic to see Welsh business confidence rise to such high levels. It’s clear that the country’s firms are looking forward with optimism and are busy identifying new opportunities for growth.
“Welsh firms seeking avenues for expansion should review how they’re managing their working capital. Optimising factors such as supplier and customer payment times and stock levels are both steps firms can take now to help ensure they have the cash they need, when they need it, to make the most of future opportunities. Whatever their business goals are, we will remain by the side of Welsh firms to help them achieve their ambitions.”
Hann-Ju Ho, senior economist Lloyds Bank Commercial Banking, said: “The bounce in economic optimism this month is the standout point. Our analysis shows that businesses felt relief that interest rates may be reaching their peak, alongside hopes that measures to tackle inflation are having an impact. With trading prospects remaining stable, and hiring and wage intentions also rising, the macro environment for small businesses and those outside the manufacturing sector is more upbeat.
“From the data, large firms and manufacturers are experiencing some degree of caution, which is likely to reflect the wider global economic environment and, for manufacturing, the rotation of spending towards services.”
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