Welsh business confidence falls amid ongoing economic uncertainty

Welsh business confidence dipped nine points to 20 per cent in December, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

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The decline in confidence was largely due to companies feeling less positive about the wider economy, with economic optimism falling by 17 points to 14 per cent.

But businesses’ confidence in their own prospects remains steady at 28 per cent in Wales, while the UK average dropped five points to 26 per cent.

A net balance of 18 per cent of Welsh firms now plan to hire more staff over the next year, down 11 per cent on last month.

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Across the nation, a net balance of nine per cent of firms said they felt that the UK’s exit from the EU was having a positive impact on their expectations for business activity. A month ago, a net balance of one per cent felt it was having a negative impact.

Overall UK confidence fell seven points to 17 per cent as firms’ optimism about the economy dropped 10 points to seven per cent.

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

David Beaumont, regional director for Lloyds Bank Commercial Banking in Wales, said: “December has been a rollercoaster month in many senses with falling global demand and ongoing uncertainty causing firms to be a lot more cautious about the year ahead.

“This is a sensible approach as it is always prudent for companies to put plans in place to help them best navigate any challenges that the future might bring. Speaking to business advisers regularly can help firms revise their plans to make sure that they’re protected against all eventualities.”

Despite the fall, Wales was the third most confident region overall, behind the West Midlands (27 per cent) and London (32 per cent). Those in Scotland were the least confident at minus nine per cent.

Sectors analysis

Overall business confidence fell across all industry sectors. Businesses in the manufacturing and construction sectors were most confident in their prospects at net 23 per cent (down nine points) and 22 per cent (down seven points), respectively.

Confidence of retail businesses was nine points lower at net 21 per cent, while confidence was lowest in the services sector at 13 per cent (down seven points).

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Tentative signs of a recovery in business confidence last month proved to be short-lived, as businesses end the year more concerned about their trading prospects and the wider economy.

“The expected slowdown in economic growth in Q4 could well be extended into early 2019, but there is potential for a rebound in sentiment should there be some respite in uncertainties that firms currently face.”