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Welsh business confidence hits a three-month low

Welsh business confidence fell to its lowest level in three months in January, dropping 11 points to nine per cent, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

The decline in confidence was largely due to economic optimism falling sharply for the second successive month.

Similarly, a net balance of four per cent of firms were pessimistic about the wider economy this month, compared with a net balance of 14 per cent that were optimistic in December.

Businesses’ confidence in their own prospects fell by a more modest six points to 22 per cent.

Welsh firms’ job creation plans also slid seven points, with a net balance of 11 per cent now planning to hire more staff over the next 12 months.

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A net balance of six per cent of businesses said they felt the UK’s exit from the European Union was having a positive impact on their expectations for business activity, down three points on the previous month.

In contrast to Wales, across the UK, overall confidence rose two points to 19 per cent as firms’ optimism about the economy climbed three points to 10 per cent.

Companies’ confidence in their own prospects edged up one point to 27 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 Wales at Lloyds Bank Commercial Banking, said:

“It’s certainly been an eventful start to 2019, with concerns surrounding political uncertainty and weakening global demand intensifying since the New Year.

“Whatever happens in 2019, we will be by the side of business as they continue to pursue growth plans. That’s why we’ve pledged to lend up to £1.1 billion to firms across Wales this year, making sure that they have the funding in place to capitalise on new opportunities and navigate future challenges.”

Regional picture

Businesses in London showed the most confidence, at 36 per cent, ahead of the West Midlands (31 per cent) and the South East (23 per cent).

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Those in Scotland and the North East were the least confident, with an overall confidence of just one per cent, 18 points below the national average.

Sectors

The construction and manufacturing sectors had both the highest confidence (30 per cent and 28 per cent respectively) and the strongest hiring intentions (26 per cent and 30 per cent respectively).

Meanwhile, the retail (14 per cent) and services sectors (19 per cent) had both the lowest confidence as well as the weakest hiring intentions (nine per cent and eight per cent respectively).

These pictures were also reflected in the sectors’ views about the impact of Brexit. Net balances of 15 per cent (services) and 13 per cent (retail) expected the UK’s exit from the EU to have a negative impact, compared with just three per cent in manufacturing. A net balance of nine per cent of construction firms expect it to have a positive impact.

Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking commented:

“Despite businesses ending 2018 on a low, it’s good to see that, across the UK as a whole, they’ve started the year on a slightly more positive footing.

“The results for the manufacturing and construction sectors are particularly encouraging and we hope the picture will improve further as we move into February and beyond, if geopolitical uncertainties subside.”

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