Business confidence drops inWales ahead of EU exit
Economic uncertainty remains the biggest threat to businesses as firms wait for information from the Government about leaving the European Union, a study reveals.
Research among 1,500 small to medium-sized companies showed that one in five expect to increase prices in the next six months, while most were not planning to take on more staff.
Manufacturers reported a big rise in business confidence, largely as a result of the weaker exchange rates, the Lloyds Banking Group report said.
But the report found business confidence had declined by 10% in Wales with the group’s confidence index – an average of respondents’ expected sales, orders and profits over the next six months – fell to 15% from 25% in September.
Confidence was highest in the North East, Scotland and the east of England, and weakest in the West and East Midlands.
Welsh businesses are feeling more optimistic than firms in the Midlands and London while neighbours in the South West saw the biggest boost, with confidence rising from 4% in September to 17% in January.
The most commonly identified threat chosen by Welsh firms in the next six months was economic uncertainty (22%), followed by weaker UK demand (20%) as firms wait for further details of Britain’s EU exit.
Firms also cited input costs (12%), productivity (10%) and political uncertainty (8%) among the biggest threats to their business.
Allan Griffiths, regional director for SME banking in Wales at Lloyds, said: “Business confidence in Wales has fallen since September – a sign that firms are entering 2017 with an uncertain business outlook.
“Many also recognise that current economic and political uncertainty may impact their prospects over the next six months and it’s vital that they plan their objectives carefully to navigate any challenges that they might face.”
Firms in Wales are expecting to increase their staffing levels in the next six months with a net balance of 6% planning to recruit new staff – up from -3% in September.
However, the share of firms saying they are experiencing difficulties in recruiting skilled labour increased to 27% from 24%.
Mr Griffiths added: “While this year may present more challenges for firms, including understanding the impact that leaving the EU will have, Welsh business owners are resilient and I am confident they will continue to do what they do best – getting on with growing their business.”
Tim Hinton, of Lloyds Banking Group, said: “Business confidence definitely dipped a bit following the EU referendum result but it has picked up again in the last few months, though still below the longterm average.
“Confidence remains well above the lows of the financial crisis, driven by demand both in the UK and abroad.
“The banking sector also has a much stronger capital position to withstand any shocks than in 200809 which should give businesses more confidence that their growth ambitions can be supported in the year ahead.”