Rising confidence a sign that the economic tide has turned
IT IS widely recognised that business confidence, and the predictions for the future, play a key role in economic developments.
When confidence is low, businesses are less likely to invest and so economic growth will be lower.
On the other hand, when confidence is high it generally leads to an increase in the number of businesses investing in R&D, staff and technology. The knock-on effect to other businesses in the supply chain can see gross domestic product (GDP) soar.
Although there are many different types of business confidence index, the data they produce offers a good barometer of how the country’s key decision-makers are thinking and feeling. This is invaluable insight for any business owner or manager looking to plan for the future, therefore shaping our economic outlook.
Many believe that one of the major drivers of change to business confidence levels is uncertainty.
That’s why I was particularly pleased that business confidence in Wales has soared into positive territory, as the uncertainty over the past few years starts to settle and economic prospects for the country brighten.
Sentiment tracked by our most recent Business Confidence Monitor (BCM) last month shows confidence in Wales has reached its highest point for two years and is also well above the country’s historical average at 18.4 on the index for Q1 2024, a significant increase from minus 6.7 in the previous quarter.
At a UK level, business confidence more than tripled to 14.4 on the index, surpassing the pre-pandemic average for the first time in two years, as economic conditions improved. The boost was likely underpinned by positive sales and exports projections for the next 12 months.
These latest findings from our Business Confidence Monitor report will be the topic of discussion at our upcoming economic summit on May 14.
This virtual event will bring together experts from across the UK and its devolved nations to discuss the current economic environment, and what it means for the future of UK business.
Huw Pill, chief economist for the Bank of England, will headline our plenary session, facilitated by Iain Wright, ICAEW managing director.
Our regional break-out discussions, representing all UK economic regions and the devolved nations, will then focus on the Business Confidence Monitor’s regional findings and consider how the regional landscape compares against the national picture.
I am delighted that Kellie Beirne, chief executive of Cardiff Capital Region, will be joining me for the break-out discussion for Wales. With responsibility for overseeing a range of investment funds including the City Deal and investment one, Kellie is a passionate advocate of nurturing the best conditions for business success and community cohesion.
She will explore local economic conditions, share insights into how businesses have adapted and even thrived in response to key universal challenges. We’ll also look ahead with a keen eye on the future and the opportunities for regional and local economies. How are local businesses adapting and responding to the availability of technology to drive productivity? And how will businesses operating in local and regional markets shape the macro-economy of the future?
I have no doubt that the insights and analysis will undoubtedly shed light on the challenges and opportunities that lie ahead, empowering us all with the knowledge and foresight to make informed decisions and adapt to the evolving economic conditions. I am also hoping we can learn new strategies for managing economic uncertainty and how to harness opportunities to build business resilience as this is what will build confidence in our economy.
In the meantime, I hope that the lift in confidence reported by our most recent Business Confidence Monitor for Wales is a reflection of businesses’ optimism that the tide has turned and prospects are set to improve for us all. ■ Robert Lloyd Griffiths is Wales director for the ICAEW.