Business confidence in the south west hits two-year high

By Anita Jaynes on 16 July, 2018

Businesses in the south west are more confident than at any point since the EU Referendum two years ago, according to the latest Business in Britain report from Lloyds Bank.

But despite confidence – calculated as an average of respondents’ expected sales, orders and profits over the next six months – rising 10 points to 29 per cent in the past six months, and the number of firms planning to increase investment climbing five points to 10 per cent, firms are not increasing their recruitment plans.

Instead, the net balance of businesses looking to hire additional staff in the next six months fell by 12 points to five per cent, from 17 per cent at the start of the year.

The share of firms that reported difficulties hiring skilled labour fell seven points to 40 per cent while the number expecting to increase pay also fell seven points to 17 per cent.

The Business in Britain report, now in its 26th year, gathers the views of more than 1,500 UK companies, predominantly small to medium sized businesses, and tracks a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

Across the UK, business confidence was highest in London (31 per cent), followed by the South East (30 per cent) while the lowest level of confidence was in the East Midlands (14 per cent) and the North West (19 per cent).

David Beaumont, regional director for the South West of England at Lloyds Bank Commercial Banking, said: “Businesses are always coming up against new challenges, and it is their resilience and capacity to adapt that influences their longevity and success.

“By increasing their investment plans in line with their growing confidence, but keeping a lid on recruitment, south west firms are showing that they are taking a cautiously optimistic approach to the challenges ahead.

“While this may be wise during times of such uncertainty, firms must also ensure they are not missing out on opportunities to prosper by being ambitious.”

Risks ahead

Uncertainty surrounding Brexit is now the single greatest risk to firms in the South West in the next six months, cited by 26 per cent of firms in the region.

This was followed by extra regulation, which 16 per cent of firms cited as their greatest risk, and weaker UK demand, at 14 per cent.

Uncertainty around Brexit negotiations continue

More than a third (35 per cent) of firms in the South West expect a negative impact on their business if no trade agreement is reached with the EU. More than one in eight (13 per cent) expect a positive impact, while half (52 per cent) either do not expect any impact or said they didn’t know.

Confidence begins to grow in sectors that rely on domestic demand

Nationally, business confidence was highest in the transport & communication and construction sectors, with the construction sector in particular registering a significant rise compared with January’s survey, rising 12 points to 26 per cent. Confidence was lowest in retail & wholesale, and in hospitality & leisure, both of which saw confidence fall since January.

Confidence Index      
Region Jul 2018 Jan 2018 Change (Jan – July)
London 31 per cent 25 per cent +6pts
South East 30 per cent 24 per cent +6pts
South West 29 per cent 19 per cent +10pts
West Midlands 29 per cent 28 per cent +1pts
North East 25 per cent 38 per cent -13pts
East of England 25 per cent 18 per cent +7pts
Wales 23 per cent 20 per cent +3pts
Yorkshire & Humber 23 per cent 15 per cent +8pts
Scotland 20 per cent 17 per cent +3pts
North West 19 per cent 31 per cent -12pts
East Midlands 14 per cent 24 per cent -10pts