Little change for South West business confidence in December

Business confidence in the South West fell by two points during December to 36 per cent, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the South West reported lower confidence in their own business prospects month-on-month, down six points at 46 per cent. When taken alongside their optimism in the economy, up three points to 26%, this gives a headline confidence reading of 36 per cent.

South West businesses identified their top target areas for growth in the next six months as entering new markets (36 per cent), investing in their team (34 per cent), and introducing new technology (28 per cent).

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

A net balance of 26 per cent of businesses in the South West expect to increase staff levels over the next year, down 13 points on last month. 

Overall UK business confidence fell two points in December to 35 per cent, the first decrease since August, driven largely by firms’ outlook on the overall UK economy which dipped by eleven points from 38 per cent to 27 per cent. Businesses’ optimism in their own trading prospects also decreased, but less markedly so – by five points to 43 per cent.   

Companies’ hiring intentions also dropped slightly with 29 per cent of firms intending to increase staff levels over the next 12 months, down six points month-on-month.  

Firms in the services industry reported a significant decrease in confidence, down 16 points to 30 per cent, due to moderation in both trading prospects and economic optimism. Manufacturing confidence also eased back. However, retail and construction both bucked the trend with rises to 44 per cent (up two points) and 37 per cent(up two points) respectively.    

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “This December data was collected following several key announcements, including energy prices rises and the UK economic outlook being revised down in the Autumn Statement. All of this will undoubtedly have had an impact on business confidence as we head into 2024.  

“Businesses are also balancing cost pressures with a challenging labour market that will see increases to minimum wage in April 2024, as perhaps indicated in the wage growth figures, at a time when they are managing staff retention and recruitment decisions. 

“However, over the course of the year confidence has steadily increased from an average confidence of 25 per cent in the first three months of 2023 and ending the year with a three month average of 39 per cent - an indication of the positive trajectory business has seen this year. This provides a healthier position to begin 2024 with, compared to 2023.”