South West business confidence hits highest level this year - Lloyds Bank

Business confidence in the South West rose 12 points during August to 46 per cent, the highest reading since February 2022, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the South West reported higher confidence in their own business prospects month-on-month, up two points at 49 per cent. When taken alongside their optimism in the economy, up 23 points to 43 per cent, this gives a headline confidence reading of 46 per cent.

South West businesses identified their top target areas for growth in the next six months as introducing new technology (31 per cent), diversifying into new markets (30 per cent) and investing in teams (29 per cent).

Read more: South West business confidence rebounds, says Lloyds

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

A net balance of 35 per cent of businesses in the region expect to reduce staff levels over the next year, down three points on last month.

Overall UK business confidence increased to its highest level since February last year, jumping 10 points to 41 per cent in August.

All 11 regions and nations reported a positive business confidence reading in August, with nine regions and nations reporting a higher confidence reading month-on-month.

Optimism in the UK economy also increased in August by 16 points to 37 per cent, and the number of businesses expecting an increase in their trading prospects rose by three points to 46 per cent.

Businesses in London reported the highest levels of business confidence at 52 per cent (up 20 points month-on-month), its strongest reading in 14 months.

Firms in the South East reported the second highest reading at 47 per cent (up 17 points month-on-month), followed by those in the South West.

The construction, retail and service sectors all saw a rise in business confidence in August. Services gained 12 points to reach a 22-month high of 42 per cent, while retail firms were up nine points to 44 per cent, an 18-month high.

Construction firms’ confidence also increased by 11 points to a four-month high of 42 per cent. In contrast, manufacturing confidence fell for a second consecutive month with a 4-point decline to 30 per cent, taking it to the lowest level since April 2023.

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: “It’s great to see confidence in the region rebounding to reach the highest levels we’ve seen in 18 months.

"Businesses are making hay while the sun is shining too, with many taking advantage of buoyed consumer spirits and looking at opportunities to grow, be it by investing in their teams or diversifying into new areas.

“Those who continue manage their working capital and keep a close eye tight margins will be well positioned for the coming months.”

Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “The bounce in economic optimism this month is the standout point.

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"Our analysis shows that businesses felt relief that interest rates may be reaching their peak, alongside hopes that measures to tackle inflation are having an impact.

"With trading prospects remaining stable, and hiring and wage intentions also rising, the macro environment for small businesses and those outside the manufacturing sector is more upbeat.

“From the data, large firms and manufacturers are experiencing some degree of caution, which is likely to reflect the wider global economic environment and, for manufacturing, the rotation of spending towards services.”