South West business confidence rebounded in August – Lloyds

Business confidence in the South West rose during August, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

South West business confidence rose 12 points during the last month to 23 per cent, putting an end to two consecutive months of decline.

Companies in the region reported lower confidence in their own business prospects month-on-month, down 18 points at five per cent. When taken alongside their optimism in the economy, up 14 points to 13 per cent, this gives a headline confidence reading of 23 per cent.

South West businesses identified their top target areas for growth in the next six months as evolving their offering (37 per cent), investing in their teams (35 per cent), and diversifying into new markets (28 per cent).

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

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

Overall UK business confidence fell nine points during August to 16 per cent, its lowest level since March 2021.

Firms’ outlook on their future trading prospects was down 32 points to five per cent, and their optimism in the wider economy dropped six points to six per cent.

The net balance of businesses planning to create new jobs also decreased five points to 16 per cent.

While every UK region and nation reported a positive confidence reading in August (except the South East, where confidence dropped 15 points to zero per cent), only three recorded a month-on-month increase in optimism.

Along with the South West, the North West was up 26 points to 44 per cent and Yorkshire was up nine points to 23 per cent, with the North West now the most optimistic region overall.

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: “This month’s reading shows a pleasing boost in South West firms’ confidence, despite the many economic headwinds businesses across the region are continuing to face.

"With pressures caused by rising inflation unlikely to end anytime soon, cash retention is critical so keeping a close eye on working capital will be key. This will help firms to weather any further shocks and be able to take advantage of growth opportunities that come their way.”

Business confidence declined across all four sectors in August. Confidence within the retail sector declined the most this month (13 per cent, down 18 points), with the service sector also seeing a significant nine-point decrease (15 per cent).

Other sectors saw moderate decreases, with manufacturing down by four points (16 per cent) and construction (26 per cent, a fall of two points), in line with recent trends.

Hann-Ju Ho, senior economist Lloyds Bank Commercial Banking, said: “Business confidence declined for a third consecutive month as firms continue to face economic challenges in the period ahead and as inflation concerns intensify.

"Despite edging lower this month, the outlook for both wage and price pressures remains elevated. However, there are some brighter points as the demand for staff remains positive, and firms reported lower concerns about staffing issues and the pandemic.”