South West business confidence rises again in May, says Lloyds Bank barometer

Business confidence in the South West rose two points during May to 26 per cent according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the region reported lower confidence in their own business prospects month-on-month, down 13 points at 24 per cent.

When taken alongside their optimism in the economy, up 18 points to 28 per cent, this gives a headline confidence reading of 26 per cent.

South West businesses identified a range of growth opportunities for the next six months, including investing in their teams (38 per cent), diversifying into new markets (25 per cent), and introducing new technology, such as AI and automation (22 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 28 per cent of South West businesses expect to create new jobs over the next year, up 14 points on last month, and the highest level since January.

Overall UK business confidence increased by five points during May to 38 per cent - its highest level since February.

Firms’ outlook on their future trading prospects rose three points to 42 per cent, and their optimism in the economy increased seven points to 33 per cent.

The net balance of businesses planning to create new jobs also increased by 11 points to 37 per cent.

Every UK region and nation reported positive confidence readings in May. London (up 23 points to 63 per cent), Scotland (up 14 points to 42 per cent) and the North West (up 12 points to 44 per cent) reported the largest increases month-on-month, with London now the most optimistic region overall.

The East of England, which experienced a 20-point dip in confidence in the last month, is now the least optimistic overall, at 14 per cent.

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: “The turbulence we’re currently seeing in the wider economy is being felt by businesses across the region, but positively many are still setting their sights on growth and planning to create new jobs in the coming months.

“Tightly managing working capital will help ensure firms are in the strongest possible position to capitalise on new opportunities.

"While businesses continue to grapple with challenges such as rising input costs, by reviewing areas such as stock levels and customer and supplier payment times, firms can make sure that valuable cash is ready to deploy for growth, as and when they need it.”

From a sector perspective, retail confidence fell two points to 27 per cent, remaining lower than the all-sector average of 38 per cent in the last three months.

The confidence level is also the lowest since March 2021 as pressure on household real incomes weigh on spending prospects.

In contrast, there was a 21-point rise in construction to 54 per cent, while manufacturing sentiment remained resilient, up two points to 45 per cent.

Confidence in the services sector reached a three-month high, increasing four points to 36 per cent.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence improved this month and firms in general seem able to rebuild some of their margins through price increases.

"However, they also report several challenges ahead, including concerns around higher costs and an economic slowdown.

"More immediately, consumer-facing industries, such as retail, are not feeling the same confidence uplift amid the widespread reports of a squeeze on household incomes.”