West Midlands business confidence falls but remains in positive territory - Lloyds Bank

Business confidence in the West Midlands fell 10 points during December to nine 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 26 points at 12 per cent. When taken alongside their optimism in the economy, up eight points to seven per cent, this gives a headline confidence reading of nine per cent.

West Midlands businesses identified their top target areas for growth in the next six months as evolving their offering (34 per cent), diversifying into new markets (27 per cent), and investing in sustainability (26 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 one in 10 West Midlands businesses (13 per cent) expect to increase staff levels over the next year, up 10 points on last month.

Overall UK business confidence rose seven points during December to 17 per cent. The proportion of businesses that felt positive about the wider economy was up 10 points month-on-month to eight per cent, while their outlook on their own future trading prospects increased by two points to 27 per cent.

Businesses also remained optimistic about job creation, with 16 per cent of firms planning to hire more staff in the next 12 months – up two points on November.

All UK regions and nations reported a positive confidence reading in December, for the first time since July, with eight out of 11 recording a month-on-month increase in confidence. Of those, the North West (up 31 points to 40 per cent), North East (up 24 points to 34 per cent) and South East (up 23 points to 14 per cent) saw the largest monthly increases, with the North West now the most optimistic overall.

Dave Atkinson, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “It’s clear that businesses have been impacted by a myriad of challenges this year, so it’s pleasing to see confidence among West Midlands firms remain in positive territory as we approach 2023.

“Economic headwinds, however, will of course persist, and we’ll remain by the side of West Midlands firms to make sure they’re equipped with the right financial tools and guidance to continue to push for growth.”

The manufacturing sector reversed a six-month trend of falling confidence, with a nine-point rise to 13 per cent. Confidence in construction and services also increased by nine points to 29 per cent and 18 per cent respectively. However, retail confidence fell slightly, by two points to 13 per cent.

Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “Business confidence has received a boost in the run up to Christmas as firms anticipate a better festive trading period than last year. While firms report being hopeful for a more successful 2023, inflation and the risk of an economic downturn remain the biggest concerns for businesses, with rising costs evidenced by the number of firms expecting to raise prices.

“Wage growth is expected to remain high for now as retaining existing staff and attracting new talent will continue to be priorities for many businesses going into next year.”