South West kicks off 2023 with rise in business confidence

Business confidence in the South West rose two points during January to 38%, according to the latest Business Barometer from Lloyds Bank Commercial Banking. 

While firms in the South West reported lower confidence in their own business prospects month-on-month, down six points at 40 per cent, their optimism in the wider economy climbed ten points to 36 per cent. Taken together, this gives a headline confidence reading of 38 per cent (vs. 36 per cent in December). 

South West businesses identified their top target areas for growth in the next six months as investing in their teams, entering new markets and evolving products and services.

A net balance of 43 per cent of businesses in the South West also expect to increase staff levels over the next year, up 17 points on last month.  

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

Overall, UK business confidence rose nine points in January to 44% – its highest level since February 2022 and its strongest start to a year since 2016. Firms’ outlook on the overall UK economy rose ten points from 27 per cent to 37 per cent, while businesses’ optimism in their own trading prospects also climbed three points month-on-month to 51 per cent.  

Companies’ hiring intentions increased marginally, with a third of firms intending to increase staff levels over the next 12 months, up four points on the month before.  

London and the North East were the joint most confident parts of the UK in January – each posting a headline confidence of 62 per cent – followed by the West Midlands and Yorkshire & the Humber.  

The East of England and Northern Ireland were the only two regions to reporting declining levels of confidence. The majority of the data was collected before the December ONS inflation data was announced on January 17^th.  

Three of the four sectors tracked in the Barometer reported rises in confidence. The most significant increase was in services which accelerated 15 points to 45 per cent, up from December’s 16 point drop. Manufacturing confidence also increased to 49 per cent, while construction rose eight points to a 10-month high of 45 per cent. There was a more mixed picture in retail however, dipping three points to 41 per cent with anecdotal evidence of weaker footfall and sales in December as shoppers hit the streets earlier than usual in November. Nevertheless, some companies still reported stronger sales over the festive period. 

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: "

“It’s great to see the South West enter the new year with a rise in confidence. 

“As part of the country with a particularly strong hospitality and tourism base, sticky inflation and relatively weak consumer demand will still be squeezing some businesses hard – a fact that is perhaps reflected in business’ feelings about their own trading prospects. But by the same token, 2024 is widely expected to bring better trading conditions – something this data shows businesses are already anticipating.       

“However, and whenever, firms seek to capitalise on new opportunities over the months ahead, we’ll be by their side with our support.”