South West business confidence rebounds, says Lloyds

By Peter Davison

1 August 2023

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Amanda Dorel

Business confidence in the South West rose five points during July to 34 per cent, 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 13 points at 47 per cent. When taken alongside their optimism in the economy, down three points to 20%, this gives a headline confidence reading of 34 per cent.

South West businesses identified their top target areas for growth in the next six months as investing in sustainability (35 per cent), investing in their teams (32 per cent) and evolving their product or service offering (30 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 38 per cent of businesses in the region expect to increase staff levels over the next year, up 25 points on last month.

Overall, UK business confidence dipped by six points to 31 per cent in July, with nine out of 11 regions and nations reporting a lower confidence reading month-on-month.

Optimism in the economy has also fallen, dropping 11 points to 21 per cent, the lowest levels since February this year.

However, firms remained resilient in their own trading prospects, with 43 per cent of companies expecting business activity to increase over the next 12 months, up one point on last month and reaching a 14-month high.

Despite the fall in overall confidence, levels remain higher than the survey’s long-term average reading of 28 per cent and every UK region and nation reported a positive confidence reading in July.

The North East reported the highest levels of business confidence at 43 per cent (down four points on last month), followed by Yorkshire (down seven points month-on-month) and the West Midlands (up two points month-on-month) both at 38 per cent.

Retail was the only broad sector registering higher confidence (up six points to 35 per cent), mostly reflecting stronger transport services.

The fall in overall business confidence this month was led by the service sector sentiment falling by seven points to 30 per cent. While the fall in confidence was seen broadly across this sector, hospitality firms appeared to be more resilient.

Confidence also was lower in manufacturing (down 16 points to 34 per cent) and construction (down eight points to 31 per cent).

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: “It’s encouraging to see the region’s firms bucking the national trend with confidence amongst South West businesses bouncing back July.

"It’s great to see too that many businesses across the region are seeking opportunities to grow, with their sights set on exploring sustainability and investment in their teams.

“To remain resilient to short term economic turbulence, and achieve their growth ambitions, businesses should keep a close eye on their cash flow and working capital.

"This will give them the flexibility to react to opportunities and challenges as they arise.”

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Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “The Barometer presents a complex picture for firms this month, with the data showing that trading prospects remain strong with businesses feeling under less pressure by inflation to raise prices.

"However, there is clearly uncertainty about the wider economy and rising interest rates. This may be causing net hiring intentions to moderate slightly. Nevertheless, wages and jobs growth continue to support staff with the current cost of living.

“However, the sectoral analysis this month shows some positive signs for the retail sector, while there are indications that pent-up demand may be boosting confidence in tourism and travel.

"As businesses continue to adapt to the economic environment, we expect to see ongoing resilience broadly across all sectors.”

By Peter Davison

Peter Davison is deputy editor of The Business Magazine. He has spent his life in journalism – doing work experience in newsrooms in and around Bristol while still at school, and landing his first job on a local newspaper aged 19. By 28 he was the youngest newspaper editor in the country.

An early advocate of online news, he spent the first years of the 2000s telling his bosses that the internet posed both the biggest opportunity and greatest threat to the newspaper industry and the art of journalism. He was right on both counts.

Since 2006 he has enjoyed a career as a freelance journalist. He lives in rural Wiltshire with one wife, two children, and three cats.