Firms in the South West are among the most pessimistic in the UK about the impact of the coronavirus pandemic, with many expecting to shed jobs when the government’s furlough scheme ends, according to a new survey.
The Lloyds Bank Business Barometer, which takes the pulse of 1,200 firms across England every month, shows while confidence among South West companies edged up by two points during August the region still registered a score of minus 25%. 
Only Scotland, at minus 35%, was gloomier. Overall UK confidence rose eight points during the month to minus 14%. The South East became the first region to register a positive reading since the lockdown began in March after confidence climbed from minus 31% in July to plus 1%.
The lack of confidence among South West firms was triggered by a fall in demand fell during the month for a majority of firms in the region, with 63% experiencing a drop in demand for their products and services and just 9% seeing an increase – a reduction of four points on July.
As a result, less than a third of firms with furloughed staff expect to bring back more than 90% of them when the scheme ends next month. Some three-fifths of firms taking part were using the Job Retention Scheme in August.
Social distancing measures in the workplace were also causing problems for West firms. While three in five said they could, in theory, operate at full capacity while remaining Covid-secure, 26% said they had not been able to operate fully within the rules.
Some 60% of businesses reported disruption to their supply chain in August. However, 46% expected the situation to improve within six months, while just 8% fear it will take more than a year to return to normal.
David Beaumont, pictured, regional director for Lloyds Bank Commercial Banking, which carries out the Business Barometer, said: “The South West is falling behind a national trend of confidence improving month-on-month, showing that local firms are still grappling with major challenges. 
“Indeed, the picture remains mixed across the region. For example, the closure of air corridors to France and Spain could feed more domestic tourism to hotspots Devon and Cornwall; but it will also create challenges for aerospace hubs like Dorset that are desperate for an uptick in air travel to help boost trading opportunities.”
Across the UK all four major industry sectors reported confidence at the highest levels since March – although they remain in negative territory.
Manufacturing had the sharpest increase of 14 percentage points to minus 7%, while construction rose 11 points to minus 11%. The retail sector rose to minus 8%, despite activity in the high street remaining subdued, while services increased to minus 18%.
Lloyds Bank Commercial Banking senior economist Hann-Ju Ho said: “With business confidence sitting well below the long-term average, and official data for Q2 confirming the UK re-entered recession, the shape of any economic recovery remains highly uncertain.
“Nevertheless, it is encouraging to see gradual improvements in trading prospects and economic optimism, albeit from a low base, which will hopefully continue over the coming months.”
