Confidence among South West businesses rose in August despite spiralling costs, according to a new survey – making it one of only three UK regions to record a month-on-month increase in optimism.
Firms in the region appear to have shrugged off the impact of soaring utility bills, wage increases and a possible recession to register a 12-point rise in confidence in the UK economy, taking it to 23%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
While companies reported lower confidence in their own business prospects month-on-month – down 18 points to 5% – when taken alongside their optimism in the economy, up 14 points to 13%, this gives a headline confidence reading of 23%.
The increase ends two consecutive months of decline during which South West firms were among the gloomiest in the country.
South West businesses now identify their top target areas for growth over the next six months as evolving their offering (37%), investing in their teams (35%) and diversifying into new markets (28%).
There was also good news on employment, with a net balance of 13% of South West businesses expecting to increase staffing over the next year, up five points on last month and stronger than the UK as a whole, which registered a decline in expected job creation.
The Business Barometer, which questions 1,200 businesses across the UK every month, provides early signals about economic trends both regionally and nationwide.
Overall UK business confidence fell nine points during August to 16%, its lowest level since March 2021.
Firms’ outlook on their future trading prospects was down 32 points to 5%, and their optimism in the wider economy dropped six points to 6%.
The net balance of businesses planning to create new jobs also decreased five points to 16%.
While every UK region and nation reported a positive confidence reading in August, except the South East – where confidence dropped 15 points to 0% – the South West was one of only three to record a month-on-month increase in optimism.
The North West was up 26 points to 44% – making it the most optimistic region overall – while Yorkshire was up nine points to 23%.
Lloyds Bank Commercial Banking regional director for the South West, Amanda Dorel, pictured, said: “This month’s reading shows a pleasing boost in South West firms’ confidence, despite the many economic headwinds businesses across the region are continuing to face.
“With pressures caused by rising inflation unlikely to end anytime soon, cash retention is critical so keeping a close eye on working capital will be key. This will help firms to weather any further shocks and be able to take advantage of growth opportunities that come their way.”
National business confidence declined across all four sectors in August. Confidence within retail declined the most (13%, down 18 points), with the service sector also suffering a significant nine-point decrease (15%).
Other sectors had moderate decreases, with manufacturing down by four points (16%) and construction (26%, a fall of two points), in line with recent trends.
