Business confidence surges in SW

Business confidence has increased in the South West but economic uncertainty remains the biggest threat to firms, according to the latest Business in Britain report from Lloyds Bank.

The report’s confidence index - an average of respondents’ expected sales, orders and profits over the next six months – increased to 17 per cent, up from four per cent, the survey’s score in September 2016.

The South West’s confidence boost is the largest increase in the country, followed by London and the South East.

David Beaumont, regional director for SME banking in the South West, Lloyds Banking Group said: “South West firms have kick started the New Year with a surge in confidence. Despite the potential challenges ahead, the region’s businesses are staying optimistic for a successful 2017.”

Challenges
The most commonly identified threat chosen by the South West’s firms in the next six months was economic uncertainty (24 per cent), followed by weaker UK demand (18 per cent) as firms wait for further details of Britain’s EU exit.

Firms also cited political uncertainty (13 per cent), weaker overseas demand (seven per cent), regulation (seven per cent) and input costs (six per cent) amongst the biggest threats to their business.

Jump in export intentions to Asia Pacific
Overall, the net balance of firms anticipating stronger export sales in the next six months increased significantly to 29 per cent from minus nine per cent in September.

This upturn was led by a big increase in the number of firms anticipating stronger exports to Europe and Asia.

Businesses indicated that the current exchange rate is favourable for their export sales because the pound is at its weakest since its last big depreciation in 2009 during the global financial crisis.

The weaker pound also contributed to a rise in firms’ pricing intentions. The net balance of firms expecting to increase their prices in the coming six months grew from 23 per cent from 17 per cent.

Businesses planning to hire despite difficulties
The region’s firms are expecting to raise their staffing levels in the next six months, with a net balance of seven per cent planning to recruit new staff, up from minus ten per cent in September.

However, almost a third (29 per cent) of firms say they are experiencing difficulties in recruiting skilled labour down marginally from 32 per cent.

David Beaumont continued: “Exporting remains the key to regional economic growth and it’s encouraging to see that South West firms are planning to explore new territories and export their products to new markets, as well as create new jobs.

“While this year may present more challenges for businesses, including understanding the impact that leaving the EU will have, South West business owners are resilient and continuing to strive towards reaching their growth ambitions.”

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “The weaker pound has given a huge boost to exporters as they look beyond their traditional export markets of the US and Europe.

“However this has also led to a jump in the number of firms intending to raise the price of their goods and services in response to higher costs. As a result, we would expect inflationary pressures to rise this year.

“The relatively low levels of investment and recruitment intentions also suggest that economic growth is likely to slow in the next six months.”

The Business in Britain report from Lloyds Bank, now in its 25th year, gathers the views of over 1,500 UK companies, predominantly small to medium sized businesses, and tracks the overall “balance” of opinion on a range of important performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.