Business confidence takes a hit in the South West

Amanda Dorel

Business confidence in the South West fell  during May, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the South West reported lower confidence in their own business prospects month-on-month, down two points at 51%. When taken alongside their optimism in the economy, down six points to 30%, this gives a headline confidence reading of 40% (vs. 45% in April).

Looking ahead to the next six months, South West businesses identified their top target areas for growth as evolving their offering (42%), investing in their teams, for example through training (34%), and entering new markets (27%).

The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. The data for this edition was collected between 1–16th May, before the UK general election was announced.

In May, overall UK business confidence reached its highest level since 2015 – rising by eight points to a net balance of 50%.

Businesses showed increased optimism in both their trading prospects (up nine points month-on-month to 54%) and the economy (up seven points to 46%). Firms’ trading outlook was the most optimistic in seven years, while economic optimism was the highest recorded since September 2021.

Similarly, there were particularly strong results reported in the construction and services sectors this month. Prospects in the construction sector jumped to 58% (up 20 points), the highest for 14 months, while in services, expected output increased to 57% (up 12 points). On the latter, it is the highest level since the survey was expanded in 2018. Expected business activity in the retail sector also improved to 49% (up three points).

Although trading prospects in manufacturing eased slightly to 49% (down three points), the underlying trend over the last three months remains positive.

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: “While overall confidence has dipped in May, it’s encouraging to see that most South West businesses are still optimistic when it comes to their own prospects.

“This is a reflection of the creativity and resilience of our region’s economy. As businesses continue to target growth – whether through launching new products or services, or entering new markets – we’ll continue to be by their side with our insight and funding to support their ambitions.”