South West starts 2025 with rise in business confidence

Business confidence in the South West rose 13 points during January to 39%, according to the latest Business Barometer from Lloyds.

Companies in the South West reported improved confidence in their own business prospects month-on-month, up 20 points at 57%. When taken alongside their optimism in the economy, up six points to 20%, this gives a headline confidence reading of 39% (vs. 26% in December 2024).

A net balance of 25% of businesses in the region also expect to increase staff levels over the next year, up 10 points on last month.

Looking ahead to the next six months, South West businesses identified their top target areas for growth as evolving their offering, for example by introducing new products or services (45%), entering new markets (37%) and investing in their team, for instance through training (34%).

The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.

National picture

Overall, UK business confidence fell two points in January to 37%.

While firms’ optimism in their own trading prospects strengthened four points to 51%, their confidence in the wider economy dropped seven points to 24%.

For the third month in a row, London was the most confident UK nation or region in January (55%), with the West Midlands following behind (51%).

Sector Insights

There were similar falls in manufacturing, construction and retail this month, with a slight increase in services. Confidence fell to 38% in manufacturing (down 4 points), 36% in construction (down 5 points), and 40% in retail (down 3 points). However, confidence in services increased by 3 points to 38%. These results come within a general trend of larger confidence declines in retail and services in recent months. Within the services sector, confidence has notably fallen in hospitality but has remained more stable in business services and health-related services.

Amanda Dorel, regional director for the South West at Lloyds, said: “It’s great to see South West business confidence rebound as we kick off the year – with local sentiment now sitting above the UK average for the first time since June 2024.

“As local firms capitalise on this outlook, we’ll continue to be on their side, offering them the support they need to realise their ambitions and drive fresh growth, whether that’s by launching new products and services or upskilling their team.”

Hann-Ju Ho, senior economist, Lloyds Commercial Banking, said: “Changes in confidence can sometimes be sudden and sharp, but what we have seen recently has been a more gradual and measured decrease over time.

“The figures for trading prospects show promise with businesses signalling more resilience and assurance in their ability to weather perceived economic headwinds. The regional picture is similarly a cause for optimism, with seven regions reporting higher confidence, meaning it is the first time since July there has been more confidence rises than falls regionally.

“Elsewhere, the results for hiring prospects are in line with other trends from this month’s survey – dipping slightly by one point to 32%. Price expectations have fallen too, for the third month out of four.”