Region’s business confidence remains among highest in UK

Business confidence in the West Midlands rose eight points during October to 27%, the third highest of all UK regions and nations behind only London and the North West.

According to the latest Business Barometer from Lloyds Bank Commercial Banking, companies in the region reported higher confidence in their own business prospects month-on-month, up 19 points at 39%.

When taken alongside their optimism in the economy, down two points to 15%, this gives a headline confidence reading of 27%.

West Midlands businesses identified their top target areas for growth in the next six months as investing in sustainability (38%), investing in their teams (37%) and evolving their offering (32%).

The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.

A net balance of 22% West Midlands businesses expect to increase staff levels over the next year, down four points on last month.

Overall UK business confidence fell one point during October to 15%, in line with the average over the last three months. Firms’ outlook on their future trading prospects was up two points to 27%, and a net balance of 21% are planning to create new jobs, up four points on last month. However, businesses optimism in the wider economy dropped three points to 2%.

Five UK regions and nations recorded a month-on-month increase in optimism in October. Along with the West Midlands, London (up 16 points to 49%), the North West (up 14 points to 28%) Wales (up nine points to 5%) and the East of England (up eight points to 9%) saw monthly increases, with London remaining the most optimistic region overall.

Dave Atkinson, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “Despite ongoing concerns about the cost of doing business, the resilience of firms here in the West Midlands is on show once again as they remain among the most confidence in the UK. Part of this could be down to their approach to scaling up, with the top growth opportunity among the region’s businesses now identified as investing in sustainability.

“For those looking to invest in green initiatives to help cut costs and target expansion, such as installing solar panels or investing in more sustainable machinery and equipment, there’s a range of funding and support to help businesses reduce their environmental impact, such as our own Clean Growth Financing Initiative.

“Whatever their industry and ambitions, we’ll be by the side of West Midlands firms to help them understand the options available and access the support they need to prosper.”

Business confidence in the manufacturing sector fell for the fifth month in a row, to 13%, down 1 percentage point, the lowest confidence level since February 2021. Confidence in the retail sector declined by 6 percentage points to 9%, while confidence in the services sector also fell to 16%, both the lowest levels since early 2021. However, the construction sector saw a 10 percentage point rise to 20%, although this level still remains weaker than in the first half of the year.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “While business confidence has marginally fallen this month, along with a drop in forward looking economic optimism, it is encouraging to see businesses still looking to increase their headcounts. However, cost pressures remain evident as businesses raise prices to protect their margins and wage pressure continue to be impactful. Given the recent turbulence in financial markets, it will be interesting to see how this will affect business confidence.”