Business confidence in the South West falls more than half

Business confidence in the South West fell 25 points during September to 21%, the lowest level in six months, 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 23 points at 26%. When taken alongside their optimism in the economy, down 27 points to 16, this gives a headline confidence reading of 21%.

South West businesses identified their top target areas for growth in the next six months as evolving their products and services (40%), investing in their teams (31%), and diversifying into new markets (21%).

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

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

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Overall UK business confidence fell five points in September from 41% to 36%. Firms’ outlook on their own trading prospects remained strong at 41% despite a five-point drop on last month, and their optimism in the UK economy also remained robust at 30%, down by seven points on August’s reading.

Businesses hiring intentions remained upbeat with 26% of firms reporting plans to increase their staff levels over the next year, down five points on last month.

Companies in London reported the highest levels of business confidence for the second consecutive month at 44% (down eight points month-on-month). Firms in Yorkshire reported the second highest reading at 40% (up eight points month-on-month), followed by those in the North West at 38% (up four points month on month).

The fall in business confidence this month centred around the retail and services sectors, following strong sentiment in August. Retail confidence fell to 32% (down 12 points) dragged down in particular by trading prospects, while services confidence declined to 36% (down eight points).

Construction confidence also fell to 36% (down eight points). However, manufacturing was stronger, with confidence rising to a three-month high of 36% (up six points).

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: “Despite a drop in confidence for South West businesses, it encouraging to see firms looking within their own operations for growth opportunities. It’s fantastic that many firms exploring their product and service offerings too as they gear up for a busy final quarter of the year.

“As consumer confidence improves, businesses in the region will be looking to capitalise on the opportunities that an increase in spending could bring their way. Those who keep a close eye on margins, and manage their working capital effectively will be best placed to take advantage of these opportunities”

Mike Randall, CEO of Simply Asset Finance says: “A decline in business confidence should not overshadow the positive trends we’ve witnessed over the past 18 months.

“Notably, confidence levels have consistently remained above the 22-year average. The past year’s high inflationary environment has understandably raised concerns among small businesses, but it’s important to recognise that fluctuations in confidence levels are cyclical in nature. At Simply, we’ve observed that many businesses are using this period as an opportunity to take stock, regroup, and reassess their strategies to maintain a strong focus on their growth for the upcoming year.

“It’s vital that lenders help businesses navigate this temporary period of lower confidence so that, as we approach the new year, they will be ready to take advantage of emerging opportunities to regain their competitive edge.”