South West business confidence falls sharply as firms face global uncertainty
Business confidence in the South West fell sharply in April, making it one of only two UK regions and nations sitting below the long-term average, according to the latest Lloyds Business Barometer.
The monthly survey found that confidence among South West firms dropped by 24 percentage points to 24%, placing the region 11th out of 12 UK regions and nations.
Only Northern Ireland ranked lower, with confidence falling to 10%. By contrast, the East Midlands was the most confident region at 53%, followed by London at 51% and the West Midlands at 50%.
The figures suggest businesses across Bristol and the wider South West are feeling the pressure from a more uncertain economic environment, with concerns around inflation, global instability, interest rates and rising costs weighing on sentiment.
Across the UK, overall business confidence fell by 11 points to 44% in April. Despite the fall, the national figure remains above the long-term average of 30%.
Confidence in the wider economy saw the steepest decline since April 2020, falling 17 points to 33%. Lloyds said 56% of businesses surveyed were optimistic about the wider economy, down nine points, while 23% said they were more pessimistic, up eight points.
Businesses’ own trading outlook weakened more modestly, falling six points to 54%. Nearly two-thirds of firms, 63%, said they still expect stronger output over the year ahead, while 9% expect weaker activity.
Lloyds said the main reasons given by firms expecting activity to fall were economic uncertainty, higher cost pressures and weaker customer demand.
Amanda Murphy, CEO for Lloyds Business and Commercial Banking said:
While sentiment declined, it remained above the long-term average, with nearly two-thirds expecting stronger output in the coming year.
UK businesses are resilient and adept at deploying strategies to defend growth in uncertain conditions. Over the past month, we’ve seen them opt for flexibility wherever possible.
They’re building contingency into their short and medium-term plans, rather than expecting a rapid return to normal. Protecting margins has become more important. That means tougher cost scrutiny and a greater focus on balancing growth with profitability.
In this environment, as with other recent market disruptions, we continue to observe that sustainable success comes from discipline, resilience and clarity about what really drives long term value.
The latest barometer also found that investment appetite remained broadly stable, with businesses continuing to look at opportunities in technology, training and artificial intelligence.
More than a third of firms said they were considering entering new markets, although Lloyds said this was lower than earlier in the year.
Staffing and wage expectations were also relatively stable. A majority of firms, 57%, said they planned to increase headcount, while 17% expected to reduce staffing levels.
Hann-Ju Ho, senior economist at Lloyds Commercial Banking, said:
Business confidence fell back in April as firms assessed a more uncertain global backdrop.
Fewer businesses said they were aspiring to enter new markets, 39% vs 43% in March, which also could be linked to heightened global uncertainty following the conflict in the Middle East.
What’s encouraging to see is that firms own internal measures have remained more stable this month, suggesting that they are adept at weathering uncertainty without resorting to significant changes.
The Lloyds Business Barometer is based on responses from 1,200 UK companies each month, covering all industry sectors, regions and firm sizes with annual turnover above £250,000. Fieldwork for the April report was carried out by Ipsos between 1 and 16 April.
