West Midlands businesses amongst most confident in the UK

Business confidence in the West Midlands has risen over the past six months making it the third most confident region in the UK, encouraging firms to increase staff pay in the coming year, according to the latest Business in Britain report from Lloyds Bank.

Business confidence in the West Midlands – calculated as an average of respondents’ expected sales, orders and profits over the next six months – increased from 22 per cent in July 2017 to 28 per cent.

As a result, the net balance of firms expecting to increase pay almost tripled, growing from 11 per cent to 29 per cent – although firms expecting to hire more staff only increased by one point to 14 per cent in comparison to July 2017.

However the region faces some challenges, with the number of businesses experiencing difficulty finding skilled workers remaining high at 44 per cent. Coupled with this is an expected decline in investment as the net balance of firms looking to grow investment in the next six months decreased by three points to 11 per cent.

The Business in Britain report, now in its 26th year, gathers the views of more than 1,500 UK companies, predominantly small to medium sized businesses, and tracks a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

Mixed picture across the UK

Across the UK, the West Midlands was amongst the most confident regions. Business confidence was highest in the North East (38 per cent) and the North West (31 per cent), whilst the lowest level of confidence was recorded in Yorkshire and the Humber (15 per cent).

Glen Wilson, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “After a strong year of growth, business confidence has increased in the West Midlands, placing the region amongst the most confident in the UK. It’s encouraging to see that many are continuing to plan for future growth over the next 12 months.

“Despite this, businesses are facing challenges. There’s a reluctance to increase headcount as many firms are still struggling to recruit skilled workers and a small decline in expected investment in the next six months..

“Manufacturing remains the most confident sector across the country, which is great news for local firms as manufacturing is at the heart of the local economy in the West Midlands.”

Risks ahead

Weaker demand for UK products is now the single greatest risk to firms in the West Midlands in the next six months, cited by 26 per cent of firms in the region, up from 22 per cent in July.

The proportion of West Midlands firms reporting economic and political uncertainty as their greatest risk increased to 18 per cent from 17 per cent and 10 per cent from six per cent, respectively.

Uncertainty around Brexit negotiations continue

The share of West Midlands firms that are confident about business interests being protected or promoted in Brexit negotiations fell to 55 per cent from 62 per cent previously, but remains higher than the share of businesses expressing a lack of confidence, which increased to 21 per cent from 14 per cent.

When asked about the impact of a ‘no trade’ agreement with the EU on their business, overall, 22 per cent of West Midlands firms said that ‘no deal’ would be positive and 37 per cent said that it would be negative.

Confidence begins to grow in sectors that rely on domestic demand

Nationally, business confidence was highest in manufacturing, while sectors more dependent on domestic demand, such as hospitality, leisure, and retail and wholesale also recorded gains.

The only sector that reported a significant fall was construction, in which confidence dropped from 31 per cent to 14 per cent.