Business confidence remains at record low in West Midlands

Coventry skyline

Business confidence in the West Midlands rose two points during May to -23%, although remained among record lows, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies’ confidence in their own business prospects remained stable month-on-month at -15%. When taken alongside their views of the economy overall, this gives a headline confidence reading of -23%.

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

In an illustration of the impact COVID-19 is having on the region’s business, the majority of firms continued to see demand negatively affected during May, but with some signs of improvement month-on-month. Though 71% reported experiencing a fall in demand for their products and services, this was down eight points on the month before. However, just 4% experienced an increase in demand, down on 9% in April.

The number of firms in the region operating at less than 50% capacity decreased three points to 41%. Almost a quarter of businesses (24%) weren’t operating at all, a decrease of four points on April.

Of the 76% of businesses reporting disruption to their supply chain during May, 29% expected the situation to improve within three months, while just 5% expected it would take more than 12 months to return to normal levels.

Amanda Dorel, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “It’s encouraging to see that the outlook of West Midlands firms hasn’t fallen further after dropping sharply in April. There are signs that some businesses are beginning to restart operations and that fewer are experiencing a subdued demand than in April.

“We’ll be by the side of the region’s businesses as they navigate their way through this difficult period and start to look to the future.”

National overview

Across the UK, business confidence held steady month-on-month, dipping just one point to 33%. The North East and London both saw confidence rise month-on-month, scoring the joint-highest confidence reading at -20%. The South West recorded lowest confidence at        -51%, compared to -35% the month prior.

From a regional perspective, despite all being in negative sentiment, six of the 12 regions reported a higher confidence in May. The North East was the least negative region at -20%. The South West was the most negative region at -51% followed by the South East at -45%.

In May, the construction sector saw the sharpest decline, falling 24 percentage points to -44%. However, all the three other major sectors saw a modest increase. The retail sector increased eight points to -25%, while manufacturing rose to -27% and services saw a small increase of four points to -18%.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Despite the results partly capturing the period since the Government’s announcement of an initial easing of restrictions, trading conditions remain difficult for most firms. Nevertheless, a further relaxation of constraints will enable more businesses to resume their activities.”