Business confidence in the West Midlands fell 15 points during March to 32%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the region reported lower confidence in their own business prospects month-on-month, down 25 points at 17 per cent. When taken alongside their optimism in the economy, down five points to 47%, this gives a headline confidence reading of 32 per cent.
Despite the drop in confidence, West Midlands remain optimistic and businesses reported plans to target new growth opportunities in the next six months, including investing their teams, diversifying into new markets and evolving their offering to include a new product or service.
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 30 per cent of West Midlands businesses expect to increase staff levels over the next year, down 14 points on last month.
Overall UK business confidence dropped 11 points during March, from 44 per cent to 33 per cent. Firms’ outlook on their future trading prospects and optimism in the economy both also fell by 11 points on February’s reading. The net balance of businesses planning to create new jobs decreased slightly, by six points to 32 per cent.
Every UK region and nation reported positive confidence readings in March, with the exception of Wales which saw confidence drop from 29 per cent to -5 per cent. Only London, Yorkshire and the Humber and the North West reported a higher reading than last month, with London now the most optimistic region overall.
Dave Atkinson, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “Businesses across all parts of the UK are being affected by the increasingly uncertain economic and geo-political landscape, and those here in the West Midlands are no different. Resulting supply chain issues will have had an impact on our manufacturing firms in particular.
“However, it’s reassuring to see that on the whole firms remain confident and many are looking to hire more staff, and targets growth areas.“We’ll be by the side of local businesses to help them stay robust in the face of the current challenges and tap into the opportunities that come their way.”
From a sector perspective the impact of the war in Ukraine appears to have had the greatest impact on manufacturing and retail firms. Both sectors saw drops in confidence of 19 per cent from February’s highs (to 35 per cent and 28 per cent respectively). From a manufacturing perspective confidence levels are now at their lowest since last summer, while retail has fallen to a one-year low.
In the other sectors, services dropped by six points while construction dropped eight points to 43 per cent, but remained higher than at the start of the year.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “March’s data shows UK businesses are facing significant challenges from the impact of Russia’s invasion of Ukraine in increasing economic uncertainty and ongoing inflationary pressures. Following encouraging improvements at the start of the year, March’s fall in confidence is therefore disappointing, but not surprising.
“There are positives with the fact that confidence remains above the long-term average and it appears for now that growth will moderate. But it is difficult to gauge what the full impact will be and therefore businesses have become more cautious.”