Substantial increase in South West business optimism flagged up by third survey in less than two weeks

May 8, 2024

Another business survey has pointed to a dramatic bounce back in confidence among South West firms as the outlook on inflation and interest rates improves.

Results of the quarterly survey by the Federation of Small Businesses (FSB) show optimism levels soared by 40 percentage points to their highest level since October 2021. 

As a result, the South West has gone from the least positive region of the country to above the UK average.

The remarkable turnaround in firms’ expected fortunes shown by the FSB survey echoes the results of two other recent regional surveys.

Both the latest Business Confidence Monitor from the ICAEW, the group representing accountants across England and Wales, and Lloyds Bank’s Commercial Banking Business Barometer showed optimism increasing rapidly on the back of expectations that lower inflation will trigger strong sales and profits growth.

According to the ICAEW monitor, confidence among the region’s firms surged over the past six months at more than three times its usual rate, while Lloyds’ barometer showed optimism soared by 27 percentage points last month to 45%. 

The FSB, Britain’s biggest business group, said in addition to the sharp rise in confidence levels, 48% of the small firms polled in the South West said their aspirations for the next 12 months were to grow ‘either rapidly or moderately’ – an increase of 10 percentage points on this time last year.

Meanwhile, more small business owners said their intention was to increase staff numbers in the forthcoming quarter than reduce their them.

However, there were still some concerns among these firms, with 63% naming the UK’s general economic conditions in the UK and 35% labour costs as the biggest perceived barriers to growth over the coming 12 months. Other concerns were over consumer demand (32%), utility costs (27%), and the tax burden (25%).

FSB South West chair Lee Nathan, pictured, welcomed the report’s generally upbeat news about regional positivity.

“Our quarterly reports are really important indicators of the mood of the local small business community and for too long now we have seen disappointing figures,” he said. “To see such a dramatic change for the start of 2024 therefore is a real tonic and we hope it will suggest we may just be turning some sort of corner at last.

“That surge has also seen the region climb well away from the bottom of the confidence league which is also good news for the perception of South West business strength as a whole

“The fall in inflation, the stabilisation in the energy market and the genuine hope that interest rates may start to come down again have all probably helped to fuel some of the change in attitude and it is definitely to be welcomed after what has been a very difficult couple of years in this region.

“Problems still remain of course – investment hopes are quite low and far too many businesses are still considering downsizing or even closing in the region – but in the context of what we saw throughout both 2022 and 2023 we have to feel a sense of some relief about the more upbeat response we have had from the South West businesses surveyed.”

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