South West firms now UK’s least confident as Covid-19 hits region hard

May 29, 2020

The coronavirus pandemic has dealt a severe blow to confidence levels among South West firms – with the region now the UK’s least optimistic, according to the gloomy results of another survey.

Overall confidence slumped by 16 points during the past month to minus 51% – an unenviable record for Lloyds Bank Commercial Banking’s Business Barometer. 

While companies in the region reported marginally higher confidence levels in their own business prospects month-on-month at minus 35% – against minus 40% in April – when taken alongside their views on the wider economy, the region dropped to last place among UK regions.

In a reflection of how rapidly conditions have changed, just two months ago the figures for overall confidence and businesses’ own prospects were well into positive territory at plus 16%.

The Business Barometer questions 1,200 businesses nationwide every month, providing early signals of UK economic trends.

May’s results, released today, paint a particularly dire picture of the national and regional economies – significantly for the South West, which is traditionally one of the most upbeat parts of the country.

Lloyds said the devastating impact of Covid-19 on industries linked to tourism had hit the South West hard.

Just 2% of South West firms reported an increase in demand for their products and services during the month – down 11 points on April – while almost three quarters (73%) suffering lower demand – six points higher on the month before.

Almost half the regions firms (49%) are now operating at under 50% capacity – an increase of 14 points on April – while one in seven have closed completely. 

Of the 70% of businesses reporting disruption to their supply chain during May, 18% expected the situation to improve within six months. Worryingly, 11% forecast that it would take more than 12 months to return to normal levels.

Lloyds Bank Commercial Banking South West regional director David Beaumont, pictured, said: “Business confidence in the South West has been the hardest hit in the country during May.

The region’s economy relies heavily on tourism, a sector that has been heavily impacted by the shutdown, which would otherwise be gearing up for the summer season.”

Across the UK, business confidence held steady month-on-month, dipping just one point to minus 33%. The North East and London both registered increases in confidence month on month, scoring the joint-highest confidence reading at minus 20%.

More details of how the pandemic has hit the South West’s small and medium-sized businesses emerged from the results of another survey this week.

Aldermore Bank’s research reveals the average SME in the region has lost 34% of its income as a result of Covid-19, with 23% suffering a decrease of more than 70%. Some 14% said the pandemic had already caused long-term damage.

The report also shed light on the strategies put in place by the region’s SMEs to cope. These include:

  • Decreasing operating costs and discretionary spending (25%)
  • Furloughing staff (22%)
  • Withdrew savings (17%)
  • Drawing on capital (17%)
  • Applying for a Coronavirus Business Interruption Loan (12%).

Some 61% of SMEs in the region have also explored ways of increasing income, including moving more business online (20%) and investing in new technology to operate remotely (17%).

At the same time, 28% of SMEs have adjusted their business plans to reflect the ‘new normal’.

Aldermore group managing director, business finance, Tim Boag said: “Businesses are having to survive in an environment which has never been more challenging or uncertain.

“The situation is continuously changing, and many SME business owners are having to swiftly adapt by finding ways to diversify their products and services, as well as cutting costs, managing supply chain arrangements, and furloughing staff in order to survive.”

The Aldermore research shows, across the UK, the hardest hit businesses have been those in the hospitality and leisure industry, with an average loss of 53% of their income, followed closely by the food and drink industry, with an average loss of 49%.



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