Gloom lifts slightly as survey shows marked bounce back in business confidence in South West

July 7, 2020

Business confidence has bounced back stronger in the South West than any other part of the UK, according to a new survey – but many firms remain gloomy and one in 10 expects to stay closed due to the coronavirus pandemic.

The monthly Business Barometer from Lloyds Bank Commercial Banking had shown a huge drop in overall confidence among the region’s firms in May. The 16-point slump made the South West the UK’s least optimistic region. 

However, figures released this week from June’s survey showed South West firms’ confidence in their prospects over the next month had rebounded by 27 points – higher than any other region – to minus 20.

Their view of the wider economy was even more upbeat, with optimism in its performance 40 points higher than in May. Taken together, these findings give the South West a confidence rate of minus 24 – a big improvement on May’s figure of minus 40 and better than the national average in June of minus 30.

The South West is now the UK’s fourth most optimistic region behind the West Midlands (minus 18) and Yorkshire & the Humber and the North East (both minus 23).

Some 43% of South West firms said they expected to be operating at more than half their capacity by the end of June – although worryingly 10% did not expect to be operating at all.

Just under a fifth said it would take them up to six months until they were back to pre Covid-19 operating levels, although 8% expect it to take more than a year.

While 63% suffered a drop in demand for their products and services in June, this was an improvement of 10 points on May. Just 5% experienced an increase in demand, up three points on the month before.

Of the 78% of businesses reporting disruption to their supply chain last month, a quarter expected the situation to improve within six months. Only 2% expect it to take more than 12 months to return to normal levels.

Social distancing is an issue for some businesses, with 17% feeling they could not operate at full capacity while complying with the government guidelines. However, 58% said it was not a problem.

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

Lloyds Bank Commercial Banking South West regional director David Beaumont, pictured, said: “Although businesses in our region continue to face significant pressure as a result of the coronavirus, this month’s more optimistic Barometer reading points to very early signs of recovery.

“Although the South West has been hit hard by the crisis, the anticipated reopening of sectors key to the region’s economy, particularly hospitality and tourism, may help to buoy sentiment further in the coming weeks.”

Lloyds Bank Commercial Banking senior economist Hann-Ju Ho said while the results suggested the economy may be starting to see some improvement, trading conditions remained difficult for most firms as the majority were still experiencing disruption to supply chains.

“Hopefully the recent government announcement of further relaxation of restrictions and the slight easing of social distancing measures will enable more businesses to reach their capacity and resume their usual activities, which we would expect to be reflected in further improvements to optimism next month,” he said.

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