Business West’s latest Quarterly Economic Survey (QES), which polled 301 businesses across the South West, reveals general economic conditions were the main source of concern (69%) for respondents. However, 62 percent express confidence in their prospects for the next 12 months. 

Over the past year, the QES results have consistently revealed a disparity in confidence levels between businesses' own prospects and their outlook for the broader UK economy. This trend persisted in Q4, with businesses expressing significantly higher confidence in their own growth potential compared to the national economic outlook.

Concerns about the national economy continue, with only 19% of businesses expressing confidence in the UK's economic outlook. Interest rates and the labour market remain within the top sources of concern for businesses.

The labour market remains a challenge, with 71% of respondents reporting difficulties in finding suitable staff. Skilled manual/technical and professional/managerial positions are particularly challenging to recruit for. 

Hiring activity increased in Q4, with 22% of participants reporting increases in their staff. 

The net balance of UK sales and orders returned to positive territory in Q4 (7% and 2%, respectively), indicating a recovery in domestic demand. Service sector businesses and manufacturers both reported improved domestic sales performance in Q4. 

International trade performance also returned to positive territory in Q4, with both export sales and orders reaching a net balance of 1%. Exporting manufacturers reported a net balance of international sales of 5%, suggesting a stronger recovery in the manufacturing sector. 

Business profitability expectations for the next 12 months remained positive, with almost half (48%) of participants anticipating improvement in their margins. 

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Matt Griffith, Director of Policy at Business West, said: “It’s certainly encouraging to see the resilience and adaptability of the steely-nerved South West business owner. It is a really challenging time for business owners across our region, yet the majority are confident in their own prospects. The easing of inflation and a potential peak in UK interest rates seem to have helped business sentiment, but stubborn labour market issues are persisting, making it harder for firms to grow and invest. 

“It’s good news too that the net balance of UK sales and orders, and international trade performance, have finally returned to positive territory after two years. However, there is a real lack of confidence in the UK’s economic outlook. Our survey clearly demonstrates the need for a more stable and supportive business environment.”

Local business commentary

Andy Fraser, Editor at Bristol Community Magazines, said,

"My dominant costs (print) have levelled off after a very turbulent two years in which they rose by some 40%, and aren't now predicted to change further to the extent that I'd have to revisit prices to my customers again. This stability has enabled me to hold and fix prices to existing customers for the next 12 months”.

Lynn Plant Client Services Director at Gloucestershire-based Mobex Exhibitions said,

“Our prices won’t change as we are holding this year’s prices to make sure we get our repeat business back.”

Marcus Kittridge, Director at Swindon-based family-run coffee shop, Baristocats, said,

“Due to price sensitivity, we could only pass on a small fraction of the increases in goods and energy costs. Even though general inflation has eased we will have to continue increasing prices by at least 10% per year for the next 3 just to claw back losses.”