Confidence returned to South West businesses in December for the first time since the start of the coronavirus pandemic as the UK began a vaccination programme – but the survey of companies was completed before a new strain of the virus pitched the nation into chaos.
The Lloyds Bank’s Business Barometer for December 2020 showed that overall confidence of firms in the South West rose 22 points in the month to 5%.
Companies in three of 12 UK nations and regions returned to net optimistic position for the first time since March, with the report showing the biggest month-on-month improvement in UK business confidence in four years after the vaccine roll-out began.
Business confidence in the South West moved to an overall optimistic position for the first time since the beginning of the pandemic in March, according to the Barometer from Lloyds Bank Commercial Banking.
Optimism towards the economy by South West firms increased 30 points month-on-month to 8%, while confidence in business prospects grew 15 points on November’s reading to 2%. Together, this gives a headline confidence reading of 5% - the highest in the UK.
Nevertheless, businesses’ hiring intentions showed that a net balance of 2% of businesses in the region expect to reduce staff levels during the next year, down 12 points on last month.
And the survey was completed just before Prime Minister Boris Johnson pitched London and the South East into a new Tier 4 restriction, locking down large sections of the economy, and nations worldwide began to ban travel from the UK after a new variant of Covid was running amok in South East England.
Speaking before the latest developments, David Beaumont, regional director for the South West at Lloyds Bank Commercial Banking, said: “It’s very encouraging to see business confidence return to optimistic levels for the first time since the start of the pandemic.
“This year has been incredibly challenging for the region’s business community and it’s great that the outlook appears positive as we head into the new year.”
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But with foresight he added: “However, we’re not out of the woods just yet. The prospect of tighter regional lockdown measures will further impact the region’s tourism and hospitality trade during one of the busiest months of the year.
“Nonetheless, the South West’s firms are strong and resilient and we’re continuing to stand by their side as they navigate the challenges ahead.”
The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.
Across the UK, overall confidence saw its largest monthly increase for more than four years in December, following vaccine progression announcements.
Confidence climbed by 17 points to -4% in November. Economic optimism jumped 23 points to -5%, while firms’ confidence about their trading prospects increased 11 points to -3%.
All 12 UK nations and regions saw a rise in overall confidence during December. The most marked improvements were reported in Scotland (up 29 points to -9%); the South West (up 22 points to 5%) and the West Midlands (up 22 points to 4%). The North East, South West and West Midlands all moved into net positive territory for the first time since March this year.
In the industry sectors, confidence reached the highest levels seen since the start of the pandemic. Manufacturing reported a strong rebound this month despite looming uncertainty during the survey period about the UK’s new trading arrangements with the EU, surging by 25 points, from -25% to 0%.
This was followed by a growth in confidence for construction, which rose by 18 points to -5%; services, which jumped by 16 points to -5% and the retail sector which reported an 11 point lift in confidence to -1%. Nevertheless, entering the holiday trading period, confidence in retail, as in other sectors, remains below the long-term average.
Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking, said: “The news of the vaccine progress has bolstered this month’s confidence figures, more than offsetting uncertainties around the UK’s new trading relationship with the EU.
“While confidence remains below average and significant challenges lie ahead, it is heartening to conclude a challenging year with a notable improvement in business sentiment and with the positive momentum hopefully continuing into 2021.”
