Business confidence in the South West has jumped significantly as the coronavirus pandemic lockdown is eased and tourism and hospitality businesses can look forward to reopening.
The latest Business Barometer from Lloyds Bank Commercial Banking showed confidence rose 27 points during June 2020 – the biggest increase of all UK regions.
Companies in the South West reported higher confidence in their business prospects month-on-month at -20%, while economic optimism bounced back by 40 points to -28%. Together, this gives a headline confidence reading of -24%.
But the picture has to be seen against a background of falling demand and supply chain disruption, all consequences of the lockdown.
And when asked about the impact of coronavirus on their business, one in four (43%) said they expect to be operating at more than 50% of capacity by the end of June, though one in 10 (10%) didn’t expect to be operating at all.
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A fifth (19%) said it would take up to six months until they were back to operating at pre-Covid-19 levels, although 8% expect it to take more than 12 months.
Almost a fifth (17%) of South West businesses don’t feel that they could operate at full capacity while complying with social distancing guidelines – though more than half (58%) saying they could comply with the rules.
The majority of firms continued to see demand fall during June, but the picture did improve month-on-month. While 63% experienced a drop in demand for their products and services, this was down 10 points on May. Meanwhile, 5% experienced an increase in demand, up three points on the month before.
Of the 78% of businesses reporting disruption to their supply chain during June, a quarter (25%) expected the situation to improve within six months. Only 2% expected it would take more than 12 months to return to normal levels.
David Beaumont, regional director for the South West at Lloyds Bank Commercial Banking, 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.
“We remain by the side of local businesses as they look to the future, and to recovery.”
The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.
Across the UK, business confidence grew marginally month-on-month, rising three points to -30%. The West Midlands was the least pessimistic region at -18%, followed jointly by Yorkshire & the Humber and the North East at -23%. Scotland was the most pessimistic, with confidence dropping eight points month-on-month to -41%.
In June, the construction sector rebounded strongly, increasing 30 percentage points to -14%. The retail sector increased two points to -23% and manufacturing saw an improvement at -35%. These were the highest levels seen since March, however, other services fell to -36% largely reflecting the impact on the hospitality and education sectors.
Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking, said: “While the results suggest the economy may be starting to see some improvement, trading conditions remain difficult for most firms as the majority are 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.”
