– Business confidence in the West Midlands fell 33 points to 17% – the lowest confidence of any UK nation or region in March
– Firms’ optimism in their own trading prospects dropped 44 points to 16%, while optimism in the economy decreased 24 points to 18%
– Overall UK confidence held steady at 42% in March – the same as in February

Business confidence in the West Midlands fell 33 points to 17% in March, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the West Midlands reported lower confidence in their own business prospects month-on-month, down 44 points at 16%. When taken alongside their optimism in the economy, down 24 points to 18%, this gives a headline confidence reading of 17% (vs. 50% in February).

Looking ahead to the next six months, businesses in the West Midlands identified their top target areas for growth as investing in their team, for example, by hiring new staff or investing in training (41%), evolving their offering, including introducing new products or services (41%) and investing in sustainability measures (35%).

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

National picture

Overall UK business confidence registered 42% in March, the same as in February, as firms’ confidence in their own trading prospects (49%) held steady, and confidence in the economy strengthened by one point (35%).

Yorkshire and the Humber was the most confident UK nation or region in March (60%), followed by the North East (56%) and London (52%).

Sector Insights

Services confidence fell 5 points to 40%, the first decline since December. That drop, however, was offset by rises in confidence in the manufacturing, retail and construction sectors.

The gains in manufacturing (up 1 point to 41%) and construction (up 2 points to 40%) were relatively modest and confidence remained below levels seen at the start of 2024. Firms in the retail sector reported improved confidence (up 5 points to 45%), which was the strongest result for over two years.

Dave Atkinson, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “While confidence has fallen this month, it’s encouraging that many businesses are still looking towards growth opportunities, whether investing in their teams or launching new products and services.

“This tenacity, resilience and focus on growth – coupled with maintaining a laser-focus on healthy working capital – will help ensure businesses are in the strongest possible position to make the most of upswings in demand, and manage any slower periods.

“Although these remain challenging and fast-changing economic conditions, there are bright spots on the horizon, including slowing inflation. We’ll continue to be by firms’ side as they navigate whatever lies ahead.”

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “With businesses reporting 42% confidence in March, this month’s figures maintain the recent improvement bringing a positive end to the first quarter of the year. Firms are showing increasing resilience which is reflected in their easing concern about supply chain disruption and energy prices.

“Businesses also continue to signal optimistic hiring intentions, although slightly down on previous months. It’s possible the impending minimum wage rises in April are beginning to come into sharper focus for businesses – especially smaller firms.

“Among the regions there was a mixed picture. Following unusually low confidence in February, London bounced back with a 14-point increase to bring the capital back in line with typical figures reported for the area, although the greatest confidence was shown by businesses in Yorkshire & the Humber who reported a 29-point rise, making it the most confident region overall. However, businesses in the Midlands saw a significant fall which seems to be an outlier compared to recent results.

“Overall, the Barometer across the quarter suggests that we could begin to see more optimistic economic growth in 2024 than seen in recent years, although medium-term challenges remain.”