Business confidence in the South West has surged to its highest level since a quarterly survey began in 2004 with the region set to register the fastest growth in exports of anywhere in the UK, a new report has found.
The Institute of Chartered Accountants in England and Wales’ (ICAEW) Business Confidence Monitor (BCM) for the South West of England for Q3 2021 found confidence at 46, a record high on the quarterly index and broadly in line with the nationwide average.
Businesses in the South West expect the fastest export growth across the UK, while only firms in the East Midlands anticipate a sharper rise in domestic sales, the survey of chartered accountants found.
As demand grows, employment is predicted to increase at the fastest rate across the UK after contracting year-on-year in each of the past four quarters.
If achieved, this would also be the sharpest rise in the region since the survey began. In line with rising staff levels, average total salaries are also set to increase.
The high level of confidence likely reflected the sharp uptake in anti-Covid vaccines in the region, the gradual reopening of the economy and strong sales projections for next year, ICAEW said.
Meanwhile, nationally business confidence reached a record high for the second quarter running. This was underpinned primarily by expectations of strong sales growth in the year ahead, especially in the domestic market where a record rise of 7.4% is predicted.
However, challenges remain for businesses despite the upsurge in confidence. In the labour market, a higher proportion of firms cite staff turnover and the availability of non-management skills as growing problems, likely due to the reluctance of some workers to re-enter the labour force due to coronavirus uncertainty, making it harder for companies to find suitable candidates.
Businesses also cited regulatory requirements and transport problems as challenges, with COVID-19 related restrictions, Brexit disruptions and transport capacity likely factors for this.
Supply shortages and transport issues are also likely behind the uptick in input price inflation over the past 12 months, while businesses expect further increases in input price inflation over the next year. As a result, selling prices are set to rise and a strong sales forecast should be enough to ensure a growth in profits.
Beverley Waters, ICAEW regional director for South, South West and Wales, said: “These findings are good news for businesses in the South West, who tell us that they expect promising sales performance in the year to come. Businesses also expect staff numbers and salaries to rise, but continue to face challenges including from a lack of transport capacity.
“After a difficult year, the vaccine rollout and gradual reopening of the economy gives us hope, but a resurgence of the pandemic and the prospect of additional costs hitting businesses, such as rising interest rates and the winding down of furlough, could scupper the recovery.”
