Business confidence dips by 3 per cent in West Midlands as retail tax increases take effect

Business confidence in the West Midlands fell three points during May to 50 per cent, in line with the national UK average.

Confidence for businesses in the retail sector fell to its lowest level since January, down to 40 per cent, as increases to national minimum wage and employer-based national insurance contributions took effect at the beginning of April.

The figures were supplied by the latest Business Barometer from Lloyds, which surveys 1,200 businesses monthly, has been running since 2002 and provides early signals about UK economic trends both regionally and nationwide.  

Companies in the West Midlands reported lower confidence in their own business prospects month-on-month, down four points at 51 per cent. When taken alongside their optimism in the economy, down two points to 49 per cent, this gives a headline confidence reading of 50 per cent. 

Dave Atkinson, regional director for the West Midlands at Lloyds, said: "While confidence has dipped, it remains resilient and in line with the national average.  

“Most importantly, businesses across the region are still focused on their growth strategies and planning new investments – from entering new markets to investing in their people."

Looking ahead to the next six months, businesses in the West Midlands identified their top target areas for growth as expanding into new markets (49 per cent), investing in their team, for example through training and development (44 per cent), and evolving their offering, for example by introducing new products and services (33 per cent). 

Nationally, overall UK business confidence increased 11 points in May to 50 per cent – its highest level since August 2024. 

Firms’ optimism in their own trading prospects strengthened six points to 56 per cent, while their confidence in the wider economy also climbed 16 points to 44 per cent.  

The East Midlands was the most confident UK nation or region in May (66 per cent), followed closely by the North East (65 per cent).  

Construction firms’ confidence rose to a nine-month high of 56 per cent, while those in the service sector reported a one-year high of 54 per cent. Manufacturing confidence also rose by two points to 40 per cent. However, retail confidence fell by five points to 40 per cent, the lowest level since January this year.  

Hann-Ju Ho, senior economist, Lloyds Commercial Banking, said: "The rebound in business confidence suggests that firms might be in a stronger position for the next quarter. The rise in confidence is driven by a sharp increase in economic optimism, reflecting the recovery in financial markets amid more promising prospects for potential global trade agreements.  

"Equally as encouragingly is the fact that trading prospects, wage expectations and hiring intentions also saw improvements this month. The positive trends in these metrics are important signals for potential growth and resilience in the business community and the wider economy. While we know that fluctuations do occur month on month and the global economic outlook remains uncertain, this month’s increase in confidence is an encouraging sign."