The latest Business Confidence Monitor (BCM) for Wales paints a challenging picture, with confidence falling sharply to a near four-year low and businesses facing growing pressures from labour and energy costs.
While companies expect domestic sales and profits to improve over the year ahead, many are balancing optimism about future opportunities with concerns about costs, demand and wider geopolitical uncertainty.
That picture is echoed in conversations with members across Wales. We've been hearing about the impact of rising employment costs, pressure on customers' spending, skills shortages, investment decisions and uncertainty created by global events. These member discussions really do bring the reality behind the numbers to life.
Five themes stand out. Here’s what we’re hearing from Welsh businesses.
1. Uncertainty is weighing on confidence
Business confidence in Wales fell sharply during the quarter, with international developments, particularly conflict in the Middle East and its impact on energy markets, adding to concerns about the wider economic outlook. Businesses are continuing to plan and invest, but many are taking a more cautious approach to growth decisions.
2. Labour and energy costs remain major pressures
Labour costs were the most commonly reported challenge among Welsh businesses, while energy costs rose sharply up the agenda. Many organisations are managing higher employment costs alongside continued inflationary pressures and are finding it difficult to fully recover those costs through price increases.
3. Customer demand is becoming a growing concern
More than half of Welsh businesses cited customer demand as a growing challenge – the highest proportion of any UK region. This is contributing to cautious pricing decisions, with many businesses reluctant to pass on higher costs for fear of affecting sales volumes and customer relationships.
4. Skills and workforce challenges persist
Although employment growth remains relatively strong, businesses continue to report difficulties finding both management and non-management skills. Recruiting and retaining the right talent remains an important issue as organisations look to maintain productivity and support future growth.
5. There is still ambition to invest and grow
Despite weaker confidence, Welsh businesses expect stronger domestic sales, profits and capital investment over the coming year. While some are scaling back research and development (R&D) plans, many organisations continue to look for opportunities to invest, innovate and position themselves for future growth.
What is this telling us about Wales
What stands out is that Welsh businesses are not lacking ambition. Even in a more difficult trading environment, business owners and leaders are reviewing their workforce plans, managing costs carefully, exploring new opportunities and investing where they can. While confidence remains under pressure, there is a clear determination to adapt and build for the future.
BCM report
Read the full Wales Business Confidence Monitor report for the detailed survey findings and regional economic analysis
