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Economic Insight

ICAEW Business Confidence Monitor (BCM): South West

Q1: Strong sales growth supports growing confidence in the region

The latest national Business Confidence Monitor (BCM) for Q1 2024 shows a significant improvement in sentiment compared to weak yet positive confidence in the previous quarter and the average for 2023. The index rose above its pre-pandemic average for the first time since Q1 2022, as economic prospects brightened.

The survey results are based on 1,000 telephone interviews among ICAEW Chartered Accountants covering a range of UK sectors, regions and company sizes, ensuring a representative picture of the UK economy. The latest quarterly findings are based on the period 15 January to 22 March 2024.

  • Sentiment in the South West continued to improve in Q1 2024, moving further above the historic average for the region.
  • Companies in the South West recorded relatively strong domestic and exports sales growth, with both expected to improve in the coming year.
  • Input price inflation has eased significantly and businesses anticipate it will return to historical norms over the next 12 months. Selling prices have also moderated.
  • Wage pressures remain very high but strong sales growth and easing input cost pressures supported improved profits growth in the region.
  • Regulatory requirements are the most widespread growing challenge in the South West, following a sharp increase from Q4 2023, but customer demand remains a prevalent issue.
  • Companies in the South West expanded capital investment but plan to scale it back. The growth in R&D budgets has been weak but is expected to improve in the year ahead.

Business confidence in the South West

The Business Confidence Index for the South West rose for the second consecutive quarter, improving to +13.4 from +8.3 in Q4 2023, significantly above the historical average for the region (+4.1). However, sentiment in the South West is marginally behind the national average (+14.4).

Domestic sales and exports growth

Companies in the South West reported annual domestic sales growth of 4.0% to Q1 2024, a strong performance compared to most other UK nations and regions, and surpassing the historical average (3.1%). This robust expansion in domestic sales is anticipated to continue over the next year with an expected increase of 5.6%, outpacing the national average (5.2%).

The South West also saw relatively strong export growth of 3.6% in the 12 months to Q1 2024, ahead of the historical average of 2.7%. In the year ahead, export sales growth in the region is anticipated to accelerate by the fastest rate in the UK, with a 5.7% increase.

Business challenges

Regulatory requirements are now the most widespread growing challenge for companies in the South West, following a sharp increase in the proportion of businesses reporting the issue compared to Q4 2023, to 44%. Customer demand remains a prevalent issue, with 30% of companies seeing it as a growing challenge in Q1 2024.

Challenges relating to tax remain close to their historical high set last quarter, with 29% of businesses reporting it as an increasing concern. The availability of non-management skills also remains a prominent issue, and more so than in any other region, after a marginal increase from the previous quarter to 29%.

Labour market

Businesses in the South West lifted employment growth in the year to Q1 2024 to 2.7%, nearly doubling the historical average (1.4%), the strongest rise in the UK. Businesses are optimistic about recruitment for the year ahead and employment growth is expected to continue at a similar pace next year, projected at 2.8%, compared to the UK average of 2.2%.

With rising labour market demand and evidence of some skills shortages, upward pressure on wages is also apparent. Indeed, the South West also experienced the sharpest increase in salaries over the past 12 months, with an increase of 4.6%. However, companies anticipate that the rate of pay growth will slow in the year ahead to 3.7%, but this projection is significantly above the historical growth rate for the region of 2.1%.

Input price, selling prices and profits growth

Input price inflation has eased significantly, rising by 4.1% in the past 12 months, with businesses in the South West experiencing slower growth than all parts of the UK, apart from Scotland. Companies expect input price increases will slow further to 2.9% in the year ahead, broadly in line with the historical average (2.8%).

As input prices have eased, businesses in the South West continued to moderate their selling price increases, falling to 3.0% over the year to Q1 2024. Businesses plan more modest growth of 2.7% in the coming year, broadly in line with the national average (2.6%).

The considerable easing of cost pressures and strong sales growth supported strong profits growth in the year to Q1 2024. Indeed, the South West recorded profits growth of 4.6% in the period, nearly doubling the national average of 2.4%. Profits growth is expected to rise further over the coming year, reaching 5.5% and well ahead of the historical norm of 3.1%.


Rising confidence, profits and sales encouraged business investment in the region. After reducing their investment in Q4 2023, companies in the South West expanded their capital spending by 2.6% in Q1 2024, outperforming the historical average of 1.9%. However, over the next year, growth is expected to be scaled back to 1.8%, marginally outpacing the national average of 1.6%.

Despite the pick-up in investment, companies lifted R&D budgets only marginally in Q1 2024 and growth was one of the weakest regions in the UK, at 1.5% year-on-year. Businesses plan to increase R&D budgets, expecting growth of 2.1% in the year ahead, matching the historical average.

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