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Economic Insight

ICAEW Business Confidence Monitor (BCM): Wales

Q1: Confidence rebounds into positive territory

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.

  • Wales experienced one of the largest swings in confidence, with the index rising out of negative territory to reach +18.4 in Q1 2024.
  • Annual domestic and export sales growth continued to decline but improvements are expected in the year ahead, with both projected to exceed their historical average.
  • Input price inflation increased for the first time since Q2 2023, however, Welsh businesses expect cost pressures to revert to their downward trend in the year ahead. Salary growth also climbed, with companies experiencing one of the largest increases in wages in the UK.
  • Annual selling price inflation in Wales was the joint highest in the UK up to Q1 2024 and businesses expect this to ease but remain above the historic average. Profits growth has also moderated, but companies predict it will improve as cost pressures subside and sales improve.
  • Regulatory requirements are now the largest growing challenge facing companies in Wales after a considerable rise from Q4 2023, while concerns about bank charges dropped significantly from the previous quarter.
  • Businesses in Wales increased capital investment spending in line with the national average, while R&D budgets expanded at an increased rate. However, businesses plan to scale back growth in the year ahead.

Business confidence in Wales

Sentiment in Wales improved significantly in Q1 2024. The Business Confidence Index climbed out of negative territory from -6.7 in Q4 2023 to reach +18.4, its highest point since Q1 2022 and considerably higher than the historical average for Wales of +3.2.

Domestic sales and exports growth

Annual domestic sales growth slowed for a second consecutive quarter in Q1 2024, dropping to 2.1%, below the historical average for Wales (3.0%) and the weakest in the UK. However, businesses expect sales growth to recover in the year ahead, projecting growth of 4.4%, though this is somewhat lower than anticipated in other parts of the UK.

The rate of exports growth in Wales has also softened since Q4 2023, to 1.5% year-on-year. This rate of growth is notably weaker than the national average (2.8%) but companies in Wales foresee the growth rate to accelerate to 4.3% over the next 12 months, slightly lower than expected for the UK (4.7%) but well ahead of the historical average for Wales (2.8%).

Business challenges

Regulatory requirements have become the most widespread growing challenge in Wales, with 48% of companies reporting them as a growing concern, compared with 30% in the previous quarter. Customer demand remains a prevalent growing challenge, despite a modest fall from the previous quarter, with over a third of companies citing it as a growing challenge.

There were also notable drops in the proportion of Welsh companies citing bank charges and the tax burden as issues compared to Q4 2023, with the former falling under the historical average for the first time since Q3 2022.

Labour market

Companies in Wales experienced the slowest employment growth in the UK, with an annual increase of 1.1% in the year to Q1 2024. This somewhat sluggish performance is expected to continue this year, with growth of 1.3%, however, this is still broadly in line with the historical average. Linked to workforce growth, the availability of non-management skills remains one of the most prevalent challenges to Welsh businesses, reported by 24% in the latest quarter, up from 21% in Q4 2023.

It could also be the labour shortages that are supporting ongoing wage pressures. Along with the South West, Wales recorded the strongest salary growth in the UK over the year to Q1 2024, with a 4.6% rise. Despite a slight moderation expected in the year ahead, employers in Wales anticipate growth of 3.9% that would put the region in a similarly high position compared to other regions and nations and would be nearly double the historical average (2.0%) for Wales.

Input and selling prices, and profits growth

Contrary to the national trend, cost pressures deepened for companies in Wales in Q1 2024 as input price inflation rose to 5.1%; the first rise since Q2 2023. Welsh businesses expect input price increases to slow in the coming year, to 3.2%, however, this will still be the joint highest rate in the UK.

With businesses in Wales facing stronger than average cost and salary pressures it is not surprising that selling price growth also differed from the national trajectory, with prices in Wales rising substantially to 4.2%, up from 2.4% in Q4 2023. This was the joint highest price increase alongside the East of England. Prices are expected to moderate in the coming year to 2.7%, but this is still high by historical standards for Wales (1.4%).

As a result of weak sales growth and rising costs, Welsh companies reported comparatively modest profits growth of 1.5% in the year to Q1 2024, only outperforming companies in the North West. While businesses in Wales foresee an improved performance in the next 12 months, to 4.2%, this is still pessimistic compared to almost all other regions.


Capital investment growth in Wales matched the national average growth rate of 2.3% in the year to Q1 2024. Businesses plan to ease investment growth slightly to 1.5% this year, falling below the historic average for the region (1.9%) but consistent with the UK outlook. Companies raised their R&D budgets by 2.5% in the year to Q1 2024, outpacing the UK as a whole (2.0%). Like capital expenditure, R&D budget growth is expected to fall below the historic average for Welsh companies this year.

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