Q3: Wales the only region with confidence in positive territory in Q3 2025.
The latest national Business Confidence Monitor (BCM) shows that business sentiment deteriorated further into negative territory in Q3 2025. This increased pessimism is underpinned by elevated concern over the tax burden, as well as above-average inflation and weak domestic and exports sales growth eroding businesses’ profit margins.
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 14 July to 24 September 2025.
- Sentiment in Wales climbed out of negative territory in Q3 2025, rising to +0.9. It was the only UK region to record a positive score.
- Domestic sales growth lagged the national average in Q3 2025 and exports declined, but businesses in Wales expect sharp rises in both types of sales.
- The tax burden remains the most prominent challenge, with the proportion of Welsh companies citing the issue reaching a new survey record high.
- Annual input price inflation remains elevated with above average rates projected for the year ahead.
- Welsh businesses reported only modest employment growth in the 12 months to Q3 2025, but expect to increase their staff levels faster than any other region.
- Companies in Wales slowed capital investment and R&D budget growth significantly in the year to Q3 2025 and improvements planned for next year are lower than their respective historical and national averages.
Business confidence in Wales
Sentiment in Wales improved for the second quarter in a row in Q3 2025 and was the only UK region with a positive score. The Business Confidence Index climbed out of negative territory, rising to +0.9 from -3.7 in Q2 2025 and above the UK average (-7.3). Despite this uplift, sentiment was still below the Welsh historical average of +3.0.
Part of this uplift may be linked to the announcements of significant investment for Wales this year with the Welsh Budget 2025/2026 releasing an extra £1.6bn for public services in March. The Crown Estate has also awarded seabed leases in the Celtic sea for floating offshore windfarms which should provide a significant boost to the region’s energy sector as well as boosting employment in Welsh coastal towns. Like most parts of the UK, the tax burden is weighing on sentiment in Wales but Welsh businesses are much less concerned about regulations than elsewhere in the UK and may also be contributing to the higher confidence score in the region..
Domestic sales and exports growth
Businesses in Wales reported annual domestic sales growth of 2.3% in Q3 2025, remaining below both the UK and the region’s historical averages (both 3.0%). However, while most other regions reduced their expectations for domestic sales growth over the coming year, Welsh companies lifted their projections to 5.7%, significantly outpacing the national average forecast of 4.0%.
Like most regions, the US “Liberation Day” tariff announcements caused significant disruption to Welsh exports. However, it was the only region to report a decline in annual exports in the year to Q3 2025. The 2.0% contraction was the first drop in annual exports since Q1 2021 and a joint survey-record low. However, in recent months some of the uncertainty in the global trading environment has dissipated, helped by progress on several UK trade deals, including deals with the US and EU. As a result, companies in Wales have raised their exports growth forecast to 4.7% for the coming year, significantly outpacing both the region’s historical average (2.7%) and the national average projection (3.6%).
Input prices, selling prices and profits growth
Companies in Wales reported that annual input price inflation remained at 4.1% in Q3 2025 and was among the highest rates of any UK region, outpacing the 3.8% increase reported nationally. Businesses in the region still expect that input price inflation will moderate significantly over the coming year, to 3.1%, however this growth is still above the regional historical average and the UK-wide projection (both 2.8%)
In the year to Q3 2025, Welsh companies increased the rate at which they raised their selling prices for the first time since Q1 2024. The 2.4% uplift in annual selling price inflation likely reflected businesses passing on to customers some of the increases to their operating costs, caused by April’s rise in employers’ National Insurance Contributions and the National Living Wage,. This increase was marginally ahead of the 2.2% growth recorded nationally. Over the next 12 months, businesses in Wales plan to reduce the rate at which they increase their selling prices over the coming year to 1.6%, close to the region’s historical average of 1.5%.
Despite the contraction in export sales and elevated annual input price inflation, Welsh businesses reported that profits growth increased for the second consecutive quarter in Q3 2025, to reach 4.7%. This rate was one of the strongest profit expansions of any UK region, more than double the UK average rise of 2.3% and only behind companies in the North East (4.9%). Over the year ahead the strong exports outlook, coupled with the predicted drop in input price inflation, supports Welsh businesses’ expectations of improved profits growth over the next 12 months. An anticipated rise of 5.4% is higher than projected for all other UK regions and double the region’s historical average (2.5%).
Labour market
Annual employment growth was reported at 0.5% in Q3 2025, with Wales lagging behind the UK average expansion of 0.9%. However, companies in Wales have the most optimistic labour market outlook and plan to increase their staff levels by 3.6% over the coming year. This projected growth rate is three times stronger than the region’s historical average and the rate forecast across the UK as a whole (both 1.2%).
Businesses in Wales reported annual wage growth of 2.9% in Q3 2025 and only marginally behind the average UK rise of 3.1%. Sticky wage inflation is reflected in the labour market challenges reported by companies in Q3 2025. The proportion of businesses citing the availability of non-management skills (33%) and staff turnover (31%) as growing challenges were well above their respective historical norms. Over the coming year, Welsh businesses expect wage inflation to cool slightly to 2.7%, matching the rise projected by companies UK-wide but still significantly above the historical regional average (2.1%).
Business challenges
The tax burden continues to be the most prominent challenge for businesses in Wales in Q3 2025. The proportion of businesses citing this issue increased to a new survey-record high of 57%, over three-times the region’s historical average of 18%. This latest spike comes as businesses in Wales are still dealing with April’s increase in employers’ National Insurance Contributions as well as being increasingly concerned about how the forthcoming Budget on 26 November could yet add to the increased costs they face.
Welsh companies report that they are still facing a challenging trading environment, with 42% of the companies surveyed in the region citing competition in the marketplace as a growing challenge. This proportion was the highest since Q1 2016 and a more widespread issue in Wales than reported in any other UK region. Another potential sign of more difficult trading conditions was the proportion of companies reporting late payments as a growing challenge. The issue was cited by 31% of Welsh businesses, the highest proportion of any UK region and above the historical average (24%). Meanwhile, regulatory requirements were a less prevalent concern for businesses in Wales than elsewhere in the UK, with 38% of companies reporting the issue in the region, below both the national average (47%) and the regional historical average (39%).
Investment
Companies in Wales significantly slowed their annual capital investment growth in the year to Q3 2025, to just 0.6%. This rate is less than a third of the historical average (1.9%) and among the weakest expansions in the UK, only outpacing the South East. However, companies plan to increase capital expenditure growth to 1.6%, similar to the projected UK average (1.7%).
The growth in R&D budgets followed a similar trend to capital investment expenditure, as growth slowed to just 0.2% in the 12 months to Q3 2025. This rate of growth was significantly below the region’s historical average (1.7%) and was among the weakest in the UK. While companies in Wales plan to lift their R&D budget growth to 1.4% over the coming year, this expansion is below the 1.6% growth forecast nationally.