ICAEW.com works better with JavaScript enabled.
Economic Insight

ICAEW Business Confidence Monitor (BCM): Wales

Wales’ Business Confidence Index rises, but remains negative

The latest Business Confidence Monitor (BCM) shows business confidence falling further. Difficult economic conditions continue, though there has been some easing in the political turmoil of the previous period, which seriously unsettled financial markets. As a result, some economic stability has been restored, even though September’s events have resulted in higher interest rates, taxes and government borrowing, and lower government spending. But the global economic background continues to look very challenging.

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 interviewing is continuous, the latest findings are based on the period 17 October to 16 December 2022.

  • The Business Confidence Index for Wales has improved slightly in the latest survey period but nonetheless, remains some way into negative territory.
  • Businesses are reporting rises in both domestic sales and exports, but expect the rate of growth to moderate in the year ahead.
  • Labour market difficulties continue to be the most widely cited challenges for Welsh businesses.
  • Partly as a result, salaries are rising at the fastest rate since the start of the survey, adding to the cost pressures caused by record input price inflation.
  • Among other challenges, the proportions of businesses reporting bank charges and access to capital as growing issues have surged in the latest survey period.
  • Capital investment growth compares favourably with other UK nations and regions in the latest survey period, although growth in Research & Development (R&D) budgets is more subdued.

Business confidence in Wales

Wales’ Business Confidence Index has improved slightly in the latest survey period, contrasting with the falls in every other UK nation or region, with the exception of the South West. However, at -13.6 the index remains firmly in negative territory and has fallen markedly from its peak of +47.1 in mid-2021.

Domestic sales and exports growth

Domestic sales growth is in positive territory, with a rise of 6.0% in the latest survey period. A similar pace of increase is also apparent for exports, at 6.1%, which outpaced the rest of the UK. That said, the outlook for the year ahead is more modest. Domestic sales are forecast to rise at the slower rate of 4.1%, while exports are expected to grow by 5.5%.

Business challenges

Although recruitment challenges have continued to ease from the record highs in recent survey periods, they are still widespread among businesses in Wales. Staff turnover and the availability of non-management skills remain the most prominent growing challenges, with 40% and 39% of businesses citing the issues respectively. Problems with the availability of management skills were reported by 32% of businesses, making the issue more prevalent in Wales than anywhere else in the UK. 

Despite a healthy rise in sales, customer demand has become a more pressing challenge in recent survey periods and is now cited by 33% of businesses. Access to capital has surged as a concern in the most recent survey and is now reported by 21% of businesses, up from just 6% in the previous period. Difficulties in domestic financial markets, along with interest rate rises, may help to explain this. Bank charges have also risen in prominence, and the proportion of companies referencing these as a growing source of difficulty now stands at 23%, twice the historical average for companies in Wales. Issues relating to the tax burden are also elevated when compared to historical norms, with 22% of companies citing this.

Labour market

Given the widespread labour market problems currently faced by businesses, and the surge in inflation, it is unsurprising that average total salaries are growing at a record rate (4.2%). Businesses expect a further 4.0% rise over the year ahead, which is more than twice the historical average for companies in Wales.

Businesses have also increased their staff levels by 3.8%, outpacing the rate of expansion seen elsewhere in the UK, with the exception of the East Midlands. However, the outlook for the next year is more modest, with a slower rise of 2.4% planned.

Input and selling prices, and profits growth

In addition to increasing labour costs, input prices are also rising sharply, reflecting the surge in global energy prices and ongoing supply chain problems. This is adding further pressure on businesses in Wales. Input price inflation reached 6.1% in the latest survey period, the highest rate recorded in Wales since the survey began. Businesses do, however, expect a softening of input price rises over the next 12 months to 4.7%, in line with the trend at the UK level. 

In response to the intensifying cost pressures, businesses are increasing selling prices by a near-record rate of 3.8%. A further 3.1% rise is planned over the year ahead. Despite rising costs, the combination of sales growth and increased selling prices has helped to maintain profits growth of 4.9%. Only businesses in the East Midlands and the North West have seen stronger rises. This is expected to moderate slightly over the next 12 months, however, with companies forecasting a 3.5% increase in profits.


Capital investment plans among businesses in Wales compare favourably with those in other UK nations and regions. In contrast to the UK-wide trend, capital investment growth is expected to hold firm in the year ahead. After an annual rise of 3.2% in the latest survey period, a 3.3% increase is planned for the year ahead. This is the strongest outlook across the UK. Unfortunately, growth in Research & Development (R&D) budgets has been slower, at 1.6%, which is below the UK average of 2.2%. A similar 1.5% increase is expected in the coming 12 months.