Businesses in Wales 'less confident' about 2012, survey finds

Low consumer confidence was one of the underlying issues

Business confidence in Wales has slipped back into negative territory for the first time since the first quarter of 2011, according to a survey.

Sixty six bosses questioned by the Institute of Chartered Accountants in England and Wales (ICAEW) were on balance less confident about prospects.

They reported increased jobs, profits, investment and turnover in 2011.

But the ICAEW said public sector cuts and rising unemployment made respondents pessimistic about 2012.

In the fourth quarter of 2011, the institute's business confidence index fell from 16.5 to -9.2, after two positive quarters.

Business leaders were asked how confident they felt about their firm's prospects in the next 12 months compared to the previous year.

Scores ranged from 100 if they felt much more confident to minus 100 if they felt much less confident.

'Difficult year'

David Lermon, ICAEW director for Wales, said: "Business confidence in Wales grew in the last two quarters but it has now fallen back into negative territory.

"The impact of the euro crisis, rising unemployment and public sector cuts are clearly having an impact and there are clearly concerns about the economic future and the possibility of a double dip recession."

He said consumer confidence was low and with energy, food and fuel prices biting hard, which was hitting business confidence for 2012 in what "looks as if it could be another difficult year for many businesses in Wales."

Positive signs reported by the survey included a 1.5% increase in private sector employment over 2011, a 3.9% rise in turnover and a 3.1% rise in gross profits and sales volumes.

Capital expenditure among those surveyed grew by 2.4% in 2011 but is expected to increase by only 0.2% in 2012.

Geraint Davies, partner at Grant Thornton in Cardiff said: "Despite the slump in overall confidence in Wales, private sector employment is holding up and competition is easing as the worst-hit businesses have closed.

"The big challenge, however, will be getting the private sector to start absorbing the coming losses in public sector jobs."

'Challenging'

Iestyn Davies, spokesman for the Federation of Small Businesses in Wales, said the survey's negative outlook for 2012 reflected the views expressed in their own monthly poll of members.

"It's difficult, it's challenging but I am confident that small businesses with their energy and determination can help lead the Welsh economy through these difficult times," he told BBC Wales.

He stressed that a co-ordinated economic strategy was as important as targeted measures by the UK and Welsh governments.

"It's important that these announcements and individual strategies come together to focus and create a definite narrative for business and the economy in Wales.

"Having numerous strategies and task-and-finish groups is good to look at unique problems - we now need to see these strategies and initiatives come together to find a unique way forward for the Welsh economy."

In November the Welsh government launched a review of business rates to see if some form of relief could promote economic development.

However, an analysis by BBC Wales found that some companies in Wales were still receiving non-repayable grants several months after a new economic strategy proposed to scrap them.