Welsh Business Barometer reveals slowdown in economic growth following Brexit vote

Liz Maher, president of the South and Mid Wales Chambers of Commerce. (C) Huw John, Cardiff.

The Welsh business community has reported a slowdown in economic growth following the Brexit vote, but the immediate economic impact is not as severe as many had predicted, according to the latest results from the Welsh Business Barometer.

The South Wales and Mid Wales, West Cheshire and North Wales Chambers of Commerce, in partnership with the University of Wales Trinity St David’s Business School, have today (6 October 2016) released the findings of the first major survey of its members since the result of the referendum on the UK’s future relationship with the EU. The number of businesses reporting growth in export sales and orders, a rise in revenues from domestic markets and increased investment in equipment and training have all fallen in the third quarter of 2016, compared to the corresponding survey results from Q2.

The Barometer findings also suggest that business confidence has taken a hit following the Brexit vote and the subsequent fall in the value of the pound. Although the difference between those who expect revenues to increase over the next 12 months and those who predict a fall remains relatively unchanged, the same figure for profitability was down more than 5% on the previous quarter’s survey, conducted prior to the 23rd June poll.

The Welsh Business Barometer is an independent survey of business performance and confidence, which acts as an early indicator of the market in Wales. The latest findings will be presented this afternoon at the Aberavon Beach Hotel in Port Talbot, with the Welsh Cabinet Secretary for Economy, Infrastructure and Skills, Ken Skates AM, in attendance. Mr Skates will provide his reaction to the survey results and address businesses on the Welsh Government’s plans to support businesses and boost economic performance in Wales.

Of all the surveyed areas showing a slowdown in growth, it was investment in training and equipment that fell most sharply, with only 6.6% more employers investing more than those cutting back – down nearly 10 percentage points on quarter two. Should this trend continue, the number making cuts will outweigh those investing by the end of the year.

The positive trend in employment found throughout 2016 has also remained steady, with the survey finding that more than 24% of businesses increased their workforces during the third quarter; more than double those reporting a reduction. The amount of businesses reporting difficulty in recruiting staff (58.8%) also fell by 2.85% in Q3 and by 3.9% since the end of 2015. However, this figure has nonetheless remained well above 50% since the beginning of 2014 as Welsh employers in a range of industry sectors continue to grapple with a significant skills gap.

Commenting on the latest figures, Liz Maher, president of the South and Mid Wales Chamber of Commerce, said: “Although it’s unsurprising to see that businesses are feeling uncertain about the future, it appears that fears surrounding the immediate economic impact of the Brexit vote have been largely unfounded, with many respondents reporting business as usual. The potential cut-backs in investment do provide some cause for concern but it is encouraging to see that most of the businesses surveyed are still predicting a year of revenue growth.

“We must, however, not rest on our laurels. Earlier this week, the Chancellor of the Exchequer warned that the Brexit vote may cause “turbulence”, and business confidence would be on a “bit of a rollercoaster”. The government and businesses must now work together to ensure that the Welsh economy continues to grow.

“Many business leaders feel that there has been a lack of activity from both the Welsh and UK governments and, while there have been positive words about support for businesses, very little has been done to provide firm answers on timescales and the approach towards negotiating renewed trade agreements between the UK and the rest of Europe.

“We are therefore pleased that the Prime Minister has given an indication of when she plans on activating Article 50 of the Lisbon Treaty, but for most businesses, getting Brexit right is far more important than doing it quickly. Now that the Prime Minister has set a timescale, the government must demonstrate to businesses that it has a clear and coherent strategy, to defend the UK’s economic and business interests in the negotiations that lie ahead.

“In Wales last week we saw the inaugural meeting of the Welsh Government’s EU Advisory Group. This meeting is a positive step in ensuring action from the Welsh Government but we must not think that holding a meeting in itself is enough. The Welsh Business Barometer shows that more needs to be done to encourage Welsh businesses to invest and help them to export.

“I am also worried that the group is largely dominated by politicians and the public sector, with only two representatives from private sector business. SMEs are at the heart of the Welsh economy and make up around 94% of all businesses in Wales, so it is vital that the EU Advisory Group ensures that issues directly affecting the SME sector are heard to inform policy negotiations going forward.

“We’re happy to hear that many Welsh businesses are, for the time being, continuing to see positive growth, but unless they are given more clarity about the post-Brexit future, my fear is that this may come to a halt sooner rather than later.”