• 60% of Welsh businesses expect their prices to rise in the next three months
• Pressure on Welsh businesses to raise prices due to labour costs has increased to 79%
• 37% of Welsh businesses reported that their cashflow had decreased in the last three months

Chambers Wales South East, South West and Mid has revealed the results of its Quarterly Economic Survey, providing an insight into how businesses in Wales have been faring since the start of the year.

The Chamber’s survey is part of the wider British Chambers of Commerce’s (BCC) Quarterly Economic Survey and the data gathered from responses is regarded as an important source on the economy and business sentiment by policymakers, the Bank of England and the wider media.

Resilience despite economic difficulties

In the BCC’s survey, 55% of businesses across the UK expect to increase the prices of their goods or services in the next quarter. The figure is higher in Wales, with 60% of Welsh businesses stating that they expect their prices to rise in the next three months.

However, 67% of Welsh businesses were expecting to increase prices in Q4 2022, which suggests that, although price rises still look inevitable for many, businesses in Wales are showing resilience and strengthening despite economic difficulties.

Cost pressures persist

The BCC reported that UK businesses are under pressure to raise prices due to labour and utility costs. Businesses in Wales shared these concerns with labour, utility and raw material costs cited as the biggest pressures.

Likely owing to the strong manufacturing base in Wales, almost two thirds of Welsh businesses were under pressure to raise prices because of raw material costs. Pressure to raise prices because of labour costs, such as salaries, pay settlements and contractors, has increased from 63% in Q4 to 79% in Q1, a significant jump that indicates that it is an employee’s market at present.

Fuel was considered more of a pressure in Q4 2022, concerning 55% of businesses in Wales. In Q1, only 27% of Welsh businesses stated that they were under pressure to raise prices due to fuel costs. While it appears that businesses are less concerned about fuel this quarter, it could be that labour, raw materials and utilities are providing significantly more pressure.

Market volatility affects cashflow

37% of Welsh businesses reported that cashflow had decreased in the last three months, compared to 30% of UK businesses. Only 21% of Welsh businesses had reported cashflow decreasing in Q4 2022.

However, some businesses in Wales have seen an increase in their cashflow with firms reporting an increase rising from 17% in Q4 2022 to 23% in Q1 2023. Cashflow was relatively stable in Q4 2022, but this may no longer be the case for many companies as the market remains volatile.

Investment plans cut back

Responses regarding investment also indicate that, on average, businesses in Wales are generally being hit harder by the cost of doing business crisis than the rest of the UK. This is illustrated by the significant difference in investment plans: 26% of Welsh businesses decreased plans to invest in equipment, plant, machinery or technology compared to 19% for the UK. Q4 2022 showed that only 16% of Welsh firms had plans to decrease investment.

The drop in investment is likely due to winter 2022-23 being very expensive for businesses, who have then had to cut back on investment plans as a result.

Minimal change to business confidence

Business confidence levels for profit and turnover are lower than the national rate but not by a significant margin (39% and 51% for profit and turnover respectively in Wales compared to 42% and 52% in the UK). The figures for Wales have seen little change since Q4 2022, showing confidence has improved, if only minimally.

Paul Butterworth, Interim CEO of Chambers Wales South East, South West and Mid, said: “Our quarterly economic survey provides a valuable insight into the experiences of businesses in Wales. Comparing our findings to those of the British Chambers of Commerce, it appears that Welsh businesses are suffering compared to the rest of the UK with cost pressures, cashflow and investment.

“Since the initial economic shock of the Covid-19 pandemic, businesses have had to navigate Brexit, soaring inflation, global supply chain issues and a cost of doing business crisis. However, Welsh businesses have demonstrated agility and resilience despite the difficulties. Although there are no quick fixes to the challenges businesses continue to face, political stability and the introduction of positive measures in the Spring Statement is a step in the right direction for firms in the medium and long term.”

If you would like to take part in the next quarterly economic survey, connect with Chambers Wales South East, South West and Mid. You can subscribe to the Chamber’s newsletter to be notified when the next survey goes live or follow the Chamber on social media for updates.