For starters, the sunshine will have helped – It is well established that good weather tends to boost economic activity from hospitality to construction. The rise in the National Minimum Wage (NMW), which has probably had a more significant impact on earnings in Wales than some other regions, will put more money in people’s pockets and provide a boost to spending. The trauma of the NMW and National Insurance (NI) increases is now baked in, and businesses can start looking forward. This week’s reduction in interest rates will also be welcome news.
We also have the UK-India trade agreement, and despite its limitations, the trade deal with the USA. The UK is in a strong position to benefit from the disruption in global trade caused by Trump’s tariffs, as countries look to politically and economically stable places to do business with. The recent strength of the Pound will give the Bank of England more room for manoeuvre and probably signifies that global investors are looking at the UK as a relatively safe haven as they seek to reduce exposure to the US. Although economic inactivity in Wales remains an issue, employment remains high and stable amongst the economically active. Skills pressures should drive investments in technology and productivity, which will be good for profitability, which has been under siege for the last year.
Negotiations between the UK and EU to ease trade barriers this month will be closely watched. There is a feeling that the UK will agree to maintain equivalent EU product standards. It is possible that the recent local election results may cause the government to back away from this, but I think it is more likely that Kier Starmer will want another deal in the hope of boosting economic growth.
Importantly, Welsh businesses have survived the traumas of Austerity, Brexit, Covid, the loss of EU funding and proved resilient. I have recently sat in on a number of judging panels for business awards, and it is clear that we have a lot of incredible people and incredible businesses in Wales.
It may not happen overnight, but this could be a turning point for rising business confidence. Yes, there are many issues and things I would like to see done to support Welsh SMEs and the Welsh economy, but my other cause for optimism is that the results of the local elections will sharpen political minds all around to work harder to solve some of these problems. When it comes to the economy, perception matters. There are some reasons to start feeling cheerful beyond just enjoying the sunshine.
