Business confidence in Wales has slumped to its lowest level for almost three years, according to the Institute of Chartered Accounts for England and Wales (ICAEW).
Publishing its latest Business Confidence Monitor (BCM), together with accountants Grant Thornton UK, the ICAEW said its index fell from -9.2 to -18.6 in the first quarter of 2012.
The index is based on a survey of 68 senior business professionals in Wales.
This is the lowest reading in almost three years and continues a sharp downward trend in the outlook in Wales from a recent high of 16.5 in the third quarter of 2011.
While business turnover held up, gross profits grew at a slower rate and firms cut their employee numbers over the 12 months to the first quarter of this year.
David Lermon, ICAEW director for Wales, said: “Business confidence in Wales has fallen back further because the outlook for the UK economy is so uncertain.
“Household incomes have been under severe pressure with salary levels restrained and job losses and higher energy, food and fuel prices all combining to impact on business confidence. This year was always going to be a difficult one for many businesses and it is proving just that.
“While some jobs continue to be created, the financial problems faced by one of our most high profile and largest companies, Peacocks, was an illustration of the tough economic situation, particularly for firms with significant debts.”
Geraint Davies, Partner at Grant Thornton in Cardiff said: “Another significant and growing problem for businesses in Wales is late payment, with more firms reporting this than anywhere else in the UK. And data shows that 1.2% of all businesses in Wales became insolvent in 2011, a failure rate higher than both the previous year and the UK average.”
Meanwhile, Welsh Finance Minister Jane Hutt has urged the UK Government to support economic growth across the UK when it publishes its Budget later this month.
Following a meeting of Finance Ministers from across the UK with the Chief Secretary to the Treasury, Ms Hutt has written to the UK Government urging them to increase capital expenditure in the forthcoming Budget.
She said: “During my meeting with the Chief Secretary to the Treasury, along with the Finance Ministers of Scotland and Northern Ireland, I made it clear that the forthcoming UK Government Budget must support economic growth across the UK.
“While there have been some encouraging signs for the Welsh economy in recent months, the recovery is still fragile and we are very keen to maximise investment over the next year to boost demand in the economy.
“I have now written to the UK Government to urge them to consider further action in the forthcoming Budget to boost capital investment in 2012-13. We have a number of ‘shovel-ready’ schemes in Wales that we could bring forward to 2012-13, or accelerate, if additional resources were provided or if we were able to bring forward capital budgets from future years to boost investment in 2012-13.
“The increases in capital expenditure that were announced last autumn were very welcome, but more is required to assist the economic recovery in Wales.”
Speaking ahead of a debate on the Supplementary Budget in the Natonal Assembly for Wales Ms Hutt added: “This Supplementary Budget demonstrates our continuing commitment to supporting growth and jobs in Wales while also continuing to invest in vital public services and protecting the most vulnerable in society.
“The £320.6m we have allocated in the Supplementary Budget includes £142.5m to health, £61.3m to education and skills and £23m to the Social Housing Grant.
“Taken together with the additional funding made available in the first Supplementary Budget, this extra resource has allowed us to reduce the impact of the cuts made in the Final Budget last February. A key example of this is in social housing where we have increased the budget by over 30% this year, enabling up to 250 additional homes in the social housing sector to be built.
“We have been able to provide this important injection of £170m capital funding as a result of a range of measures we have taken to provide an economic boost, including our decision to transfer £97m from resource to capital.
“This shows our commitment to supporting the Welsh economy. I would now encourage the UK Government to do the same and boost capital investment in their forthcoming Budget.”