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Business confidence in the South West has fallen into negative territory as companies face challenges, a survey from chartered accountants has found.

ICAEW's Business Confidence Monitor put confidence at -3.2, a drop into negative territory from the 9.9 recorded in the last quarter. The firm attributed this to challenges including inflation and interest rates but said it would have fallen further if not for "healthy domestic sales", which at the rate of 5.7% in the year Q3 2023, makes the South West one of the better-performing parts of the º£½ÇÊÓƵ.

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The Institute of Chartered Accountants in England and Wales said the rate is expected to decline to 4.7% in the next 12 months. It added that annual export was weak by comparison in the region, but at 2.4% in Q3 2023, was broadly in line with the usual rate for the region.

Cost pressures continued to mount for businesses in the South West, with input prices rising at their fastest rate since the survey began, though the ICAEW expects them to slow in the coming year. The survey also found businesses in the region are raising their selling prices at "record speeds". ICAEW expects these to increase more slowly over the next 12 months, but at a rate higher than the region’s historical average.

The survey found rising employment and persistent inflation saw salaries increase by 4.7%, year-on-year in Q3 2023, at the fastest rate since the BCM began and the highest increase outside Scotland. ICAEW said this was likely due to the prevalence of IT and communications in the region.

Beverly Waters, ICAEW regional director, South and South West, said: “It’s disappointing to see that business confidence in the South West has dropped into negative territory amid challenges from persistent inflation, high interest rates and late payments.

“Nevertheless, domestic sales growth has remained healthy for our businesses and without this confidence would likely have fallen even further.�

Nationally, business confidence remains lower than the pre-pandemic average but still positive amid a backdrop of high inflation and interest rates and record wage pressures, with sentiment at 6.1 on the index.