The South Wales Chamber of Commerce’s latest Quarterly Economic Survey (QES), released today (3 April 2012), reveals that the economy is showing signs of improvement with businesses becoming more confident about the next 12 months.

The Q1 survey for 2012, which is sponsored by Broomfield and Alexander, shows that more than two thirds (67%) of small and medium sized businesses from Newport, Swansea, Cardiff and mid Wales experienced increased or constant sales, with only around a third (31%) reporting a decrease.

The survey also found that exports fared particularly well in the first quarter of this year, with half of all companies that export reporting an increase in sales overseas, compared to 5% of those that saw a decrease in international demand.

As a result, expectations for the next 12 months have increased dramatically, with more than half (53%) of businesses expecting an increase in turnover – a substantial rise from the end of 2011, which saw only two fifths of companies (39%) expecting an increase.

Graham Morgan, director at the South Wales Chamber of Commerce, said: “These results are a welcome change to the ones we saw at the end of last year when businesses reported a disappointing quarter, which diminished the improvements that were seen earlier in 2011.

“With an overall improvement in figures throughout the survey, we believe it is likely that the economy will avoid slipping into another recession, although we still expect GDP growth to be fairly small.

“It’s particularly encouraging to see a stronger set of export results, which shows why the export market should be a key area of focus for Wales in the coming months. The only negative is that we aren’t seeing any increase in the number of exporters, and we urge companies in Wales to look further afield in order to take advantage of the sales increases that others are beginning to enjoy.”

The results of this survey, which monitor the performance of businesses in Newport, Swansea, Cardiff and mid Wales, act as a barometer for the strength of the Welsh economy.

The report also reflects the current unemployment situation, and shows that the majority (69%) of businesses have maintained constant workforce numbers compared to a fifth (18%) of businesses that have boosted staff numbers.

Nearly half (48%) of companies did not attempt to recruit during the first quarter of 2012, and there was a slight drop in the number of those looking to fill full-time positions out of those that did recruit.

It was also reported that only a third (29%) of businesses were profiled as working at full capacity, with around 65% reporting that they were under capacity – a trend that has continued since last year.

Mr Morgan continued: “Considering the fairly static monthly unemployment figures we’ve seen this year, it’s unsurprising to see that recruitment levels and the rate of job creation seems slower during this quarter. However, it’s good to see that very few companies are planning to decrease the size of their workforce in the next three months and more are planning to create jobs in the near future. This suggests that slightly better trading conditions have given companies the confidence they need to consider recruitment this year.”

Encouragingly, the survey shows that investment plans for machinery and training in south Wales has continued to increase on last quarter, hinting at recovery across the region.

Mr Morgan added: “It’s fantastic to see that the manufacturing sector in Wales is continuing to develop into 2012. All of these figures are showing that the Welsh business community is beginning to regain confidence, but it’s important that we do not become complacent and recognise that many businesses are still working below-capacity.

“Now it’s more important than ever for more Welsh businesses to sustain this recovery by looking into opportunities with overseas markets. Those selling to the UK and further afield not only benefit from the lower cost base associated with operating out of Wales, but also tap into new markets and cast their net wider.

“With the falling rate of inflation, competition and taxation have now become the major concerns for businesses in south Wales, but by looking further afield for opportunities through exporting the threat of competitor clashes can be diminished.

“We have clear plans to increase the level of information, advice and guidance that is available to help Welsh businesses penetrate overseas markets and will increase the staff resource available in this important aspect of the Welsh market place.”

Leighton Reed, tax director at Broomfield and Alexander, said: “It is interesting to note that taxation remains one of the biggest concerns for businesses.  The Government’s recent ‘budget for business’ will hopefully play a part in reducing this anxiety, which can also be reduced through a more stable tax regime and lower tax rates.

“In addition, the headline reduction in company tax rates, together with better tax incentives for research and development, ought to ease concerns.

“Organisations should always examine whether they have the right structure for business; a company might be more tax efficient for partnerships and sole traders. The tax regime ought to become more stable, thereby providing a more solid platform to encourage business to invest, as the Government seeks to publicise and consult upon tax changes far in advance.”

The British Chamber of Commerce’s Quarterly Economic Survey for the whole of the UK also shows encouraging signs of growth, but points towards a slow pace of recovery or ‘stagflation’. These results are more encouraging than the previous quarter, but show that balances are weak and still below those seen in 2007 before the recession.

Although the UK-wide results do not point to another recession this quarter, they do indicate that growth is likely to remain low until 2013.