Business confidence has dropped in Wales and economic uncertainty remains the biggest threat to firms, according to the latest Business in Britain report from Lloyds Bank.

But despite this, six per cent of firms in the country said they were planning on recruiting during the coming year.

The report’s confidence index - an average of respondents’ expected sales, orders and profits over the next six months – fell to 15 per cent down from 25 per cent, the survey’s score in September 2016.

Welsh businesses are feeling more optimistic than firms in the Midlands and London, but fall behind the North East and the East of England in terms of confidence.

Neighbours in the South West saw the biggest boost, with confidence rising from four per cent in September to 17 per cent in January.

The confidence index is an average of respondents’ expected sales, orders and profits over the next six months.

It calculates the ‘net balance’ - the difference the percentage of firms that are positive in outlook against those that are negative. It can vary between -100 if all firms are negative and 100 if all firms are positive, 0 is neutral.

The most commonly identified threat chosen by Welsh firms in the next six months was economic uncertainty (22 per cent), followed by weaker UK demand (20 per cent) as firms wait for further details of Britain’s EU exit.

Firms also cited input costs (12 per cent), productivity (ten per cent) and political uncertainty (eight per cent) among the biggest threats to their business.

Allan Griffiths, regional director for SME Banking in Wales, Lloyds Bank Commercial Banking, said: “Business confidence in Wales has fallen since September, a sign that firms are entering 2017 with an uncertain business outlook.

“Many also recognise that current economic and political uncertainty may impact their prospects over the next six months, and it’s vital that they plan their objectives carefully to navigate any challenges that they might face.”

Businesses indicated that the current exchange rate is favourable for their export sales because the pound is at its weakest since its last big depreciation in 2009 during the global financial crisis.

The weaker pound also contributed to a rise in firms’ pricing intentions. The net balance of firms expecting to increase their prices in the coming six months rose from eight per cent in September to 25 per cent.

Welsh firms are expecting to raise their staffing levels in the next six months. A net balance of six per cent planned to recruit new staff, up from -3 per cent in September.

However, the share of firms saying they are experiencing difficulties in recruiting skilled labour increased slightly to 27 per cent from 24 per cent.

Allan Griffiths said: “It is positive to see that businesses are planning to take on new staff, and, coupled with our support, we can help them to implement their growth plans and expand successfully during the year ahead.

“While this year may present more challenges for firms, including understanding the impact that leaving the EU will have, Welsh business owners are resilient and I am confident they will continue to do what they do best – getting on with growing their business.”

The Business in Britain report from Lloyds Bank, now in its 25th year, gathers the views of more than 1,500 UK companies, predominantly small to medium sized businesses, and tracks the overall “balance” of opinion on a range of important performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.