Business confidence in the South West cooled by six points to 30% during May.

But rising temperatures could kick-start a strong summer season in the hospitality and leisure sectors, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

It shows companies in the South West reported lower confidence in their own business prospects month-on-month, down one point to 42%. When taken alongside their optimism in the economy, down 11 points to 17%, this gives a headline confidence reading of 30%.

The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.

A net balance of 35% of businesses in the region expect to increase staff levels over the next year, up three points on last month.

Top target areas for growth in the next six months were evolving product or service offerings, diversifying into new markets, investing in teams, and introducing new technology.

Overall UK business confidence dropped five points to 28% in May. But every UK nation and region reported a positive confidence reading.

As the country celebrated the Coronation, London topped the table at 43% (down four points on last month), followed by the North East at 35% (down six points). The South West, West Midlands and South East all reported readings of 30%.

Overall 34% of UK firms expect business activity to increase over the next 12 months, down five points on last month.

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: "Despite a slight dip in confidence levels it's encouraging to see firms looking to increase staffing levels in order to take advantage of growth opportunities.

"A combination of bank holidays and rising temperatures could be the tailwind the region's hospitality and leisure businesses need to kick start a season of strong summer trading. "Businesses that act swiftly to manage working capital needs and keep a close eye on their margins will be best placed to capitalise on timely prospects."

Confidence among manufacturers increased to a one-year high of 40% (up from 29%), while retail registered a more modest two point rise to 26%, and construction remained robust

at 34% despite its monthly nine point decline. Services confidence, however, fell back to 26% from 36%, almost erasing last month's rise. Overall, confidence across the broad sectors remains above levels at the start of the year.

Hann-Ju Ho, senior economist Lloyds Bank Commercial Banking, said: "As the economic environment remains challenging, compounded by stubborn inflation and higher wage pressures, business confidence has dipped slightly this month as firms feel cautious about the wider economy and their own trading prospects.

"However, while firms' trading prospects and economic optimism both eased back, they still remain in positive territory as the UK has avoided an outright contraction in GDP - indicating a certain amount of underlying resilience in the economy."