More than a quarter of organisations in the south-west have made redundancies in the last year as inflation and operational costs rose.

The South-West Market Research Report, commissioned by accountancy and business advisory firm Monahans with research carried out by Atomik Research, found 28 per cent of all enterprises in the region have had to lay off employees.

Rising inflation and operational costs and reductions in spending due to interest rates moving above five per cent were identified as key challenges for 42 per cent of the businesses surveyed.

Small businesses employing between 11-50 people have been hardest hit by these economic factors, with nearly half citing them as their biggest challenge.

The hospitality and tourism industries were most affected by this issue, with 56 per cent of businesses in these sectors listing it as their most pressing concern last year.

But that number was overshadowed by energy prices, which 67 per cent of firms said was the sector's greatest challenge.

Simon Tombs, managing partner of Monahans, said: “It is indisputable that businesses of all sizes have faced significant challenges over the last 12 months."

However, despite turbulent market conditions, micro and small businesses have largely avoided laying off staff.

The majority of redundancies have been seen in medium/large businesses, those with between 250 and 500 employees, with 45 per cent reducing their workforce and the average employee count of those who have done so falling by almost a fifth.

In contrast, the most significant issue for micro-businesses, which have up to 10 employees, has been generating new business, but only eight per cent of these firms have made redundancies.

These companies are generally, however, faring worse than larger organisations.

Only 31 per cent of micro businesses consider themselves to be in a better position than they were a year ago, overshadowed by 35 per cent who believe they are faring worse.

In comparison, the majority of small, medium and medium/large businesses believe they are in a better position compared to 12 months ago.

However, turnover has largely increased across the board, and businesses can be buoyed by improving market conditions as the economy stabilises.

Nearly half of all businesses saw an increase in turnover, by an average of 31.5 per cent, where only one in five reported a decrease.

Mr Tombs said: “Businesses are largely optimistic and they should be.

"Half of businesses reporting increased turnover in turbulent financial conditions is extremely positive."