Small business growth predictions hold firm during final countdown to Brexit

15-Aug-2019


Set against the warnings of a shrinking UK economy and full-blown recession, the nation’s small business community is holding strong - with an upturn in growth predictions across six industry sectors - according to new data from Hitachi Capital Business Finance (www.hitachicapital.co.uk/business-finance). 

 In contrast to the various market reports that focus on historic sector trading and output figures, the Business Barometer is a forward-looking study from Hitachi Capital and offers an early snapshot on how small businesses are feeling going into the autumn months. Overall, for the three months to 30 September, around one in two small businesses (49%) will be holding their position, with twice the number predicting growth (35%) over contraction or decline (16%). Furthermore, there are signs that the fall in small business growth predictions noted during Q2 - the first fall in 12 months – is already beginning to correct itself. 

Percentage of small businesses that predict net growth to 30 September – and, within this, those that predict significant expansion. Results for the last two years.

 

% that predict net growth (significant or modest/organic) 

% that predict significant expansion

Q3 2017

40%

6%

Q4 2017

38%

7%

Q1 2018

39%

6%

Q2 2018

41%

6%

Q3 2018

36%

7%

Q4 2018

36%

5%

Q1 2019

36%

6%

Q2 2019

34%

4%

Q3 2019

35%

5%

 

Small businesses outlook to 30 September – overall results for the last three quarters.

 

Q3 

2019

Q2 

2019

Q1

2019

Significant growth

5%

4%

6%

Modest / organic growth

30%

31%

30%

Stay the same / no change

49%

49%

47%

Contract / slow down

10%

9%

10%

Struggle to survive

6%

7%

7%

Sector analysis

  • More sectors see a rise in confidence: Whilst four sectors saw notable falls in small business growth predictions for Q2 – manufacturing, construction, retail and real estate - six industry sectors actually saw a rise in the number of business leaders that predicted growth. This was most significant in the professional services sectors, an indication perhaps that Brexit is creating work for small businesses that provide consulting services that relate to business planning, regulation and accounting. In the finance and accounting sector, the percentage of small businesses predicting growth rose sharply from 33% to 48% in just three months. In legal services growth predictions have risen from 37% to 44% over the last six months.

 

  • Caution in manufacturing and construction: Small business growth predictions in manufacturing and construction continued to fall quarter-on-quarter – although, curiously for these sectors, the percentage of small businesses predicting contraction was also lower than many other sectors.  Given the market context of low output in these sectors, the research suggests business owners in manufacturing and construction are being cautious and focusing on holding firm.

 

  • Transport and distribution emerged as the only sector where more small business owners now predict contraction rather than growth. The forthcoming outcome of Brexit may indicate whether this sector viewpoint is a short-term reflection of current market uncertainty or part of a deeper, long-term trend.

 

Percentage of small businesses that predict net growth to 30 September – by industry sector – including comparative results for the previous two quarters.

 

Q3 2019

Net %that predict

growth 

Q2 2019

Net %that predict

growth

Q1 2019

Net %that predict

growth

Q3 2019

Net % that predict contraction

Finance & accounting

48%

33%

42%

11%

Legal

44%

41%

37%

11%

IT & telecoms

41%

38%

41%

13%

Media & marketing

37%

36%

33%

22%

Retail

34%

40%

31%

20%

Real estate

32%

45%

28%

15%

Agriculture

32%

27%

24%

23%

Manufacturing

30%

38%

42%

10%

Transport & distribution

27%

25%

38%

29%

Hospitality & leisure

27%

29%

24%

7%

Construction

26%

31%

31%

16%

 

Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance commentated: “At first glance, the results of our tracking study look similar to last quarter - but dig deeper and there are some significant findings. First, the spring months saw the first fall in small business growth predictions for a year and there are encouraging signs now that this was not the start of a seasonal slide. Second, there are some major variations by sector this summer and in six sectors some notable rises in growth predictions. It’s also important to note that whilst transport, building and manufacturing businesses have been faced by tangible challenges from Brexit uncertainty, small businesses that provide professional and consulting services seem to be prospering. Market uncertainty is the one certainty for the months ahead and at Hitachi Capital Business Finance we are working hard to help small businesses to exploit the opportunities from the current market - to grow and fully realise their potential.”