A tale of two general election years: 8 in 10 small businesses cite barriers to growth
More small businesses cite barriers to growth today (80%) than was the case in pre-pandemic Britain (73%) – and, compared to the last General Election year (2019), across five industry sectors and six UK regions more small businesses cite market challenges that are holding them back.
Compared to the last General Election year of 2019 – small businesses in five industry sectors – construction, hospitality, media, medical and education – are more likely today to be facing barriers to growth. Looking back, this is significant given that during the pre-pandemic years (2015-19), 2019 represented a peak year for the number of small businesses perceiving barriers to growth.
Sectors where more businesses cite barriers to growth in Q2 2024 compared to Q2 2019
Regional findings: Compared to the last General Election year (2019), small business owners in six regions – South West, East Midlands, South East, West Midlands, North West and Wales – are more likely to cite barriers to growth today.
These findings are the latest from the quarterly Business Barometer study from Novuna Business Finance, which has been tracking small business outlook for the last 10 years. The latest poll found that eight in 10 small business owners identified barriers to growth that were holding them back. Whilst largely unchanged since the cost-of-living crisis took effect, more small businesses cite barriers to growth than they did in the years before the pandemic.
The UK’s top 5 barriers to growth for small businesses in Q2 2024
Of those businesses that cite barriers to growth, it is clear from the Novuna data that there are five major challenges that have remained as barriers over time and have resonance to enterprises spanning region, sector, age and turnover.
- Market uncertainty: This is the single biggest issue for small business owners today. Whilst slightly down on last quarter, 41% of enterprises name it as a barrier to growth, and the level of concern over market uncertainty is significantly higher today than it was during the pre-Covid years. For example, in 2015, 31% of small businesses cited market uncertainty as a barrier to growth – and in 2016 the figure stood at 33%.
- Overheads/ fixed costs: A symptom of the economic volatility, energy price rises and cost-of-living crisis which followed the War in Ukraine – 25% of small business owners see these rising costs as a barrier to growth. Furthermore, the position is largely unchanged for the last three years – a measure of the ongoing struggle many enterprises still face coping with higher fixed costs.
Percentage of businesses that name overheads and fixed costs as a barrier to growth
- Brexit: For some, the drama of Brexit was put to one side when the nation faced the immediate challenges of Covid and a series of national lockdowns. Whilst this era has been and gone, the legacy of Brexit as a disruptive force quietly lives on to this day. Nationally, 21% of small business owners still cite its legacy as a barrier to growth.
Percentage of businesses that cite Brexit as barrier to growth
- Cost of skilled labour: The challenges small business owners face finding skilled labour – and at an affordable price – is at a record high. For the last three years, this has been a consistently serious problem, with 19% citing it as a top barrier to growth in Q2 2024. Furthermore, there have been significant five-year rises in the North East (from 7% to 22%), London (17% to 27%) South East (10% to19%) – and rises too in the North West, West Midlands, East, South West, Wales and Scotland.
Percentage of businesses that cite the cost of skilled labour as a barrier to growth
- Red tape: An age-old problem for many small businesses who, by their nature want to be in the front line talking with customers and booking new business. Whilst the proportion of small businesses that cite red tape as a barrier is falling, it is still prevalent for 16% of enterprises nationwide.
Jo Morris, head of insight, Novuna Business Finance comments: “After a seismic period of disruption during the Covid era, followed by the cost-of-living crisis, many naturally assume that the next step will inevitably be a period of recovery and a return to the normalcy of the pre-Covid years. Our research spanning a decade tells a very different story. Many small businesses see more and bigger barriers to growth today than they did before the world changed in March 2020. Some issues like Brexit have endured rather than faded, and the economic challenges of recent years have left a lasting legacy on dealing with fixed costs, overheads and labour costs. On top of all this, is the dark cloud of uncertainty, something every small business owner dislikes and finds it hard to forward-plan against.
“At Novuna Business Finance we are working steadfastly to provide flexible tailored financial solutions that help established small businesses to achieve their true potential. Despite the challenging economic context, periods of uncertainty are actually a time for business owners to make plans for the future, to put strategies in place for the upturn. We are busy doing this with established enterprises and we are serious about doing our bit to support a sustainable growth agenda for the small business community – because whenever it comes, the return to economic growth in the UK will be powered by a nation of resolute and committed small business owners.”
