UK business confidence recovers but dark clouds on horizon
The Federation of Small Businesses’ (FSB) quarterly survey has found that business confidence has recovered. The report noted that confidence is being restored after a decline at the end of last year, but “dark clouds” are on the horizon as costs remain high.
The study found that sentiment improved among small business owners and sole traders over the first three months of the year. However, the FSB’s confidence measure scored minus 2.8 points in the first quarter of the year, which means more firms felt pessimistic than optimistic. Interestingly, there was an improvement from the confidence drop in the final quarter of 2022, which had a negative reading of minus 45.8 points as retailers and hospitality firms were struck by higher costs and reduced consumer spending.
The report found that the tech and science sectors were leading the way with a positive confidence reading of 14.9 points. The research also found a major rise in confidence among sectors including retail, accommodation, food and manufacturing in the latest survey, although they all remained in negative territory.
The FSB, which represents more than 150,000 business owners and self-employed workers, surveyed nearly 700 people in the latest iteration.
Commenting on the survey, Neh Thaker, co-founder of fintech platform HedgeFlows said: “With business confidence returning, the time has come to equip SMEs with the tools they need to expand and grow in new markets. Small companies are the lifeblood of the economy, fuelling job creation and growth, yet too many find themselves unable to reach their full potential due to barriers such as high trading costs, transfer fees and a lack of support from their bank.
“By giving SMEs access to a suite of key financial services, a new generation of ambitious companies will be able to expand contributing to the nation’s ambition to become a global trade powerhouse,” said Thaker.
Meanwhile James Campanini, CEO of VeUP added: “British businesses have shown remarkable resilience in the face of soaring inflation and interest rates, so it’s encouraging to see confidence returning to smaller firms. However, with lingering uncertainty, the time is right for companies to think again about key resources such as IT investment and optimising cloud environments to better equip them for potential challenges in the future.”
“By building a leaner, more effective infrastructure, organisations will be much better placed to survive and thrive, whatever the economic circumstances,” said Campanini.
Fintech entrepreneur Khalid Talukder, co-founder of DKK Partners said, “These are exciting times for UK businesses, with confidence returning and companies gearing up for growth. Despite storm clouds on the horizon, the business community is clearly ready for the challenges ahead. Key to driving and sustaining growth is giving businesses access to the financial services they need to send and receive funds, drive revenues, and expand internationally.”
Falling sales were an issue for many small firms over the first quarter. Two in five small businesses said their revenues fell during the period, compared to a third who said sales had risen.
At the same time, around nine tenths of businesses said their costs were higher than in the same period last year, largely thanks to soaring utilities costs, as well as a record number of firms saying staff wages had shot up.
