Businesses are experiencing no signs of recovery while confidence and profit expectation has stabilised at “worryingly low levels”, according to a report published today.
The British Chambers of Commerce’s latest Quarterly Economic Survey looked at the fourth quarter of 2022 with the research taking place between November 7 and November 30.
The survey of more than 5,600 firms – 92 per cent of whom are SMEs – reveals business confidence, conditions and sales have stabilised at low levels following significant declines in the third quarter.
And it concludes that the Chancellor’s Autumn Statement in mid-November had little or no impact on increasing this business confidence.
As a result, local business leaders are calling on the Government to put support for SMEs at the centre of its policy making in order to blaze a trail for recovery.
Staffordshire Chambers of Commerce Chief Executive, Sara Williams OBE, said: “The economy is definitely looking like it is divided into three chunks. Firstly, the businesses who are still operating with full order books.
“In the middle, we have businesses who are working hard and struggling against the increasing headwinds of inflation, cost of living crisis and the cost of doing business, especially around energy costs.
“The final third are those businesses for whom the struggle has become too much or who have chosen to leave such a difficult environment.
“Underlying all of these three is the problem of confidence and what is needed is significant leadership from the Government to provide stability with energy costs, import and export regulation and international relations and to help with the challenges around the new costs of doing business.
“We need to work to make sure that more businesses can join those with fuller order books, skilled staff and opportunities. The Government’s New Year’s resolution should be to put business support for SMEs at the heart of its agenda and get the UK back on the road to recovery.”
According to the survey, inflation remains the top external factor of concern with 80 per cent of firms citing it as a growing worry to their business. But there are also significant jumps in the percentage of firms concerned about taxation (38 per cent) and interest rates (43 per cent).
In addition, profitability confidence remains at Covid-crisis levels. Only one in three (34 per cent) of businesses believe their profits will increase over the coming year, while more (36 per cent) expect a decline.
The BCC research also shows that just a third of firms experienced an increase in sales over the past three months, while a quarter reported a decrease, with hospitality firms the least likely to report improvements.
There is also little sign of plans to increase business investment with only 21 per cent of firms reporting an increase to plant/equipment investment over the past three months, while 57 per cent reported no changes and 22 per cent a decrease.
David Bharier, Head of Research at the British Chambers of Commerce, said: “Business confidence remains worryingly low, with only a third of firms reporting improvements to sales, and less than a quarter reporting increased investment.
“The widespread economic damage caused by Covid shutdowns has been compounded by subsequent inflation, global trade crises, and new trade barriers with the EU. For many SMEs, the cost of doing business is now simply too high.”
“While the change in administrations from Truss to Sunak may have stabilised markets, the Autumn Statement on 17 November appears to have had no impact on business confidence. Indeed, while inflation is still by far and away the top concern for businesses, taxation has now become far more of an issue for SMEs.”
Responding to the findings, Director General of the British Chambers of Commerce, Shevaun Haviland, said: “The outlook from businesses remains bleak. Now, more than ever, we need to create the right conditions for firms to invest and grow.
“We urge Government to promote business growth by investing in public infrastructure and incentivising international trade, with a particular emphasis on making the UK the global hub for green innovation.
“Barriers to trade must be removed in order to allow firms realise their full trading potential. The impasse over the Northern Ireland Protocol continues to loom and the UK Government must work with the European Commission to reach a negotiated solution on its business compliance burdens.”