The British Chamber of Commerce’s Quarterly Economic Survey – the UK’s largest and longest-running independent business survey – shows a small rise in business confidence in the final quarter of 2023. The percentage of businesses expecting an increase in turnover over the next year (56%) has risen to the highest level since Q1 2022 when Covid restrictions were lifted.
The data also reveals that more businesses expect price hikes, ending the downward trend of the last two years.
The survey, conducted in November, of over 5,000 businesses across the UK – 91% of whom are SMEs (fewer than 250 employees) – also reveals business performance across different sectors varies considerably.
Summary
Business confidence improves in Q4, with 56% of UK businesses expecting an increase in turnover in the next twelve months.
Despite this boost, most businesses continue to report no improvement to sales, cash flow or investment.
Downward trend in price growth expectations ends with more expecting their prices to rise over the next three months.
Hospitality sector continues to struggle disproportionately, with nearly a third (32%) of businesses reporting a decrease in investment.
Minor improvement in overall business conditions
The percentage of respondents reporting increased domestic sales rose slightly to 36%, compared with 35% in Q3. Meanwhile, 22% reported a decrease and 42% said sales had remained constant.
There were significant sectoral differences. 46% of consumer services businesses said they had seen a boost in sales, whereas 35% of hospitality companies and 28% of retailers saw a decrease.
Slight increase in business confidence
The percentage of businesses expecting to see their turnover increase over the next 12 months increased to 56%, from 53% in Q3. Only 15% of respondents are expecting to see their financial situation worsen in the year ahead, 29% expect things to remain the same.
Profitability confidence has also improved, with 47% of companies saying they expect profits to increase in the next year. That compares to 45% in Q3. 21% of respondents believe their profits will fall.
Downward trend in price expectations halts
Despite inflation continuing to ease, more businesses are expecting their prices to rise, compared with the last quarter. 47% of respondents are predicting an increase (compared with 41% in Q3), 49% think prices will stay the same, and just 4% are anticipating a decrease.
Slightly fewer businesses cite interest rates as a concern
While inflation remains businesses’ biggest concern (58%), a recent trend in rising worries over interest rates has eased. 39% of businesses say they are concerned about the cost of borrowing, compared with 41% in Q2 and 45% in Q3. These figures remain high compared with the pre-Covid trend.
Most businesses still not increasing investment
Challenging economic conditions continue to impact heavily on business investment. Overall, the percentage of respondents reporting an increase to investment in plant/equipment has increased only slightly from 23% in Q3 to 24% in Q4. 58% of businesses said investment had remained the same, 19% reported a decrease.
There are large sectoral disparities in investment levels. 32% of hospitality sector businesses say they have decreased investment, and only 19% have increased. Meanwhile, in the transport and logistics sector, 36% of respondents reported a rise in investment – only 18% a decrease.
Suzanne Caldwell, Managing Director of Cumbria Chamber of Commerce said:
“The results of our Quarterly Economic Survey for Q4 2023 show an uptick in business confidence, yet significant hurdles persist for the upcoming year.
Concern about interest rates and inflation remains notably high, although there has been a slight reduction.
The recruitment difficulties encountered by many businesses emphasise the need for a skills plan from Government along with an affordable immigration system.
Businesses continue to struggle with investment as a major challenge. The Chancellor’s decision to permanently implement full expensing in the Autumn Statement was warmly received. 2023 demands a concerted effort to provide additional support for companies to invest.
Politicians must stay focused on fostering economic growth and enabling businesses to prosper during the forthcoming busy election year.”
What Cumbrian businesses say:
“Last year our costs went up 22%. This year it is just 4.5% – inflation is now under control for our sector. Last year’s government inflation stats were way under the reality and this year they are way over the reality. Can we trust the ONS in future?” – Hospitality business
“Our economic situation is unsteady, whilst it is maintainable, the constant rise of materials makes keeping a steady cashflow difficult.” – Consumer services business
“Minimum wage/pension/NI increases are costs which will seriously impact our business and are of most concern to us.” – Wholesale business
