• Business confidence remains weak following the employer NI rise, with just 40% of firms in the East expecting turnover to increase in the next 12 months
• The proportion of businesses expecting to put up prices over the next three months eases to 49% (from a spike of 71% in Q1)
• Tax remains the main concern for firms, with a significant 71% citing it as a worry, followed by inflation at 52%
• No significant change in sales indicators, with only 25% of business reporting a rise in sales, down from 30% in Q1
• Nearly a third (32%) of firms have cut back on investment in the past three months, while only 15% have increased investment
In the largest survey of business sentiment since April’s employer National Insurance rise, the British Chambers of Commerce (BCC) Quarterly Economic Survey for Q2, shows confidence among firms remains weak.
While price rise expectations have eased back from near historic highs in Q1 – tax remains the biggest concern cited by firms. Only a quarter say domestic sales have grown over the last three months.
The survey was carried out by the BCC Insights Unit and the UK’s wider Chamber network after the National Insurance rise came into force, with the fieldwork conducted between 12 May and 9 June. Over 4,500 businesses across the UK (88% of whom in Norfolk are SMEs) responded online.
Business confidence remains subdued
Levels of confidence among businesses remain weak, with only 49% of responding firms across the UK expecting their turnover to increase over the next 12 months. This loss in confidence is even more stark in the East of England where the figure is just 40%. Nationally this is the second lowest figure since the aftermath of the mini budget in late 2022. Nearly a third (30%) of our region’s businesses expect turnover to worsen and another 30% expect no change.
Confidence levels remain lowest in the hospitality sector (33%) and retail (44%), showing the continued struggles these sectors face, particularly in Norfolk where the sector is especially prevalent.
Profitability confidence has dropped slightly in the East from 34% to 32% of firms expecting profits to increase over the next year, while 40% expect them to worsen (42% in Q1).
Fewer firms planning to increase their prices
The proportion of businesses in our region saying they expect to raise their prices in the next three months has dropped significantly. In Q1 64% expected to raise prices which has dropped to 49% in Q2. This suggests a moderation in new price rises after firms made adjustments ahead of the NICs increase. Just under half (49%) say their prices are likely to remain the same, and only 3% are expecting them to decrease.
Labour costs continue to be far and away the main cost pressure for firms, cited by 84% of respondents – almost unchanged the previous quarter. Nationally this issue is most significant for transport and logistics businesses (88%) followed by the hospitality sector (83%).
Tax remains the biggest concern as NI rise bites
Following the employer NI contribution rise at the start of April, tax continues to be the biggest worry for businesses. In the East this concern is felt much more strongly than elsewhere, with 72% citing it as a worry compared to just 56% nationally. This quarter’s figure is the third highest on record, following the previous two quarters.
Concern about inflation also remains high among businesses, but has dropped slightly – 48% compared with 52% in the previous quarter. Worries about interest rates are slowly dropping for businesses in our region, with 18% citing them in Q2, down from 21% in Q1.
No significant improvement in business conditions
The percentage of responding businesses reporting increased domestic sales has shown no noticeable improvement, 25% compared with 24% in Q1. 38% reported no change and over one third (37%) said they had seen a decrease in sales.
Just over a fifth of businesses (21%) report an increase in cash flow over the last three months, up from 16% in the previous quarter. 35% report a fall in cash flow (down from 39% in Q1), while for 44% cash flow remained the same.
Most firms struggling to invest
As businesses face increased cost pressures, nearly a third, 32%, say they have cut back on investment plans (compared with 35% in Q1). 53% of firms say their investment strategy has remained the same, while only 15% have increased their plans.
Once again, the issue is more marked in certain sectors across the country, with 39% of hospitality firms reporting a scaling back of investment plans.
Shevaun Haviland, Director General of the British Chambers of Commerce, said:
“The rising cost of doing businesses means confidence levels remain at their lowest levels since 2022.
“However, it’s encouraging to see a drop in the number of firms planning to raise prices. Any signs of inflationary pressures easing is good news for business and the wider economy. But prices remain volatile.
“Last week, the Prime Minister acknowledged at the BCC’s Global Annual Conference that business has been asked to shoulder a huge tax burden. We now need the Government to rule out any further business taxes in this year’s Budget.
“Businesses have welcomed the series of long-term strategies from Government in recent weeks, all designed to drive forward economic growth. Our research shows businesses are stuck in a rut and more needs to be done at pace by ministers to turbocharge the economy and boost business confidence.
“Our Blueprint for Growth report provides a clear set of proposals to drive business innovation and investment. We urge ministers to work with us to implement these ideas.
“Businesses are clear – they want their costs reduced, regulation reformed, and skills barriers removed. Action by policymakers now, will help businesses out of this confidence slump and give firms the tools to boost growth.”
Jack Weaver, Chief Operating Officer at Norfolk Chambers of Commerce said:
“Business sentiment in Q2 remains fundamentally subdued, following last autumn’s tax increase announcements and the more recent introduction of global tariffs. And in the East of England, we see even more stark confidence and investment issues than the national average.
“April’s rise in National Insurance contributions means taxation as again the dominant concern for firms. Businesses are now contending with ever-higher labour costs and administrative requirements, fuelling increased anxiety about redundancies. This is particularly acute in Norfolk where sectors like hospitality and tourism, retail and transport and logistics are sizeable employers.
“While there has been some easing in our price expectations indicator, this follows a spike to near historic highs and may mean that firms already baked in the recent NICs increase. As the Bank of England has indicated, inflation is likely to remain volatile in the short term, as any geopolitical turbulence could trigger renewed shocks to prices.
“SMEs are operating in an increasingly unpredictable world and have limited capacity to absorb further disruption when compared to larger businesses. A roadmap to easing tax and administration, de-escalation of global tensions and improvements to the UK-EU and UK-US trading relationship would go a long way in reassuring our business community.”
