BCC Quarterly Economic Survey: Business Confidence Boost Fails To Revive Investment
- Confidence of Norfolk firms improves in Q4, but manufacturers expect turnover to drop slightly, bucking an otherwise upward trend.
- Despite this overall improvement, firms continue to report a limited no improvement to sales, cash flow and only modest increase in investment.
- Downward trend in price growth expectations ends with more Norfolk businesses expecting their prices to rise over the next three months.
- Hospitality sector continues to struggle disproportionately, with nearly a third (32%) of firms reporting a decrease in investment.
The BCC’s Quarterly Economic Survey – the UK’s largest and longest-running independent business survey – shows a small rise in the confidence of Norfolk businesses in the final quarter of 2023. The percentage of firms expecting an increase in turnover over the next year shows sectoral disparity in Norfolk with 36% of manufacturers expecting turnover to increase, down from 43% in Q3, whereas the service sector saw this jump significantly after 3 quarters of stagnation. The data also reveals that more firms expect price hikes, ending the downward trend of the last two years. The survey, conducted in November, of over 5,000 firms across the UK including those in Norfolk – 95% of whom are SMEs (fewer than 250 employees) – also reveals business performance across different sectors varies considerably. Minor improvement in overall business conditions The percentage of respondents in Norfolk reporting increased domestic sales rose notably to 24%, compared with 17% in Q3. Meanwhile, 19% reported a decrease and 41% said sales had remained constant. Across the UK, there were significant sectoral differences. 46% of consumer services firms 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 UK firms expecting to see their turnover increase over the next 12 months increased to 56%, from 53% in Q3. But in Norfolk that change is more pronounced due to a number of services businesses reporting significant growth expectations. Meanwhile, profitability confidence for our county’s businesses has also improved significantly, with 41% of companies saying they expect profits to increase in the next year. That compares to just 23% in Q3. 20% of those respondents believe their profits will fall. Downward trend in price expectations halts Despite inflation continuing to ease, more local firms are expecting their prices to rise, compared with the last quarter. 55% of Norfolk respondents are predicting an increase (compared with 36% in Q3), 57% think prices will stay the same, and just 4% are anticipating a decrease. Slightly fewer firms cite interest rates as a concern While inflation remains firms’ biggest concern for local Norfolk businesses (74%), a recent trend in rising worries over interest rates has eased. 54% of businesses say they are concerned about corporation tax, compared with just 36% in Q2 and 37% in Q3. These figures remain high compared with the pre-Covid trend. Norfolk firms beginning to increase investment Challenging economic conditions are still being felt across the county and continue to impact heavily on business investment. However, the percentage of respondents reporting an increase to investment in plant/equipment has increased slightly from negative territory in Q3 to 12% in Q4. 55% of businesses said investment had remained the same. At the national level, there are large sectoral disparities in investment levels. 32% of hospitality sector firms 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. Jack Weaver, Chief Operating Officer at Norfolk Chambers of Commerce said: “The latest QES results for Norfolk show steadily growing confidence among our local SMEs, particularly compared to this time last year, when the UK was in the midst of an energy price shock, political instability and lingering confidence issues post-COVID. However, while it’s likely the UK will avoid a technical recession, these results provide more evidence of a very low growth climate across the whole country as most SMEs continue to report no improvement to sales, cash flow, or investment. What we do see however is remarkable resilience across the Norfolk business community. The data shows local firms bucking the national trend in sales, investment and confidence for the future. The data does reveal the disproportionate impacts of economic shocks on different types of businesses. Manufacturers, for example, are more likely to be exposed to the trade barriers established with Europe, while many firms in the retail and hospitality sector are reporting recessionary conditions. With a local economy more heavily geared towards the seasonality of hospitality and tourism, this remains a concern. These sectors also face the combined challenge of attracting and retaining staff; something Norfolk Chambers hears time and again when we discuss skills with our members. Norfolk businesses need to see a clear long-term plan for growth from Government, and increasingly the opposition in a general election year, that addresses infrastructure, access to skills, economic development and a coherent plan for global trade.” Shevaun Haviland, Director General of the British Chambers of Commerce said: “Our data shows business confidence is growing, but real challenges remain in the coming year. “Worries about interest rates and inflation remain at historically high levels, despite a slight easing of concern. “The recruitment challenges many firms are facing underlines our calls for a skills plan from Government alongside an affordable immigration system. “Investment continues to the Achilles’ heel for business. The Chancellor’s decision in his Autumn Statement to make full expensing permanent was very welcome. 2023 needs to be the year when companies are given further assistance to invest. “In the noisy election year ahead, it is crucial politicians remain focused on growing the economy and helping businesses thrive.” We asked our Strategic Partners to share their insights into the Q4 results, here’s what they had to say: “We are cautiously optimistic for the year ahead. We are getting positive signals from customers concerning potential import volumes for the coming 12 months which should translate into additional throughput for the business.”
Kevin Wilding – Branch Manager – LV Shipping Ltd
“We do see a difference in the size of organisations, whereby larger are taking a more longer term view with enhanced focus on talent retention and progression – as they see this as key to their strategy, and is a barrier to growth. With the flatlining this year we see businesses taking this as an opportunity to focus on the efficiency of their business, and to invest in their staff.”
Kathryn Horton – Chief Executive – Turning Factor
“The focus on retaining and advancing the existing workforce in Norfolk must be complemented by initiatives aimed at cultivating a skilled labour pool. There’s a growing trend of individuals seeking opportunities beyond the region, prompting the need to proactively address this potential exodus. By bolstering efforts to grow and enhance the skills of workers in Norfolk, it becomes possible to not only attract new talent but also retain the current workforce. This balanced approach will fortify the local economy and help counteract the trend of people leaving the area for better prospects elsewhere.”
“With the escalating costs set by larger international and national businesses, the inevitable consequence is the transfer of these elevated expenses to end consumers. This upward price shift is anticipated to contribute to an overall increase in the cost of living and inflationary pressures. These economic indicators are poised to create conditions that could steer us toward a technical recession. A technical recession, stemming from increased living expenses and inflation, appears to be more probable than a complete economic downturn. This distinction is crucial since a technical recession typically signifies a slowdown in economic growth rather than a full-fledged recession characterized by widespread economic decline. Therefore, while the trajectory may lead us towards a technical recession, it might not necessarily entail a severe and prolonged downturn across all economic sectors.”
James Fowler – Business Development Manager – Uptech LTD “We are always optimistic at Source One, if you do the right things well then that’s a good mantra to work to in the long run. Enquiries from clients remain continual and level. Clients do seem to be taking longer to make decisions with their projects and associated costs……all totally understandable in the world we are currently in…..we work the same way at the moment when making spending decisions. The supply chain and services are being hit with increases due to all the factors we know….which has an effect at the end of the chain when project margins can be affected. Offering a value for money service helps negate some of those challenges.” Patrick Lewis – Co-Owner and Chairman – Source One Consulting Ltd The first QES of 2024 will be live on 12th February, please ensure you are subscribed to our newsletter for announcements, as well as following us on social media. If you would like to be emailed an invitation to complete the survey on release please email [email protected] and we will add you to our distribution list.
