1 August 2023 – Despite the challenging economic landscape, the majority of small businesses are optimistic for the future, with almost 80% being positive about their performance.
The past few years were tough for small businesses: the pandemic, supply chain issues, energy prices soaring, inflation rising, borrowing costs going up and business rates and taxes increasing. Many small firms had to close.
As a result, business confidence has fallen sharply. And while some issues have improved, like supply chain issues, others, such as high inflation and borrowing costs, are still there.
However, new research has shown that 79% of small businesses are positive about their performance and the future.
13% More Small Businesses Expect To Grow Compared To Last Year
American Express and Small Business Saturday UK conducted a survey of 1,000 SME owners and decision makers for their annual Business Barometer. Surprisingly, 79% of respondents said they were expecting their business to grow in the next 12 months.
This is an increase of 13% compared to the same time last year. Eight out of ten small business owners reported that they believe that their business is in good shape at the moment. 5% more than last year, when 74% said so.
This optimistic outlook is surprising given the still challenging economic landscape. But despite all the challenges, 64% of small businesses are positive about their performance in the final quarter of 2023 and expect to do better than in the last two years.
Only a small percentage (15%) said they expect to do worse than the previous 24 months.
While SMEs continue to face a challenging environment, there are real signs of positivity in our research, with an uplift in business owners and leaders feeling confident about the future, along with plans to invest across a number of areas of their operations.Amanda Salt, Vice President, Small & Medium Enterprises, UK Card Services at American Express
The optimism about the performance of small businesses translates into action too, with 30% planning to increase sales and marketing activity in the coming months.
25% have plans to diversify the products or services they offer. 20% said they will invest in technology.
Inflation Biggest Challenge For Small Businesses
Even though the majority of small businesses are positive about their performance, owners and leaders are aware of the many challenges their businesses still face.
35% have said that running a business has become harder during the last 12 months. The biggest challenge the respondents identified was rising inflation. More than half (53%) believe that rising costs for goods, services and energy will be the key challenge in the next six months.
25% have pointed to increased business rates and taxes as a key issue for their business in the coming months. For 23% of small business owners labour and recruitment is the main challenge in the months ahead.
Issues with cashflow are seen as the main reason for stunted growth, with 57% of small businesses saying so.
The UK business landscape is a tough place to be in current times. The survey also asked small businesses what standing they think entrepreneurialism has in this country.
Half of the respondents believe that people understand the challenges faced by small businesses and how much hard work is needed to make it work. However, 30% disagree, showing that there is a divide in opinion regarding this topic.
But when it comes to being recognised and supported for their contributions, the majority of respondents (82%) said that there is a need for improvement. 76% want the Government to implement measures to support small businesses and encourage them to grow.
With over a third saying it is increasingly hard to run a small business, and three quarters feeling there needs to be more recognition of entrepreneurship, we need to support them more than ever, and celebrate their incredible impact on local communities and the wider economy.Michelle Ovens, Director of Small Business Saturday UK
Running a business can be a lonely place sometimes. When business owners or leaders need advice or support, 37% go to fellow business owners and entrepreneurs. They are looking for someone who has done what they are looking to do or are going through.
Other sources, including friends, family or trade associates, business owners also turn to for support and advice. But the first port of call for many is someone who has experience in the relevant field.
While the past few years have been incredibly tough, 70% said that the experience of going through these difficult times has made them more resilient as a business leader.
The UK’s economy is performing less well than other comparable economies in the world. In order to boost growth, our 5.5 million small businesses have to thrive. And it is good news that they are positive about their performance in the current economic situation.