Small business confidence reaches two-year high

According to a study commissioned by Novuna Business Finance, the percentage of small business owners forecasting growth has reached its highest level in more than two years, after a period of slow decline since the beginning of 2022.

The research found that in the two weeks immediately following the general election, 35% of UK small business owners were forecasting growth over the next three months – up from 30% in the previous quarter. The research shows a recovery in confidence comparable to pre-Covid years – and a revival in small business confidence at the start of 2022 as Covid restrictions finally fell.

Contrary to reports of a sharp drop in business confidence in France and Germany – and fears that the eurozone’s two biggest economies are facing a downturn – UK small business confidence has seen a positive upturn in the weeks following Labour’s election victory, with more small businesses forecasting growth across most sectors and regions of the UK than in the three months to 30 June.

Nine sectors saw an increase in the percentage of small businesses forecasting growth over the next three months (to 30 September) this quarter. Compared to the three months before the general election, growth forecasts rose significantly in construction (up from 15% to 36%), agriculture (up from 28% to 40%) and IT/telecoms (up from 28% to 38%) – and there was also a welcome boost in the retail sector (up from 26% to 37%). Overall, small businesses in finance, agriculture and media were most likely to forecast growth over the next three months.

New July data from Novuna Business Finance shows that nine regions in the UK saw an increase in the percentage of small businesses forecasting growth. Confidence was strongest in London, where 49% predicted growth over the next three months. Small businesses in the East (up from 36% to 43%), Scotland (up from 27% to 34%), Wales (up from 15% to 32%), the North East (up from 19% to 31%) and the East Midlands (up from 24% to 32%) also saw significant quarter-on-quarter increases.

Jo Morris, Head of Insight at Novuna Business Finance, said: “At Novuna Business Finance, our Business Barometer study has been tracking small business growth prospects quarterly for more than a decade. The results show remarkable consistency from quarter to quarter over time, with prospects rarely changing significantly in a short period of time. Our latest research represents the largest quarter-on-quarter swing in growth prospects since spring 2021. We don’t believe this is driven by small business owners’ political views, but rather a reflection of their perceived need for security. The feeling of a new government with a large public mandate, as well as falling inflation, suggests solidity – and small businesses need a sense of stability and certainty. To support a summer of resurgent business confidence, at Novuna Business Finance we are working to provide flexible, tailored financial solutions that help established small businesses reach their true potential.”

Share of small businesses forecasting growth, by industry

Percent of small businesses forecasting growth each quarter – results over time