A turbulent Q4 in both political and economic arenas

Political stability may give businesses some hope, but inflation is still high and demand low.

The Savanta Business Confidence Index saw a significant decline again this quarter from 34 points in Q3 2022 to 27 in Q4 2022. With fieldwork incorporating the Truss and Sunak leadership challenge, inflationary pressures, and economic forecasting of deep recession this was not unexpected.

Download a copy of the infographic here.

Confidence decreased significantly across all business sizes

The Confidence Index among smaller established businesses, who represent most enterprises by number, is at 27 with the score having also fallen significantly by 7 points on Q3 2022.

Larger businesses with annual sales above £1m are among the most confident groups when reflecting on economic health, with a Confidence Index of 32. Yet this audience has experienced a similar decrease in index (-6 points) compared to Q3 2022.

New start-ups have a Confidence Index of 26. This represents a significant decrease in confidence of -6 points compared to Q3 2022.

In terms of geographic location, confidence fell in all regions

Confidence decreased in all regions, significantly so in all but Scotland.

London is no longer the most confident region. It experienced the largest fall in Confidence Index, a significant decrease of 10p on Q3 2022, now at 26.

The South East has overtaken London as the most confident region with an index of 30, but its score also represents a significant decrease on Q3 2022, of 4p.

Midlands/East is the next most confident region with an index of 29. This represents a significant decrease of 5p on Q3 2022.

Scotland and the North/North West (and London) all have a Confidence Index of 26.  Scotland experienced the smallest fall in score (-3) but the North/North West was one of the highest (-8).

In this wave, Wales/South West has the lowest Confidence Index at 24. This presents a significant decrease of 9p on Q3 2022.

An index of less than 50 means more businesses are pessimistic rather than optimistic about the current state of the economy.

Confidence is down in all but two industry sectors

In Q4 2022, two sectors reported a positive change in Confidence Index, Agriculture (+2) and Education (+2), but these changes were not significant.

The smallest fall was in the Accommodation sector (-2, not significant). All other scores fell significantly with the largest falls being in the Business Services and Other Services sectors (-8).

Confidence is again highest in the Transport sector (34, 6p down on Q3 2022).

Agriculture was the next most confident sector with an index of 33 and a +2 increase in score on Q3 2022 (not significant).

The Production (31) and Construction (30) sectors had the next highest confidence but experienced significant falls in score of -7 and -5 respectively.

Wholesale (28), Education (27) and Business Services (25) had the next highest Confidence Indices, however, whilst Wholesale and Business Services reported some of the largest falls (-7 and -8, significant) the Education sector reported a positive change (+2, not significant).

The least confident sectors this quarter are Accommodation and Other Services both with indices of 23. The Accommodation sector experienced the smallest fall (-2 and not significant) whilst the Other Services sector experienced one of the largest falls in score (-8 and significant).

Amongst Start-ups and small businesses’ confidence decreased for all age groups

Confidence decreased for all age groups, significantly so amongst those aged up to 34 and those aged 65+

In terms of age of small business owners (start-up and established £0-2m), confidence decreased for all age groups but not significantly so amongst those aged 35-64.

Those aged over 65 are again the most confident group this quarter (29, -8).

Those aged up to 34 score 27 (down 8 points, significant), those aged 35-64 score 26 (down 6 points) and those aged 65+ score 37 (down 8 points, significant).

Commenting on the findings Sue Lewis, Senior Director at Savanta, said

“Is it striking that Business Confidence has been on a downward trajectory since Q3 2021 and with our fieldwork during the mini-budget and political and economic turmoil that followed we fully expected confidence to fall again in Q4. With economic forecasts moving and in contraction, it’s very hard to predict what might come next quarter. Political stability may give businesses some hope, but inflation is still high and demand low. We anticipate that confidence will rise again this year, but that this might not be seen until the second half of the year.”

Download a copy of the infographic here.

Quarterly findings are from Savanta’s MarketVue Business Confidence programme, conducted among 2794 GB businesses from start-ups to companies with £1bn turnover, surveyed from between 20th September 2022 – 16th December 2022. Indices are mean scores based on a scale of ‘extremely positive’ (100), ‘fairly positive’ (75), ‘neither positive nor negative’ (50), ‘fairly negative’ (25) and ‘extremely negative’ (0), for the question “How do you feel about the current health of the UK economy?”

For more information contact Sue Lewis, Senior Director, Financial Services at [email protected] or on 07813 717153.