After a rally in Q3, Business Confidence fell back once more as restrictions tightened in Q4

Following a generally downward trend since April 2018, the Savanta Business Confidence Index (formerly the Charterhouse Business Confidence Index) had rallied at Q1 2020 following the general election, but it then plummeted with the onset of Covid-19 at Q2.

The impact of Covid-19 on business confidence is clear to see with a significant drop in confidence in the spring, a small rally in confidence in the summer and a falling back as winter fell.

Confidence began creeping back up at Q3, but fell again at Q4 with the introduction of new lockdowns.

Larger businesses with annual sales above £1m are one of the most confident groups with a confidence index of 39, representing a decrease in score of 4 points compared to Q3 2020, and 21 points on Q1 2020.

The confidence index among smaller established businesses, who represent most enterprises by number, is at 38 with index having fallen 4 points from Q3, and 17 points down on Q1 2020.

Although traditionally new start-ups have been least confident, at Q4 2020 the new start-up segment index is also 39. This represents a decrease in confidence of 6 points on their Q3 score and 13 points on their Q1 2020 score.

To download an infographic summarising the results please click here.

In terms of geographic location, confidence decreased across all 6 regions.

• The North/North West and Wales/South West are now the most optimistic regions with indices of 40.
• In the North/North West the score fell 2 points from Q3 to Q4 (the smallest fall) and by 17 points on Q1 2020.
• In Wales/South West the score fell 3 points from Q3 to Q4 (the second smallest fall) and by 14 points on Q1 2020 (the smallest fall).
• The South East is the next most confident region with a score of 39, representing a 4 point fall on Q3 and a 17 point fall on Q1 2020.
• London and the Midlands/East are the next most optimistic regions with scores of 37 at Q4 2020, a fall of 7 and 6 points respectively over Q3 to Q4 and 17 and 20 points on Q1 2020 – the largest falls in score.
• Scotland is the least confident area with a confidence index score of 33 this quarter. This represents a 4 point fall on Q3 and a 16 point fall on Q1 2020.

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

Industry sector continues to be a stronger differentiator of sentiment than region, both in terms of the size of the quarterly shifts within a given sector and the degree of variation from one sector to another.

• At Q4 confidence fell in 8 of the 9 sectors from Q3 – confidence in the Production market remained stable.
• The biggest falls occurred in Transport (down 12 from Q3 to Q4, but 21 from Q1 to Q4 with an index of 31) and Accommodation (also down 12 from Q3 to Q4, and 19 from Q1 to Q4 with an index of 32). These indices represent the lowest confidence scores across the 9 sectors.
• Confidence is highest in the Construction (45) and Agricultural (45) sectors, as it was at Q1 2020 and throughout 2020.
• In terms of age of business owners, confidence levels are similar this quarter – those aged up to 34 score 38, 35-64 score 37 and 65+ score 38.
• Confidence amongst the youngest age group fell 8 points from Q3 and 14 points from Q1 2020, score amongst those aged 35-64 fell 5 points from Q3 and 18 points from Q1 2020 and score amongst those aged 65+ fell 7 points from Q3 and 17 points from Q1 2020.

Commenting on the findings Sue Lewis, Director at Savanta, said “The impact of Covid-19 on business confidence is clear to see with a significant drop in confidence in the spring, a small rally in confidence in the summer and a falling back as winter fell. It will be interesting to see whether confidence levels rise in Q1 2021, with the contrast between the vaccine rollout and the continuing lockdown restrictions, and to what extent Brexit affects business sentiment. It may not be until Q2 2021 that we start to see notable rises in confidence.”

Quarter 4 findings are from Savanta’s MarketVue Business Confidence programme (formerly the Charterhouse Business Confidence Survey), conducted among 3,178 British businesses from start-ups to companies with £1bn turnover, surveyed from 1^st October to 18^h December 2019. 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).

To download an infographic summarising the results please click here.

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