The Savanta Business Confidence Index saw a marginal improvement this quarter, from 38 in Q1 2023 to 39 in Q2 2023, but this is not significant.
Though encouraging, confidence is still low compared to previous periods. Whilst we may now have more political stability, businesses and their customers are still navigating inflationary pressures and now need to consider the impact interest rate increases will have on potential growth plans.
Confidence increased significantly for start-ups and larger business sizes, but fell for smaller businesses; the bulk of the market
New start-ups have a confidence index of 42. This represents a significant increase in confidence, of +6 points compared to Q1 2023.
The confidence index among smaller established businesses, who represent most enterprises by number, is at 37, with the score having fallen by 1 point on Q1 2023. This is resulting in a relatively stable overall confidence index this quarter.
Larger businesses with annual sales above £1m are the most confident group when reflecting on economic health, with a confidence index of 45. This audience has also experienced a significant increase in their index compared to Q1 2023 (+6 points).
Confidence up significantly in four geographical regions
London is the most confident region. It experienced a +3 points increase in the confidence index compared to Q1 2023, now at 42.
Scotland is the second most confident region this quarter (41) with its score having increased significantly since last quarter (+6 points).
The South East is the third most confident region. It has a confidence index score of 39 and an increase of +3 points.
The North/North West and Midlands/East both have a confidence index of 36. Whilst the North/North West confidence index has increased by +2 points, the Midlands/East index is stable.
This wave, Wales/South West has the lowest confidence index at 34. This represents a significant decrease of -6 points on Q1 2023, the only negative change.
An index of less than 50 means more businesses are pessimistic rather than optimistic about the current state of the economy.
Confidence up in most industry sectors
At Q2 2023, confidence increased in five of nine industry sectors (Education, Production, Business Services, Other Services and Accommodation) but decreased in three (Transport, Construction, and Agriculture).
The greatest increase was in the Education sector, the only significant change, with confidence highest in this sector (49, +16 points up on Q1 2023).
Transport is the second most confident sector (40) but has experienced a fall in confidence of -2 points.
The production (39), business services (39), wholesale (39) and construction (39) sectors have equal confidence indices.
Whilst this represents an increase in confidence in the production (+2 points) and business services (+1 point) sectors, confidence fell in the transport (-2 points) and construction (-3 points) sectors. Confidence is stable in the wholesale sector.
Other services (36) and agriculture (35) have similar confidence indices, but confidence has grown in the Other services sector (+2 points) and fallen in the agriculture sector (-3 points).
The least confident sector is again accommodation with an index of 32, but this represents an increase in confidence on Q1 2023 (+2 points).
Amongst start-ups and small businesses, confidence increased for younger age groups
In terms of the age of small business owners (start-up and established £0-2m), confidence increased for all the younger age groups but not significantly so.
- Those aged 65 and over are again the most confident group this quarter (42, stable).Those aged up to 34 score 39 (+3 points) and those aged 35-64 score 37 (+1 point).
Commenting on the findings Sue Lewis, Senior Director at Savanta, said
“At the beginning of the year we were encouraged by Business Confidence improving, bucking the downward trend, as businesses welcomed political stability and reports that the gloomy prediction of prolonged recession might not actually come to fruition. And whilst many now expect the UK to swerve recession, inflationary pressures remain stubbornly high resulting in interest rate rises that might affect borrowing investment for growth. Many businesses are in ‘wait and see’ mode, but we hope that economic improvement over the next half will result in increased business confidence over Q3 and Q4 of this year”.
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About Market Vue Business Confidence
Quarter findings are from Savanta’s Market Vue Business Confidence programme conducted among 2364 GB businesses from start-ups to companies with £1bn turnover, surveyed between 29th March 2023 – 23rd June 2023. 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?”