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Despite the ongoing cost of living crisis, business confidence increases significantly

Sue Lewis Senior Director, Financial Services 12/05/2023
We predict that confidence will rise again and throughout the year, but that progress will be slow.

The Savanta Business Confidence Index saw a significant improvement this quarter, from 27 in Q4 2022 to 38 in Q1 2023 as we moved out of the political turmoil of Q4. Whilst encouraging, confidence still remains at one of the lowest levels we have seen since we started recording, as businesses still grapple with ongoing inflationary pressures.

Confidence increased significantly across all business sizes

The confidence index among smaller established businesses, who represent most enterprises by number, is at 38 with the score having risen significantly by 11 points on Q4 2022.

Larger businesses with annual sales above £1m are one of the most confident groups when reflecting on economic health, with a confidence index of 39. Yet this audience has experienced the smallest increase in index (+7 points) compared to Q4 2022.

New start-ups have a confidence index of 36. This again represents a significant increase in confidence, of +10 points compared to Q4 2022.

Confidence up significantly in all geographical regions.

This wave Wales/South West has the highest confidence index at 40. This presents an increase of 16 points on Q4 2022, the largest increase of all the regions.

London is the second most confident region. It experienced a 13 point increase in confidence index on Q4 2022, now at 39.

Midlands/East is the next most confident region with an index of 38. This represents a significant increase of 9 points on Q4 2022.

The South East and the North/North West both have a confidence index of 36.  The South East experienced the smallest increase in score (+6 points) and the North/North West an increase in score of 9 points.

Scotland is the least confident region, but even here score increased significantly (+9 points).

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

Confidence up in all industry sectors

At Q1 2023, all sectors reported a positive change in confidence index and this increase was significant in all but two sectors (Agriculture (+5 points) and Education (+6 points).

The largest increase was in the Business Services sector (+13 points) and the smallest was in the Agricultural sector (+5 points)

Confidence is again highest in the Transport sector (42, 8 points up on Q4 2022) but this wave joined by the Construction sector also with an index of 42 (up 12 points on Q4 2022).

Wholesale (39), Business Services (38), Agriculture (38) and Production (37),  had the next highest confidence indexes. Wholesale and Business Services reported some of the largest increases (+11 and +13 points) whilst the Agriculture and Production sectors reported some of the smallest increases (+5 – not significant, and +6 significant).

The least confident sectors this quarter are again Other Services and Accommodation with indices of 34 and 30 respectively. The Other Services sector experienced one of the largest increases in score (+11 points) whilst the Accommodation sector experienced one of the smallest (+7 points).

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

In terms of age of small business owners (start-up and established £0-2m), confidence increased 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 (42, +13 points).

Those aged up to 34 score 36 (up 9 points, significant), those aged 35-64 also score 36 (up 10 points, not significant) and those aged 65+ score 42 (up 13 points, significant).

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

“Is it very encouraging to see that Business Confidence has improved this quarter, bucking the downward trend we noted last quarter and moving forward into 2023 with more positivity. Whilst we may now have more political stability, businesses and their customers, are still navigating inflationary pressures and now interest rate rises. We predict that confidence will rise again and throughout the year, but that progress will be slow and that it won’t be until H2 or even the end of the year that we start hitting positive (+50) levels of confidence.”

Quarter 1 findings are from Savanta’s MarketVue Business Confidence programme conducted among 2797 GB businesses from start-ups to companies with £1bn turnover, surveyed from between 3rd January 2023 – 28th March 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?”

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

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