The UK Business Confidence Crisis
The UK is currently in the grips of a business confidence crisis, with figures showing that confidence has hit its lowest point in 13 years. This arrives among other major issues such as staff retention and falling revenue, forcing businesses to re-evaluate their priorities going into 2023.
The figures
According to a recent poll by Accenture and S&P Global, businesses in the UK have seen their confidence plummet by 40% since February this year. These figures come from 12,000 businesses across Europe, including 1,400 in the UK.
This represents the highest level of uncertainty since the great recession, meaning that firms are less likely to invest in new products, expand their operations, or hire new talent.
The British Chamber of Commerce Q3 2022 survey also reports similary dire statistics. Of the 5,200 firms they surveyed:
Less than half believe their turnover will increase over the next year
32% reduced cash flow over the last quarter
There’s been a 10% drop in those reporting increased sales
Almost 90% are concerned about growing inflation measures
Only 22% reported an increase in equipment investment over the last quarter
Outcomes
With economic conditions expected to worsen over the next year, this does not bode well. The Institute of Chartered Accountants in England and Wales (ICAEW) has stated that many businesses will require short-term business loans es to stay viable due to a high inflation and soaring energy costs.
Despite these worrying figure, Accenture believes that there is sofigures, Accenture believes that there are positive outcomes from the analysis. They say there’s signs that there are signs that the UK could recover from a recession relatively quickly. This is because business businesses are making a show of strength through their human resources strategies, including the raising of salaries.
80% of surveyed companies expect to raise salaries over the next 12 months
Continuing troubles in the labour market are spurring on this sort of strategy. The ICAEW’s study found that 40% of companies are having difficulties employing people with non-management skills, with almost 50% having staff turnover issues. So, whilst companies would usually change pay structures or freeze pay in such economic scenarios, they’re instead raising pay in line with inflation in order to retain their key talent and stem the bleeding.
Businesses are instead reducing spend spending in areas such as research and development to balance out their costs. But this might not be the best idea.
What can businesses do?
Simon Eaves, the Market Unit Lead for Accenture, suggests that the best thing to do is the opposite of what one might assume. Businesses usually become more conservative during recessions by cutting back on development and focussing on short-term survivability.
"Businesses should stay focused on the long-term and plan for the next growth cycle to remain competitive. They can do this by seeking to reinvent their operations across the whole enterprise, invest in new technologies and skills, and embed sustainability in everything they do.”
As Warren Buffet said of investments: “be fearful when others are greedy, and greedy when others are fearful”. Investors have the most oppertunity opportunity for return on investment if they can buy whilst everyone is reducing their exposure. Whilst it can seem a scary strategy, once the sentiment reverses, those who invested will reap the rewards.
Keep a steady course
With soaring energy bills, staff costs, and a talent shortage, it’s no wonder that business confidence is plummeting. Even the usually resillient resilient tech sector is feeling the pain, with a sharp downturn in confidence measured by a quarterly TechUK survey.
So now is the time to think carefully about your next steps. Is your business keeping a steady course on its long term growth plan, or is it battening down the hatches? Whilst the latter can feels like the safe and natural option, the former offers the most opportunity feel like the safe and natural option, the former offers the most opportunity to those who find a way to forge on.