Our research for the third quarter of 2023 shows another decline in business confidence in the South East of England. From -7 in Q2, confidence has fallen to -13, reflecting the ongoing battles small businesses have with high inflation and increasing interest rates. The trends aren’t encouraging, the trend downwards is a continuous one from the start of 2023, where the South East recorded a positive rating of 4. Compared to the rest of the country, the South East is joint-third lowest in confidence, with the lowest being the South West at -31.
However, firms report a continuing upward trend in revenue, with 39% reporting an increase and 33% reporting a decrease. This net 6% score is an increase on last quarter, where more firms reported a decrease in revenue. The South East registers the second highest net revenue, behind the East Midlands and only one of two where firms report a net increase in revenue.
On employment and wage growth, small businesses report a slight increase, but below expectations. Over the last quarter 15% of firms increased staff, while 12% decreased. This 3% net result, while positive, is well below the 14% anticipated by small firms in the last quarter. Just over two thirds increased wages in the last 12 months, 63% increasing by 2% or more. Looking ahead 7 in 10 firms expect to increase wages next year, and 6 in 10 by 2% or more.
The trends show growing pessimism among small businesses. A year ago, more businesses expected to grow than they do today, although this quarter 46% of small businesses still expect to grow. This is also reflected in the investment intentions of small businesses, where 24% expect to increase investment and 16% decrease.
In summary, it’s not an overwhelmingly positive set of figures. Despite revenue increasing, this is not matched by significant increases in investment or growth. It reflects unease at the economic picture and worry about interest rates and lingering inflation. That hesitation to act is stopping business growth that would kick start the UK economy. Policy makers should take heed before stagnation sets into the British economy.
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South East Small Business Index Q3 2023 Report