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No festive cheer for Britain’s youngest businesses as confidence plummets

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The proportion of young small businesses (those trading for less than five years) predicting growth has hit its lowest level for two years – falling from 54% in November 2016 to just 40% this month, according to new research from Hitachi Capital Business Finance.

At a time of year when Small Business Saturday traditionally signals the countdown to Christmas shopping season with a nationwide focus on supporting smaller companies, Hitachi Capital tracks the communities confidence at the start and end of each year to assess their outlook at this critical period.

The new data reveals:

  • Compared to the start of the year, 2018 has seen dramatic falls in small businesses predicting growth – particularly those that are relatively young (26%) and that have been around for longer (older, 37%) – an indication that anxiety over Brexit and the global economic outlook have taken their toll after a tough year.
  • Comparing confidence in November 2018 to the same time in 2016 and 2017, the UK’s youngest enterprises have seen a sharp fall in confidence compared to the previous two years (down from 54% to 40%). By comparison, levels were stable between 2016 and 2017.
  • In nine industry sectors small businesses were less optimistic about their growth prospects than they had been at the start of the year. By comparison, in just three sectors business leaders were marginally more confident this month than they had been in January 2018.
  • In all but one UK region, respondents were less confident in November 2018 than they had been the previous January – with London, the Midlands and Wales experiencing the sharpest falls.

Percentage of businesses that predict growth by business age

November 2016 November 2017 November 2018
Up to 5 years 54% 54% 40%
5-10 years 50% 43% 41%
10-20 years 35% 33% 32%
20-35 years 39% 29% 35%
35+ years 38% 28% 28%

 

Business outlook for the year ahead (national averages)

November 2016 November 2017 November 2018
Significantly expanding 5% 7% 5%
Modestly growing 38% 31% 31%
Scaling down 7% 9% 9%
Struggling to survive 4% 5% 4%
Total Growth 43% 37% 36%
Total Contraction  11% 14% 13%

 

Businesses predicting growth: 2018’s risers and fallers by sector

2018 Risers & fallers Q4 2018 Q3 2018 Q2 2018 Q1 2018
Finance & accounting +3 50% 44% 52% 47%
Education +2 41% 24% 40% 39%
Manufacturing +1 48% 43% 50% 47%
Retail 37% 33% 41% 37%
Media -1 48% 39% 50% 49%
Hospitality and Leisure -2 29% 29% 40% 31%
Legal -3 49% 43% 37% 52%
Construction -3 28% 34% 27% 31%
Real Estate -7 36% 34% 35% 43%
Health -7 33% 28% 49% 40%
Agriculture -10 18% 27% 32% 28%
Transport -12 24% 35% 32% 36%
IT & Telecoms -21 31% 37% 46% 52%

 

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance commented: “The final charge into Christmas is important for many small businesses. For those in retail and leisure, it’s a key for sales and in other sectors it’s a time to plan for the New Year. During the course of the last 18 months, smaller companies in general have been resilient and relatively calm in the face of unprecedented economic and political upheaval. What we have discovered with our latest research is an emerging new trend. Having looked in detail at community by sector and geography, business age is now showing itself to be a very significant factor. The very old and very young are struggling a lot more. The older ones may be more resistant to change, in a year when GDPR was voted one of the biggest headaches for the sector. For young businesses that are building up their experience and credit history, some feel less confident about coping with uncertainty and change.

“It is often difficult for businesses big or small to adapt quickly to the ever-changing needs of the market. We understand these pressure points and are happy to offer the support and tailored financial solutions that can help businesses focus on their individual priorities and return to a more positive outlook for the future.”




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