More than half of UK firms believe their turnover will increase over the next 12 months – heralding a slight increase in business confidence, according to a new survey.
However, only one in three experienced an increase in sales over the past three months and almost half of hospitality businesses reported a drop in cash flow in the last quarter.
The findings were reported in the British Chamber of Commerce’s Quarterly Economic Survey (QES) for Q1 2023 with the research taking place between mid-February and March 9, before the Chancellor’s Spring Budget.
The survey of more than 5,200 firms – 92% of whom are SMEs – also reveals a sectoral division in business performance, with hospitality and retail firms consistently more likely to report worsening cash flow, investment, and turnover than other sectors.
The retail and hospitality sectors remain particularly weak. Almost two in five (38%) retail firms experienced a decrease in sales over the past three months, with one in three (32%) hospitality businesses reporting a fall.
More businesses continued to report a decrease, rather than an increase, in cash flow, highlighting the precarious state many SMEs are still in. Only one in four (25%) businesses said their cash flow has increased over the last three months, while 30% have seen it decrease.
However, after a significant fall in Q3 2022, business confidence is now on the up. Over half (52%) of firms believe their business turnover will increase over the next 12 months, up from 44% in Q3 2022.
While profitability confidence has also improved, it continues to remain weaker than turnover confidence. 42% of businesses now expect their profits to increase over the next year, up from 34% in Q4 2022.
And the overall level of concern regarding inflation has dropped for the first time in over two years. However, at 74%, the level remains close to the historical high.
David Bharier, Head of Research at the British Chambers of Commerce, said: “After a significant decline in business confidence in the second half of 2022, results from QES Q1 show an improvement in business sentiment as political turmoil and inflationary pressures show some signs of easing.
“However, this comes from a very weak base, and while confidence has improved, this is yet to translate into an overall improvement of business conditions. Most SMEs still report no improvement to sales, cash flow, and investment.”
