One in four small firms are optimistic about growth

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Date: 2 February 2021

A smiling businesswoman prepares orders for shipping

A quarter of UK small businesses are predicting growth in the next three months according to a new study.

The latest quarterly Business Barometer from Hitachi Capital Business Finance has found that UK small business growth forecasts remain unchanged on the previous two quarters, despite the new year lockdown. The poll, conducted by YouGov in January, asked 1,464 UK small business decision-makers about their expectations for the next three months.

Following a crash in small business growth forecasts during the first lockdown in March 2020 - falling from 39% to 14% overnight - the proportion of small business owners predicting growth doubled the following quarter and has remained unchanged ever since.

Unsurprisingly, the survey has uncovered marked differences between sectors. Those that are more optimistic about growth include directors in finance/accounting (40%), media/marketing (36%) and IT/telecoms (36%). By comparison, just 19% of businesses in retail and 9% in hospitality predict any form of growth over the next three months. Worryingly, 29% of small retail businesses and 52% of small firms in hospitality fear contraction or collapse in the same time period.

The findings also reveal that Scottish small businesses are the least likely in the UK to be predicting any form of growth, with just 17% of small firms north of the border anticipating growth compared to 34% of small businesses in London.

Another significant discovery is that Brexit is "quietly but decisively … having a direct bearing on short-term growth plans", according to Hitachi Capital Business Finance. Those small businesses for whom the EU is their biggest market were most likely to predict contraction or collapse (31%), whereas businesses that had a broad-based international reach beyond the UK were most likely to predict growth in the next three months (36%). However, small businesses that rely purely on the domestic market for sales were more likely to predict contraction or collapse than growth (28% versus 22%).

"We live in unprecedented times and the surprises from our latest quarterly study reflect this," said Joanna Morris, head of insight at Hitachi Capital Business Finance. "Overall, it is hugely positive that growth outlook for the small business sector as a community remains strong. Our study showed how dramatically confidence fell with the first lockdown in March 2020, and whilst growth forecasts have not matched pre-pandemic levels, the consistency of more than one in four predicting growth over each of the last three quarters is a firm and positive building block for the British economy."

Written by Rachel Miller.

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