Survey finds over half of businesses materially impacted by economic and political uncertainty

Business West’s latest Quarterly Economic Survey has found that over half of businesses have reported that political and economic instability has had a material impact on their business in the last quarter. 

Over 350 businesses from across the South West took part in the survey, with over three quarters of companies reporting concern about the general economic conditions, while 63% of businesses said general business uncertainty was a key concern. These figures have jumped by over 20 percentage points since this time last year, during the depths of the pandemic. 

The proportion of businesses concerned by taxation has risen to 38% (from 22% in Q3) – possibly linked to the new Chancellor’s Autumn Budget statement which took place halfway through the fieldwork period. Within this Budget the tax burden was further increased on the back of large-scale U-turns immediately following the end of the Truss Government. The tax burden relative to the economy’s overall size has now reached a historic high. 

Business confidence in the UK economy has also reached a new historic low, with only 6% of companies feeling confident in the nation’s economic prospects. 46% of businesses are confident about their own business prospects, a decrease of almost 20% since this time last year. The gap between confidence in their own business and that of the UK economy is the highest ever recorded.

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Rebecca Hobbs, owner of Bijoux Floral Design based in Yate in Gloucestershire, said:

“I have over 50 bookings for next year already, however I am expecting customers to decrease their orders due to the cost of living and recession. This means I'm going to have to take on more work just to stay afloat. 

“On top of that I am probably going to have to register for VAT. I won't be earning any more money but due to the cost of raw materials going through the roof I’ll need to charge more meaning I will hit the VAT threshold sooner. I am concerned about the next year, but I have thought about contingency plans if necessary.”

Prices are continuing to soar for businesses, with over half of firms having increased their prices in the last three months. Rising inflation looks like a trend that is set to continue, with over half of firms  expecting to put their prices up in the next 3 months. While the proportion of businesses worried about inflation has dropped marginally to 67% from 73% in Q3, this is still the second highest ever recorded. 

Stephen Davis, Director of Noma Architects based in Bristol, said:

“Along with other professionals in the construction industry, our costs have risen but without the prospect of additional fees on secured appointments. We are experiencing higher costs (e.g. overheads, salaries) and lower productivity given difficulties with planning and dissolving contractor companies.”  

The number of businesses reporting difficulties with recruiting staff remains high at 79%. Workforce expansion remains low in Q4 with only 18% of respondents confirming increases in their personnel, and just a fifth (20%) of businesses expecting to recruit during the next three months. 

Judith Barrass, Director of Ebonstone Limited, a consultancy based in Chippenham in Wiltshire, said:

“It's been challenging. We're concerned over staff costs and ability to retain and recruit staff.”

UK sales and orders have both fallen further into negative territory in Q4, symptomatic of the impacts of the recession. The proportion reporting a decrease in domestic sales is now above 30%, compared to 17% this time last year.

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Matt Griffith, Director of Policy at Business West said:

“2022 has been a very tough year for local businesses, with global inflation and economic headwinds compounded by a confidence sapping period of political uncertainty in the UK. 

“The consequences are still being felt, both on business balance sheets and economic sentiment. We hope that 2023 holds more cheer, and it is a testament to business resilience that many still feel confident in their own business prospects. With luck the new year will bring a let up of pressures and we can start to report signs of green shoots in our future surveys.”