Q4 2012 Business Barometer Report
Business Environment provides serviced office space and outsourced office facilities for more than 500 companies in the South of England. In November 2012 the company surveyed 300 business owners from across the UK, to find out what challenges they were facing – in particular their experiences of the fourth quarter of the calendar year (October to December 2012) and their expectations for the coming quarter (January to March 2012).
Tough conditions continued for UK firms. The UK economy came out of recession in August, but in the December Autumn Statement the Chancellor of the Exchequer announced that the economy was weaker than expected, and that the austerity period would continue for longer than originally planned.
However, the Eurozone crisis seemed to be at least temporarily abating, and national spirits remained lifted by a summer which had contained both a Royal Jubilee, the successful hosting of the Olympics, and a great year for British sport.
Despite the tough economic conditions, the overall picture was one of stability. When asked what their turnover was compared to the preceding quarter, more than half of respondents (61.7 per cent) reported that it remained the same. Similarly, when asked whether the number of employees in their firm had changed over the past quarter, the most frequent reply was that headcounts had remained constant (47.7 choosing this option). Looking forward, a majority (67.3 per cent) of respondents had no plans to expand their business in the coming quarter.
There were some signs of cautious optimism. A majority of firms (70 per cent) expected their sector to grow in the coming quarter; a majority (58 per cent) were either “confident” or “very confident” in the UK economy’s prospects over the first three months of 2013.
Looking at specific business factors, the most commonly-cited barrier to liquidity was lack of credit from banks (37.7 per cent), followed by debtors paying late (19 per cent).
David Saul, managing director of Business Environment, said: “One of the main messages to come from the report was that while few companies are thriving, a large amount are on an even keel. Nearly half a decade after the beginning of the financial crisis, the initial fallout is now over and businesses are beginning to adjust to a long period of austerity and reduced consumer demand.
“We see this reflected in much of the survey’s findings. Companies are not growing at a fast rate, but they remain confident about the long-term prospects for their firms. Companies complain about bank lending, but few expect the economy to tank in 2013.
“The issue for businesses is whether to become reconciled to a period of stagnation, or whether to try to think their way out of it – by innovating, expanding into new markets, or exporting to new territories.”
The most consistently positive regions were the West Midlands, Wales and the North East.
West Midlands businesses were the most likely to have introduced new products and services in the last quarter (47.1 per cent), and most likely to be confident about the longevity of their business (76.5 per cent). They were second most likely to be confident about the UK economy’s prospects in the coming quarter (73.5 per cent), and second most likely to have plans for business expansion in the next three months (52.9 per cent).
Employers in Wales were the most likely to have seen their business grow in the previous quarter (78.6 per cent), were most likely to predict their sector would grow in the next quarter (85 per cent), and were second-least likely to have suffered cashflow issues over the previous quarter (71.4 per cent).
Firms in the North East were most likely to have increased their number of employees in the final three months of 2012 (60 per cent), most likely to have a higher turnover now compared to the quarter previously (46.2 per cent) and third-most likely to have plans for business expansion in the next quarter (46.2 per cent).
Conversely, the regions posting the most consistently negative replies were Northern Ireland and Scotland. The Scottish were least confident in the longevity of their business (14.3 per cent), were equal-most likely to have seen a decrease in their firm’s headcount (23.5 per cent – a figure shared by the North West), and were second most likely to have suffered cashflow issues in the previous three months (52.9 per cent).
Northern Irish firms were least confident about the UK’s prospects over the next quarter (80 per cent), most likely to have seen business shrink over the previous three months (60 per cent), and were most likely to predict that their sector would shrink over the coming quarter (80 per cent).
Interestingly, London and the South East, the areas associated with the UK’s strongest recent growth, tended to post results which saw them appear consistently in the middle of the UK’s regions, in terms of confidence.
Unsurprisingly, there were many signs that larger firms were weathering the storm best. For example, the biggest companies were the most likely to have introduced new products and services. 50 per cent of companies with over 250 people reported they had brought out new products and services, compared to 46.2% of 100 – 249 people, down to just 16.7% of 1-9 people. Similarly, larger firms were more likely to have employed more staff over the preceding three months (62.5% of firms with more than 250 staff, compared to 37.3 per cent with between 1 and 9 employees).
Similarly, the largest firms were most likely to have plans for business expansion over the coming quarter, with 72.7 per cent of firms over 250 people expecting to grow, compared to just 58.9 per cent in the 100-249 bracket, down to just 18.2 per cent in the 1-9 bracket.
However, there were plenty of positive signs from smaller companies. One striking finding was that the smaller the firm, the more positive they were about their business’ future. 68.2% of firms between 1 and 9 employees were either “positive” or “very positive” about the longevity of their firm, compared to 66.3% of firms with between 10 and 49 employees, 64.8% of firms between 50 and 99 employees, and 58.9 per cent of firms between 100 and 249 employees. For firms with more than 250 employees, the figure was just 54.5%.
One surprising trend was the relative bullishness displayed by companies in the 50-99 bracket, who were the most confident about the UK’s prospects over the coming quarter (70.3 per cent being either confident or very confident) about their sector’s prospects in the coming quarter (74.1 per cent predicting a growth), and who were most likely to have noticed an increase in business over the past quarter (72.5 per cent).
In December 2012 Vince Cable, the UK Government’s Business Secretary, commented that there was a risk of the country sliding back into a triple-dip recession. The same month, the report from the Office of Fiscal Responsibility predicted that “the recovery still lacks momentum… we expect weak productivity to constrain normal earnings growth.”
Against this bleak background, the stable picture painted by respondents to the Business Environment SME Tracker is, relatively, good news.
Further good news is the fact that small businesses, while they were not predicting the growth of their larger counterparts, did not report huge skepticism about the future, This is encouraging, as a moribund SME sector is a sure sign of a stagnant economy.
One of the most interesting signs is the distribution of confidence around the UK’s regions, which showed that clichés such as the north/south divide are outdated.
Overall, as the euphoria of summer 2012 wears off but the tough economic climate that has characterised the decade remains, the survey shows that there are grounds for cautious optimism in the UK’s SME sector.
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Business Environment is the leading owner and provider of flexible serviced offices in Southern England. It owns and operates office space approaching 1,000,000 sq. ft. and caters for small to large companies demanding competitive and flexible office accommodation. Its success is the result of providing clients with exceptional value together with excellent award winning service. www.beoffices.com
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This report can be downloaded from the Business Environment website and was published in January 2013