North West small business confidence takes a hit but remains positive

Paul Wareham

The latest FSB Voice of Small Business Index (SBI) shows that North West business confidence has fallen to 21% in the second quarter of 2021, down from 39% the previous quarter – the highest level since 2015 – when shops began to re-open in England and Wales.

However, with confidence understandably fluctuating during the past 12 months during the COVID pandemic, FSB’s research shows sentiment in the region has remained positive in 2021. This coincides with the continued relaxation of COVID safety regulations.

Encouragingly, the number of businesses reporting increased profits (40%) has increased significantly over the past three months – the last time North West small businesses were asked about profits, in quarter four of 2020, just 21% reported growth.

In addition, the number of businesses increasing headcount (23%) is greater than those reducing headcount (12%) – something not seen since before the pandemic.

Further, heading into quarter three, investment intentions in the North West are the most positive across the UK.

In all, 37% of small businesses are looking to increase the amount of capital being invested in their business.

Despite these positives, businesses are still experiencing significant barriers to growth.

FSB’s research shows that the greatest perceived barriers to growth over the coming 12 months are general economic conditions in the UK (48%), appropriately skilled staff (36%), consumer demand (33%) and labour costs (31%).

FSB England policy unit representative for the North West, Paul Wareham, said: “The latest North West results have built on the positive outlook of many small businesses. This optimism follows a difficult period for many, who have been closed for up to 15 months, with the majority now open for business.

“Small business confidence remains in positive territory. However, that confidence is down on the first quarter results, perhaps indicative of businesses realising that recovery could be a long process for them.

“Pleasingly, profitability sees a positive score for the first time in many quarters, with a net balance of businesses looking forward with optimism to revenues and margins returning to something resembling ‘normal’.

“A net balance of small businesses expect to take on more staff this coming quarter and we also see positivity when it comes to investment and growth intentions.

“With a view to barriers to progress, North West businesses report skills and recruitment difficulties, the general economic climate and uncertain consumer demand as the main areas of concern.”