SME confidence stronger in the NW than national peers

Small business confidence in the North West is proving to be more resilient than the national average, according to the latest Small Business Index from Blackpool-based the Federation of Small Businesses (FSB).

While the NW SBI for Q2 2023 remains in negative territory at minus seven, that’s up from -11 recorded in the previous quarter. And with the comparable national average SBI score at -14, small businesses here in the North West appear to be less pessimistic than their nationwide counterparts.

However, the sharp UK-wide increase in confidence recorded by FSB in the first quarter of 2023 has not carried through to Q2, with businesses hit by stubbornly high inflationary pressures and economic uncertainty, but there are some reasons to be positive.

In all, while 43% of respondents in the North West reported a decrease in revenues over the past three months, more than a third (36%) have seen an increase. In addition, revenue performance is significantly worse in other regions.

A net balance of 13% in the region expect growth in profits in the coming quarter, and future revenue expectations are significantly more positive than the net national average.

However, in other areas the North West is lagging behind. Fewer businesses in the region are planning to grow and investment aspirations have fallen significantly compared with the previous quarter, standing at three per cent from the net 18% recorded in Q1. The North West underperforms the nationwide average (seven per cent).

According to the SBI for Q2 of 2023, the greatest perceived barriers to growth over the next 12 months for businesses in the North West are: The general economic conditions (68%), consumer demand (41%), and utility costs (33%).

FSB area leader for Greater Manchester, David Sudworth, said: “While Q1’s significant upturn in confidence has not carried over into the second quarter, our research shows there are reasons for optimism.

“Over half of all small firms expect to grow in the next year, and we can see confidence in the North West is more pronounced than the national average, perhaps bolstered by net revenue performance being significantly better here than several other UK regions.”

He added: “It is particularly encouraging that energy and fuel costs are falling in the ranks of small firms’ most-cited barriers to growth – and we welcome that Ofgem has recently backed our call for energy companies to allow small businesses to ‘blend and extend’ their contracts.

“Of course, significant challenges still lie ahead.

“North West businesses are less likely to seek investment and growth support, for example, there is a pressing need to tackle the perennial problem of late payment of invoices and, of course, successive interest rate rises have not really tamed inflation but are hitting consumer demand and small business margins hard.

“We are warning that further increases will seriously undermine their prospects and economic growth.”

He said: “Confidence is often fragile but we know small firms are survivors and there are positive signs in our SBI findings for Q2 2023.”