Research shows a hopeful outlook for the UK’s small businesses

Enterprise Nation recently published its quarterly Small Business Barometer, which analysed what the next 12 months look like for small businesses.

Encouragingly, it reveals that momentum is starting to build for small companies, with 20% of small businesses saying they plan to reboot growth plans in the next year—a 7% increase from the previous year. Of those, 34% predict they’ll expand by a quarter, which could boost the UK economy by more than £40 billion.

Emma Jones CBE, founder and CEO of Enterprise Nation, said: “Small businesses will play a vital role in the future success of the UK economy, so it’s more important than ever to create clear and easy routes to help them find the support they need to grow.”

Profitability has increased since last year

The Sage Small Business Tracker Q1 2024 revealed that small businesses are financially healthier now on average compared to this time in 2023.

Despite a slight revenue drop (1.7%), average profits increased by 6.5%. This is reportedly due to considerable reductions in expenses and overheads, both of which decreased by over 8%. It’s also the largest decrease in overheads since the start of the post-pandemic period.

The tracker also shows that cash balances are up nearly 5% from last year and that average debt has reduced by over 11%.

Derk Bleeker, Chief Commercial Officer at Sage, said, “This quarter’s tracker shows how small businesses are effectively managing challenges like reduced revenues and broader economic uncertainties. By controlling costs, they’ve managed to become more profitable, though many are waiting for a more stable economic and political climate before making major investments.”

Late payment—an improving situation

In other positive news, the Sage report showed that the average number of days it took small businesses to pay a sales invoice once it was overdue was 11.5 days in Q1 of 2024, down from 21 days in the previous quarter; whilst the average number of days they were late to pay an invoice reduced from 22 days to 13.9 days over the same period.

Growth strategies over the next 12 months

YouGov recently commissioned a survey that asked over 1,000 business decision-makers about the specific growth strategies they plan to implement over the next few months. Here’s what micro and small company owners said:

Common strategies include expanding sales and marketing efforts, launching new products/services, reducing costs, and boosting efficiency. For small businesses specifically, workforce expansion is another key area that entrepreneurs are focusing on.

There’s also considerable attention on sustainability, with 15% of small businesses planning to invest in sustainability in the near future.

Increase in credit obtained by small businesses

In other positive news, the Federation of Small Businesses reported an increase in the number of small businesses successfully applying for credit, which rose by 13.9% from Q1 to Q2 in 2024, despite the perceptions of credit availability decreasing significantly in the same quarter. This could have a positive knock-on effect on growth in future quarters.

Anticipated challenges

However, there are some issues small business owners highlighted in Enterprise Nation’s survey, which they expect to add pressure to their growth plans in the coming months.

1. Tax

Most (60%) entrepreneurs said the tax burden on small companies is too high. With the Autumn Budget just around the corner, fears continue to grow as Prime Minister Keir Starmer warns that “tough times are ahead”. As a result, consumer confidence has begun to suffer in recent weeks.

2. Cost of living

Despite stable inflation, the cost of living remains a concern for 42% of small business owners. With the withdrawal of winter fuel payments and more cuts looming, shoppers are still cautious about how they spend their cash, pushing internal costs up for small businesses and making it more difficult to generate sales.

3. Late payments

23% of small businesses said they are often paid late for their goods and services, showing that although the issue of late payments is improving, it is still a big concern, which will likely affect cash flow for thousands of small businesses, thereby hampering growth.

4. Access to suitable space

Small businesses also feel held back by spatial restrictions. 1 in 5 entrepreneurs expressed frustration at the lack of adequate space they need to run their business, such as business units, coworking spaces, and high street pop-ups. Alarmingly, this has been a problem for the past two years, with no signs of movement.

Whilst the newspapers are full of gloomy headlines about the economic climate, the research in this article shows there are reasons for optimism for the UK’s small business community. Profitability is increasing, late payments are decreasing, and access to credit is improving.

We hope these optimistic shots have inspired you to become your own boss. Ready to take the plunge? The 1st Formations team is here to help. Browse our range of incorporation packages to find the perfect one for you, and start your business from just £52.99.

If you have any questions, let us know in the comments below. Thanks for reading.