Inaugural insights from the Barclays Business Prosperity Index show that UK businesses’ intention to grow remains strong, with 61 per cent feeling confident in the UK economic outlook.
Launching today (13th November 2024), the Index is a quarterly measure of the current performance and future growth opportunities for UK businesses. It brings together anonymised data from over one million business clients, including cashflow, lending, and international payments data, with Q3 survey data from 1,000 business leaders alongside economic modelling from the Centre for Economics and Business Research (Cebr).
The findings are supported by an additional survey of 500 businesses, giving their initial reactions to the Government’s Budget covering economic confidence and future plans for investment.
Appetite for investment fed by financial resilience
The Q3 survey data found that businesses expected to increase investment by 1.4 per cent in the quarter compared to Q3 2023, a sharp uptick from the 0.7 per cent year-on-year rise reported for Q2. The main focus of this investment was staff training and development (44 per cent) alongside R&D to improve products and services (35 per cent).
Barclays data also showed improved financial resilience in Q3 2024 vs Q3 2023, indicating that many businesses have been gearing up for growth. Key findings include:
- Positive net cash flow – despite a slight decline in cash coming into Barclays business accounts (3.0 per cent year on year), outgoings fell, resulting in a 17.0 per cent increase in the difference between cash coming in and going out
- The value of drawn loans – the total borrowing drawn against available loan facilities –increased by 4.8 per cent over the year to Q3 2024, a faster rate than the 3.6 per cent uplift recorded in Q2 2024 (vs Q2 2023)
Unlocking UK growth: the £22bn Barclays Business Prosperity Fund
Post-Budget analysis shows that almost half of firms (46 per cent) reported having plans to invest on hold, but now intend to move ahead. Close to four in 10 (37 per cent) said they are now more likely to seek additional funding to invest in the growth of their business.
While there may be a period of adaptation to the measures laid out, reassuringly 61 per cent reported feeling confident that the Budget will deliver prosperity for the UK economy overall.
To help UK companies unlock growth and access finance, the Barclays Business Prosperity Fund, worth £22bn, is also available for new and existing Business Banking customers and UK Corporate Banking clients who wish to apply for lending.
Matt Hammerstein, Chief Executive of Barclays UK Corporate Banking, said: “The economic environment remains challenging for those on tight margins, but there are signs of cautious optimism emerging. Our data shows many businesses with investment plans on hold are now confident to kick-start growth by seeking the funding they need. The availability of our £22bn Barclays Business Prosperity Fund will help our clients to invest for their future and support economic prosperity for all.”
Lack of skills hampers growth
The Q3 survey data shows that 62 per cent of business leaders across the UK cited skilled labour as an ongoing issue, with over three-quarters (77 per cent) saying it was having a negative impact on their ability to grow. In response, increased training and staff development was identified by 42 per cent as a priority area for investment.
Areas where access to labour is reportedly most challenging are Scotland (92 per cent) followed by Yorkshire and the Humber (90 per cent) and the West Midlands (88 per cent). Other areas where access to labour was identified as a challenge were the South West (82 per cent), North West (82 per cent) and London (80 per cent).
The post-Budget figures show that building the workforce remains a key priority, with 40 per cent of respondents seeking investment to recruit additional headcount.
Peak inflation pricing paradox
Business leaders reported that demand has softened since this time last year. This was also reflected in Barclays business accounts, which saw a 3.0 per cent fall in business cash inflows in Q3 compared to last year. While this pressure has eased over the last three quarters, with inflows starting to pick up, businesses and their customers continue to feel the effects of inflation and rising costs.
As a result, businesses report that customers are waiting longer before making big purchases (25 per cent), seeking cheaper alternatives (25 per cent), and questioning the value for money of goods and services (20 per cent).
In response, 84 per cent have introduced strategies, such as making changes to their product offering and updating supply chain processes to retain customers. In addition, 65 per cent have reduced prices, either overall (31 per cent) or by offering special offers and discounts (41 per cent).
These measures suggest we are in a period post “peak inflation”, whereby inflation has passed its peak but left the costs of producing products and services high for businesses. In response, some firms have needed to reduce the size and/or quality of their goods and services (shrink- and skimpflation, respectively) or take on a higher cost burden themselves to retain customers.
However, over half of firms (52 per cent), are committing to investing in the expansion of products and services following the Budget.
Hannah Bernard, Head of Barclays Business Banking, said: “Our new Index is designed to be a bellwether of business sentiment, performance and future growth opportunities. We hope business leaders and policymakers find it a valuable tool to navigate the economic landscape.
“It’s reassuring that businesses remain committed to investing to grow, despite the extra financial pressures faced by many. Barclays stands ready to help unlock access to finance and support business prosperity in the long and short term.”
The Barclays Business Prosperity Fund is available for new and existing Business Banking customers and UK Corporate Banking clients across the UK to apply for lending and refinancing on existing projects, for more details visit: home.barclays/businessprosperity.
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