Retailers bank on Christmas trading for uplift


Retailers bank on Christmas trading for uplift

The percentage of small businesses predicting significant or modest growth in the retail sector rose by 9 per cent in the last three months, from 20 per cent to 29 per cent forecasting growth. With a tricky winter predicted ahead, it seems small businesses are banking on the Christmas period to provide a necessary increase in business for the sector. The proportion predicting growth was the highest figure since Q4 2021 (also 28 per cent).

This quarter was also the first time this year where the proportion anticipating growth was higher than those anticipating decline. In Q4’22, the proportion predicting either significant or severe decline fell to 21 per cent, following a two-year high in Q3’22 of 34 per cent.

This comes from new research by Novuna Business Finance, which has tracked and studied small business growth predictions against prevailing market conditions every quarter since 2015. At the start of each quarter Novuna asks a representative sample of 1,200 small business owners about their growth predictions for the next three months. At a time of unprecedented economic strain and market uncertainty, the contraction of growth predictions is a cause of concern, although the scale of the dip in confidence this quarter is less pronounced than may have been expected.

Across the nation, the percentage of UK small businesses predicting growth has hit its lowest level in two years (31 per cent), with the latest figures suggest a slight drop in growth predictions on last quarter (34 per cent) and a bigger fall on this time last year (37 per cent) – a time when the country was still coping with Covid restrictions.

In addition, 18 per cent of small businesses fear they will contract or struggle to survive over the next three months. These figures have gradually risen quarter-on-quarter through 2022 and the percentage of small businesses fearing for the future is now at its highest level since January 2021.

However, the picture was much more mixed when it came to sectors, with some excelling and the many falling behind. Growth predictions fell for transport and distribution (falling from 30 per cent to 24 per cent), real estate (falling from 32 per cent to 27 per cent) and hospitality (31 per cent to 26 per cent). Despite holding firm on last quarter (35 per cent), in the manufacturing sector, the percentage of small businesses predicting growth remained significantly down on 12-months ago (48 per cent).

Despite a difficult picture for many sectors, small businesses in retail were not only predicting increased growth in the next three months, but also a decrease in those contracting or struggling to survive. With less than one in five retail enterprises predicting contraction or potential closure in the next three months (22 per cent), this figure represents a marked decrease on last quarter, where more than one in three businesses predicted the same (35 per cent) – a positive picture for retail businesses despite a difficult winter ahead.

Jo Morris, head of insight at Novuna Business Finance comments: “We are all very aware of the seismic economic challenges that everyone is facing as we head into autumn and winter months. We were not surprised to see a dip in the proportion of small businesses that are predicting growth in the run-up to Christmas, although the fall was less severe than may have been expected – given the scale of economic volatility and the impact of price rises and inflation on running costs and the supply chain. Whilst in some regions and sectors there are grounds for concern, our findings also suggest there are strong levels of resilience from other businesses. We saw this during the lockdown era, a time many small businesses where quick to adapt their plans, some even re-purposed or re-engineered their businesses at a time of unforeseen change.”

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