Proportion of small businesses predicting organic hits 2 year high
Almost a third of small business owners (32%) have started 2022 predicting organic growth for the next three months.
Now in its ninth year, the tracking study by Novuna Business Finance reveals that whilst the percentage of small business owners predicting significant growth for the next three months remained unchanged from this time last year, the larger group predicting organic growth has risen sharply. Compared to this time last year, there have also been falls in the proportion of small businesses predicting contraction or collapse.
Short-term changes
Looking at shorter-term change on the previous quarter, the percentage of small business owners predicting net growth rose in the construction sector (up from 26% to 38%), real estate (up from 24% to 36%) and confidence more than doubled in agriculture – up from 12% to 23%. In contrast, those industry sectors hardest hit by Christmas Covid restrictions saw a fall in confidence for this quarter. In retail, the percentage of small businesses predicting growth fell from 29% to 23% and in the troubled hospitality sector growth predictions fell from 34% to 29%.
Welsh and Scottish businesses bounce back
The key regional highlights were in Wales and Scotland, where growth predictions for the next three months hit a 9-month high – a resounding bounce-back after the challenging period of Christmas restrictions.
Elsewhere, London saw a moderate increase in the percentage of small businesses predicting growth, but there was a sharp fall in the south East (falling from 39% to 27%). It is possible that Covid had greater disruption on small businesses that supply London market than it did on enterprises based in the capital.
Home working as productive as returning to work
With millions of people facing a return to the workplace in the coming months, the research also suggests working from home can be equally as productive as returning to the office. Nationally, 39% of small businesses unaffected by Covid predicted growth for the next three months, compared to 37% of enterprises whose staff will continue to work from home. It was business that had been temporarily closed as a result of Covid (20%) – or were having to re-purpose their services and offer (27%) – that were far less likely to predict growth for the next 3 months.
The research also reveals a correlation between growth outlook and progressive view towards technology and the environment. Businesses that had fully used technology to drive operational efficiencies were far more likely to predict growth than those that had not innovated enough (27%), or who struggled to make full use of it (18%).
On green issues, small businesses that were working on a clear plan to become carbon neutral were also far more likely to predict growth (54%) compared to those enterprises that were taking small steps on sustainability (37%) or were doing nothing (28%). Whether sustainability drives growth – or whether growing businesses take the issue more seriously – the research indicates a clear trend; investing in sustainability correlates with business growth and confidence.
Joanna Morris, Head of Insight at Novuna Business Finance comments: “After a challenging Christmas trading period for many small businesses, our latest findings are very positive. Overall confidence, defined as the proportion of businesses predicting growth, has now held firm for three consecutive quarters – with an important year-on-year improvement in businesses transitioning from contraction or standing still to predicting modest or organic growth. These are green shoots, a sign many are turning the corner, or planning to.
“Our task at Novuna Business Finance is to help small businesses to fulfil their true potential. With a background in manufacturing not banking, we understand the cycles many businesses go through – and we think the findings from this quarter’s research suggest more small businesses are putting building blocks in place to build growth strategies in 2022. The rebuild after Covid won’t be easy, but small businesses have a vital role to play – and we will do everything we can to support the economic recovery in the small business sector this year.”
