UK recession prompts calls for small business ‘re-start’

UK small business confidence is set to suffer another blow following news the UK has entered recession, according to the findings of a fresh report from Small Business Britain and TSB Bank.

Two thirds (68 per cent) of small firms previously said they were feeling optimistic about 2024 in the new research, but over three quarters (78 per cent) said success would depend on whether the UK goes into recession. As new data from the Office for National Statistics confirms the UK economy contracted at the end of last year, the news is likely to dampen this previously rising small business confidence.

Emma Robson, founder at Stort Valley Gifting outlined her concerns: “Although it's a fairly shallow recession, the concern for us as a small business, is the impact on consumer confidence.”

“We try to remain optimistic that falling inflation will offset that, but with people still hurting from the cost-of-living crisis, this may cause people to tighten their belts further. Hopefully the next quarter will show some growth and restore some confidence going into our busier periods over the summer and towards Christmas which, as a hamper and gifting company, is our peak time.”

The new ‘How to Start & Re-start’ report – which surveyed small businesses on their experiences starting up, and as they grow - found signs of a more positive outlook for 2024, set against immediate economic concerns and a need to adapt to future opportunities and risks like AI and sustainability.

Calling for a ‘re-set’ for the nation’s 5.5 million small businesses and greater support for the growing wave of new start-ups to spark growth in 2024, the report shares guidance to help firms navigate current economic difficulties and prepare for the future. 

“In recent years we have seen businesses navigating crisis after crisis, and the news that the UK is now technically in recession will sadly be another dent to confidence,” said Michelle Ovens CBE, founder of Small Business Britain. Many of those businesses are really exhausted, but hopefully the recession will be swift and mild. In the meantime, we need to find ways to help our nation’s small business through and to ‘re-start’ and rediscover that entrepreneurial zeal again to spark new opportunities.”

Adeel Hyder, Business Banking Director at TSB Bank said: “As 2024 unfolds, there are still grounds for guarded optimism that the conditions for small businesses to thrive are slowly beginning to take hold. 

While the economy has now been found to be in recession in the second half of 2023, it is still expected to grow by 0.9% in 2024. The outlook is not without ongoing risk and uncertainty. In particular, interest rates are higher than we have been used to in recent years, and their future path is unclear. But small businesses are continually proving their resilience and adaptability, and I firmly believe this will be the case again.”

The new research found 42 per cent of small firms want more help with business planning, with over half (53 per cent) saying they need support with sales and marketing, whilst 32 per cent want help with finance and 34 per cent with digital. It also identified a big gap in start-up skills and support, with only 23 per cent of new businesses getting help with business planning, and just 16 per cent seeking help with finance. Instead, 76 per cent cite their personal skills as the key factor in their success and 31 per cent put it down to ‘luck’. 

As well as navigating current economic challenges, AI and sustainability are called out as two high priority areas of opportunity for small firms to explore to drive growth, and for start-ups to consider from the outset. For example, the report’s data shows that 38 per cent of small businesses did not consider sustainability when starting out, but 89 now take some form of action.

“The UK economy has seen a phenomenal number of businesses starting up, triggered not least by the downturn,” continues Michelle Ovens. “Our research shows more needs to be done to support these tiny businesses to grow strategically and drive the economic growth our country so badly needs.” 

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