The UK’s economic prospects have looked distinctly brighter since the turn of the year, but a new survey shows the economy is not out of the woods yet.
According to the British Chamber of Commerce’s (BCC) quarterly outlook, there was “no overall improvement” in business conditions during the first three months of 2024, as measured by investment, sales and cashflow.
For the second consecutive quarter, 56 per cent of surveyed firms expected turnover to increase over the next year. Similarly, 48 per cent of firms predicted profit would increase, only slightly higher than the 47 per cent in the final quarter of last year.
“After a slight rise in Q4, levels of business confidence have remained static,” the BCC said.
The survey – which included over 4,800 firms, 92 per cent of whom are SMEs – showed that firms are still reluctant to invest. 60 per cent of companies kept their rate of investment the same over the past year while an additional 16 per cent invested less.
The results provide “further evidence that the UK economy is trapped in a low-to-no growth state,” David Bharier, head of research at the BCC said.
“The lack of investment among most SMEs is a real concern. Inflation, skills shortages, and an almost endless list of new trade barriers with the EU, coupled with a lack of clear direction on infrastructure and technology investment at the government level, have led to paralysis for many businesses.”
Shevaun Haviland, Director General of the BCC said: “We desperately need to see SMEs investing again. Government moves on rate relief, planning reform and full expensing are welcome – but they haven’t yet shifted the dial.”
Worryingly, 46 per cent of companies said they expected prices to increase. Labour costs were cited as the main cost pressure on business, particularly among hospitality and manufacturing companies.
The survey will dent confidence that the UK economy will be able to escape from its recent malaise. Last year the economy grew just 0.1 per cent, its worst performance since the financial crisis – excluding the pandemic.
With inflation falling and the Bank of England set to cut interest rates later this year, many economists are hopeful that growth will recover.