A major new survey of small and medium-sized businesses across the UK has shown a dramatic dip in confidence amidst rising inflation and wider economic turbulence.
The Be the Business Productive Business Index (PBI), now in its fifth edition, shows business owners and directors forecasting a negative shift in their prospects over the next three months due to the difficult economic environment.
The Productive Business Index, unique amongst UK business surveys, tracks changes in five key areas of business activity shown to impact on productivity. Management capability; Technology adoption; Training, Development and HR; Operating efficiency; and Innovation.
Key findings include:
- The first-ever negative change in headline figure since the Index launched;
- Two in five businesses are seeking efficiencies as a direct result of inflation;
- Business leaders feel less confident that they have the management skills to handle the current economic situation, but are fighting back with plans to improve
Anthony Impey MBE, CEO of Be the Business, said: “These findings tell a stark story – following two years of unprecedented challenge, many businesses are struggling to cope with the latest turbulence in the UK economy.
“For the first time ever, our Productive Business Index shows a decrease in the optimism and outlooks of business leaders. Having been through the challenges of the pandemic and the ongoing supply chain and workforce issues, it highlights how heavily the economic situation is weighing on them.
“The headline figures are concerning, but it’s encouraging to see more leaders digging deep and looking for ways to improve themselves and their business to help navigate the next year. Business owners are tired, but they’re being forced to pedal harder in response to the difficult conditions they’re facing. It’s vitally important that they’re given all the support they need so that improving their business and boosting productivity is as easy as possible.”
The Be the Business’ Productive Business Index’s headline score, running from 0 to 200, decreased for the first time this quarter, from 121.1 to 115.6, indicating a fall in the productivity of firms.
In response to inflation, two-fifths (38%) of business leaders are planning to respond by finding efficiencies, one quarter (26%) will prioritise growth opportunities, and about one in six (15%) are considering reducing headcount to help their business survive.
Despite fighting through the previous two years of ups and downs, business outlook has fallen for the first time since Q4 2020, with half (50%) of leaders not confident in their business’ ability to respond to sustained inflation.
However, leaders are increasingly looking to improve their businesses and performance as they look to survive these new challenges.
Beneath the figures: Bruised UK firms are still looking to improve in the face of decreasing confidence
The consistent pressure on business leaders over the last several years – from the pandemic through to supply chain issues and now the escalating cost of living crisis – appears to have had a negative impact on them.
Business leaders feel less confident in their management skills as they look to navigate an increasingly challenging autumn and winter.
While belief in capabilities is down, business leaders continue to respond positively, by looking to bolster their skills as managers and invest time and money in their business over the next year:
- Over half (56%) of UK business leaders believe their management teams have the right blend of skills, an 8% decrease from Q1 2022.
- However, determination and the drive to improve shine through, with 45% expecting to spend more time on management and leadership activities – a 9% increase in only 6 months.
- Just 54% of business leaders believe they have the skills and talent needed to succeed, a 10% decrease from Q1 2022
- But 4 in 10 (40%) have plans to reassess pay, rewards and incentives to improve employee motivation, an increase of 8% on the last PBI.
- There has been a significant drop (9%) in the number of business leaders that feel their company fosters innovation and new ideas from employees.
- Yet, 41% of business leaders plan to develop new ideas, an increase of 7% compared to the beginning of the year.
The contrast between lower confidence and intent to improve is striking in the data on capabilities, and demonstrates the determination from business leaders to succeed in spite of the volatile economic context.
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