Business confidence in the UK crept up in the first quarter of the year, despite only a third of firms seeing an increase in sales, according to a survey.
The data from the British Chambers of Commerce show how stubbornly-high inflation is weighing on consumers’ spending decisions and adding to costs for companies. That’s creating a headache for Chancellor Jeremy Hunt, who is relying on economic growth to boost tax revenues and help bring down government borrowing.
Some 52% of businesses surveyed by the BCC said they thought their sales would rise over the next 12 months, up from 44% in the third quarter of 2022.
But just 34% saw sales tick up over the first three months of 20223, while 47% of hospitality businesses reported a drop in cash flow.
The figures indicated “an improvement in business sentiment as political turmoil and inflationary pressures show some signs of easing,” said the BCC’s head of research, David Bharier. “However, this comes from a very weak base, and while confidence has improved, this is yet to translate into an overall improvement of business conditions.”
The survey was done before Hunt’s budget last month, which attempted to encourage business investment by offering a three-year tax break to firms which buy qualifying plant and machinery equipment.
This followed the end of the “super deduction,” a similar policy implemented by Rishi Sunak during his time as Chancellor in the aftermath of Covid lockdowns. The BCC’s research demonstrated the need for a replacement of that allowance — 75% of respondents said they had either kept constant or decreased their investment in plant or equipment over the first quarter of 2023.
But pointing out that there had been little discernible improvement in business investment over the last six years, BCC Director General Shevaun Haviland said Hunt’s budget “did not go far enough to shift the dial on growth which remains stubbornly low.”
“The government failed to tackle some of the major issues holding firms back from their potential, in particular energy costs and the tight labor market which remain top business concerns,” Haviland said.
“The government’s new energy support package represents a drop of 85% in the financial help available to businesses. We reiterate our calls for increased, targeted support for those firms who desperately need it,” she said.
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