Low business confidence fuels fears of stagnation

BRITAIN’S small and medium-sized businesses have not seen any sign of an economic rebound so far this year, raising fears the country will struggle to escape from the recession suffered at the end of 2023.

Small companies’ sales showed no significant acceleration in the first quarter of 2024, according to the British Chambers of Commerce’s survey, while investment intentions stayed weak.

David Bharier, the head of research at the business group, said it was “further evidence that the UK economy is trapped in a low-to-no-growth state.”

While most businesses surveyed by the BCC did not see an improvement in trading during the first quarter, more companies remain optimistic than not. Some 56pc said they expected revenues to increase over the next 12 months.

Mr Bharier said: “Although business confidence remains buoyant at the start of the year, most SMES are still not reporting any tangible improvement to business conditions.

“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.” However, there are some signs that the full expensing tax break is encouraging investment by manufacturers.

Almost one in every three is increasing investment, compared to just under one quarter of all SMES.

In better economic news, a separate survey of surveyors found they are predicting a bounceback for the property market this spring.

The number of new buyers in the market has risen for the third consecutive month and house prices are tipped to rise by the end of the year, according to a report by the Royal Institution of Chartered Surveyors (Rics).

A net balance of 8pc of property professionals said inquiries were rising rather than falling, the most positive result since February 2022. The Rics survey also pointed to an uptick in new instructions for house sales.

It is a sign that both supply and demand are finally picking up amid expectations that mortgage rates will soon be falling.

Tarrant Parsons, of Rics, said: “With the inflation backdrop turning a little less difficult of late, this has led to expectations that the Bank of England will be able to start lowering interest rates later in the year. This should continue to support the market to a certain degree going forward. In keeping with this, near-term sales expectations point to an improving outlook.”