The number of small business owners with a positive outlook has fallen over the last six months and in some industry sectors by as much as 20 per cent.
Construction has seen decision maker confidence drop from 50 per cent to 39 per cent – a significantly steeper fall than the national average – according to new research from Aon Risk Solutions.
The preliminary findings from Aon’s Business Small Change Index tracks business leader outlook and attitudes to business risk every six months. The last cycle of research in March 2015 – ahead of the Scottish Referendum and the pending General Election – was a period of uncertainty for many SMEs. Six months on, rather than seeing signs of more broad-based economic confidence, the proportion of SMEs with a positive business outlook for the next six months has fallen from 50 per cent to 48 per cent. The proportion anticipating difficult times ahead has risen from 9 per cent to 11 per cent and those anticipating no change stays at 39 per cent for the period.
Looking within specific industry sectors, IT was the only sector surveyed where there was a net increase in the number of businesses with a positive outlook for the next six months. Within construction, the noted change was predominantly a story of fewer businesses feeling confident about the next six months rather than more businesses predicting business contraction. Only 39 per cent of decision makers within construction said they had a confident outlook for the next 6 months (down from 50 per cent in March). More construction businesses predicted no change (44 per cent compared to 33 per cent in March). The proportion that predicted contraction remained broadly unchanged (15 per cent compared to 16 per cent in March 2015).
SME outlook for the next six months: A comparison between March 2015 and September 2015. Results by sector September 2015 (reported first) Vs. March 2015 (reported second)
Which factors correlated with a positive business outlook?
Looking at the national figures as a whole, the Aon research suggested a number of factors correlated with having a more positive outlook.
- Size matters: Larger SMEs were significantly more likely than their smaller counterparts to have a confident outlook for the next six months (65 per cent Vs. 38 per cent), although these larger enterprises were also more likely to expect modest growth over significant expansion in the months ahead.
- London and Manchester top growth incubators: Regionally, small businesses in London, the north west and the south east were most likely to have a confident outlook, whereas those in the south west, Wales and Scotland had the fewest businesses with a confident outlook.
- Business age also emerged as a significant factor – younger and long established businesses had highest levels of confidence – whereas those in the middle were more likely to predict no change or just modest growth.
Chris Lee-Smith, Managing Director, Aon Risk Solutions Affinity Commented:
“When we commissioned this research last spring ahead of the General Election, almost one in four UK businesses identified political uncertainty as a very real risk to overcome in the next 12 months. Six months on, it is a surprise to see that SME business leader confidence is at best static, with some significant swings of opinion prevalent in a number of key industry sectors. With construction often regarded as an early weathervain for the economy, it is concerning to see a marked fall in confidence over the last six months.
“Businesses that embrace change and are looking to open new markets are most likely to be very confident, whereas confidence is notably more muted among those businesses that are placing most emphasis on maintaining their current position. An over-arching concern, whether bullish or muted in outlook, the vast majority of business leaders are placing scant emphasis on practical risks close to home.”