A major new survey of business sentiment published this week reveals business owners are downbeat about their prospects in 2021.
The British Chambers of Commerce Quarterly Economic Survey Q4 2020 was conducted back in November during the second national lockdown. The results were published this week.
The bellweather survey of 6,203 firms, employing nearly a million people, found business conditions were weakened in the fourth quarter as the second lockdown squeezed activity.
Ninety-five percent of the businesses that responded to the survey were SMEs.
Unsurprisingly, hardest hit were businesses in the hospitality sector. While cashflow – a key indicator of business health – continued to deteriorate for 43 percent of all businesses, 77 percent in the hospitality sector reported a decrease.
Nearly half of firms – 43 percent – reported decreases in decreases in domestic sales, broadly unchanged from 46 percent in Q3, while 26 percent of firms reported an increase in domestic sales.
Forty-five percent of firms reported a decrease in domestic orders, while 33 percent report no change, and just 22 percent reported an increase.
Meanwhile, 38 percent of firms reported decreases in export sales.
Business to consumer firms saw the largest falls in domestic sales in the quarter. But the survey revealed that even sectors which have continued their operations through the pandemic, and/or shifted their operating models to remote working, also had a higher proportion of firms reporting decreased sales.
Fifty-three percent of transport and distribution firms and 44 percent of marketing/media firms reported decreases in sales, well above pre-pandemic levels of 29 percent and 23 percent reporting decreases in Q1 2020, respectively.
In the manufacturing sector, the balance of firms reporting increased domestic sales increased to minus nine percent in Q4 2020, up from minus fifteen percent in Q3 2020. The balance of firms reporting increased export sales increased to -minus eight percent from minus 26 percent in Q3.
In the services sector, the balance of firms looking to increase investment in training remains at minus 17 percent in Q4, unchanged on Q3. The balance of firms confident that turnover will improve over the next year decreased slightly to minus three percent from one percent in Q3.
In the manufacturing sector, the balance of firms looking to increase investment in training increased to minus ten percent in Q4 from minus nineteen percent in Q3. The balance of firms confident that turnover will improve over the next year increased to twelve percent in Q4 up from seven percent in Q3.
Responding to the findings, Dr Adam Marshall, director general of the British Chambers of Commerce, said: “Our findings demonstrate that businesses across the UK face a difficult and uncertain year ahead in 2021. The announcement of another major lockdown across all four nations of the UK will compound the gloom for many.
“As we start 2021, governments across the UK should be pulling out all the stops to ensure support for businesses is commensurate with the restrictions in place. Both the pandemic and government restrictions continue to hit firms hard, and many are grappling with a difficult period of adjustment to new trading conditions following the end of the Brexit transition period.
“The current drip-feed approach to business support measures is too short term and leaves businesses unable to plan. Ministers must set out, now, what additional steps they will take to underpin business cash flow and help viable firms preserve livelihoods until a full reopening of the economy is possible. They should be boosting confidence by extending tax holidays and key support schemes that are due to expire over the coming weeks.
“As we look to the future, our findings demonstrate that big investment incentives are also needed. Prosperity and success depend on businesses, both domestic and international, having the confidence to invest here in the UK for the long term.
“For business, the pandemic doesn’t end simply because vaccines are starting to be delivered. Brexit isn’t ‘done’, either. The sooner the Prime Minister and his colleagues set out a coherent economic plan and longer-term support to help businesses to restart, rebuild, and renew, the better.
“2021 cannot be a year where Britain dithers while others do.”