Most British small and medium-sized businesses are confident of growth next year, despite persistent economic and geopolitical uncertainty and the budget fallout.
A survey of 1,500 private business owners by Big Four accounting firm KPMG found that 92 percent were confident about their companies’ prospects over the next year.
In a separate survey by insurer Aviva of decision makers at around 500 smaller companies, 89 per cent agreed they were confident for 2025.
KPMG, which targeted small and medium-sized enterprises (SMEs) in a variety of sectors including technology, finance, manufacturing and retail, said the companies’ optimism was mainly due to the expectation of greater demand for their goods and services over the next few years. year.
Most also had a “positive long-term growth outlook”, KPMG said, with 85 per cent of Aviva respondents expecting to do more business in five years than they do now.
Much of that optimism centered on the planned development of new services and products and entering new markets, especially in Europe and North America, KPMG found.
Euan West, head of KPMG’s private companies practice in the UK and Europe, said: “2024 has been a turbulent year, so it is encouraging to see that private companies are showing resilience and projecting a very positive outlook for the growth and investment in 2025 and beyond. .”
He warned, however, that next year would likely be “another difficult year” for most businesses.
Just over a third of respondents to the KPMG survey expected the increases in national insurance contributions and the national minimum wage announced by Rachel Reevesthe chancellor, in the state budget October 30 would affect its profitability next year.
More broadly, “cost pressures” were the most common response when bosses were asked what could derail their progress next year. To avoid this, most planned to invest in technology to help improve their operational efficiency, and most of that money was intended to be spent on artificial intelligence.
Some concerns had been raised in the days after the budget that companies would curb their hiring ambitions in response to the higher costs they now faced, but, after technology, skills and workforce were the biggest investment companies companies planned to do in the new year. .
Aviva found that only a third of small businesses strongly agreed that there were enough people with the skills they needed in their local areas. Manufacturers, hospitality and leisure groups and financial services companies were especially concerned about worker shortages.
Two-thirds believed they would need better local transport infrastructure next year, including electric vehicle charging points and sufficient cycle lanes, both of which would support employee travel and were identified as specific priorities.
“SMEs are the backbone of the UK economy,” said David Schofield, sustainability director at Aviva. “Its growth is vital not only to economic stability but also to the prosperity of local communities across the country. “The results of this survey underscore their determination and optimism, while highlighting the challenges that could impact their growth.”