Introducing Tide’s Small Business Confidence Index

We’ve just launched the Small Business Confidence Index, our quarterly report which takes the pulse of the small business economy in the UK.

Gloomy outlook for 2020

Will the UK economy grow this year? Small business owners don’t think so.

Our respondents were pessimistic about the prospects for both their own businesses and the UK economy overall in 2020. 

Nearly three-quarters of the owners we asked said they don’t expect the UK economy to grow during the rest of 2020. 

In terms of their own company, 52% expect their revenue to decrease over the next three months (to the end of May 2020, compared to last year) with sole traders more likely than owners of limited companies to be pessimistic (59% vs 49%).

The owners most likely to think their revenue will decrease are in the hospitality and leisure trade, at 69%. 

Most optimistic sector: Legal services 

Standing out in our results is the optimism of owners with small legal services businesses. 

64% predict their revenue will increase over the next three months and this sector is most likely to invest in growing their business (56%). 

Our results don’t reveal why small legal services businesses are more optimistic. To assume it’s Brexit would be simplistic – just 37% of legal services owners told us they expect Brexit will mean they make more money.

Of course, the UK’s ‘divorce’ from Europe will create plenty of work for lawyers but we’re keen to understand what the other factors could be. For example, is the legal sector’s optimism due to increased activity in the housing market, IR35, more companies protecting themselves cyber-security, or something else? 

If you’re a small business in the legal sector, we’d love to know the top three things you think will increase your revenue this year compared to last year: let us know on Twitter or Facebook.

On everyone’s mind: Brexit and coronavirus

In February 2020, unsurprisingly the main concerns for business owners were Brexit and the coronavirus. But the effects differ, depending on the sector. 

Overall, 32% of our survey responders think the financial performance of their business will decline due to Brexit. But for some, Brexit means they expect to gain more work. We asked, how will Brexit affect your revenue?

Sectors more likely to expect a decrease:

• medical and health services (42%)
• media, marketing, advertising (41%)
• retail (40%)
• manufacturing (40%)

Sectors most likely to expect an increase:

• legal (37%)
• construction (31%)
• transportation and distribution (31%)

Not the time to invest

As small businesses prepare for no growth in the UK economy, it’s no surprise that 57% of owners told us they’re unlikely to invest in growing their business in the next three months. 

This type of investment could be, for example, hiring staff, buying new equipment, investing in technology or opening a new branch. Sole traders are least likely to spend money this way in the next three months, with 79% telling us they won’t invest.

By sector, those least likely to invest are retail (69%) and education (65%). Owners with real estate businesses are split 50:50 

Regardless of their sector, small business owners in Wales and the West Midlands are the most wary about investing. 69% and 64% respectively told us they’re unlikely to invest in their businesses this quarter.

In their own words

Survey respondents also had the chance to tell us about their specific concerns for running or growing their business in 2020. 

Many business owners mentioned the effect of Brexit on the wider UK market:

“With the UK leaving the EU and seemingly not going to adopt EU product laws we will be at a disadvantage compared to our European competitors. Exporting to Europe will be more difficult and costly.”

“Brexit has ruined the economy and made people worried about spending. There’s too much focus on corporations and not on the small businesses which keep this country going. My business is all but dead already. Working class folk like me are starving because living is too expensive. There are no funding avenues for me to grow my business with.”

While some respondents were more specific about the problems they expect Brexit to cause them:

“Availability of foreign staff in the UK with the right skill-set we needed for our business.”

Other owners predicted that regardless of what actually happened with the spread of coronavirus and the UK economy, the public perception of these would affect their trade: 

“Panic over covid19. If people are less likely to socialise/congregate in large groups, fewer people will come out to my pub for a drink. Also Brexit is highly likely to destroy consumer confidence, drive down discretionary spending and increase the cost of wine and beer.”

Some who feared coronavirus would negatively affect their business could also see positives, for example, on innovation and finding different ways of working:

“The impact of Corona virus on our suppliers in the Far East, and on our customers. There could be some positives in that we might see more growth in video-conferencing.”

Many respondents stated “increased costs” which ranged from buying stock and delivery fees to waste management charges and regulatory change. Some were explicit that it was increased costs in combination with not being able to put up prices that affected them: 

“Increase in costs, insurance premiums, minimum wage and pension costs with no chance to increase our prices.”

 “Costs increasing. My costs go up each year and I have to evaluate what I can do with my prices. I can’t put prices up all the time so I have to look at other ways I can soak up these costs.”

Some respondents raised issues local to where they’re based:

“I’m thinking of changing to a virtual office as our local council has huge cuts. I believe they will pass these onto businesses like they did last year in the form of higher business rates. Expanding the business at this time is far too risky, there is no benefit.”

“Mayoral elections in Manchester. If Labour gets back in and introduces the congestion charge, it will destroy many businesses. Our business will move out of the zone and I know quite a few others will too.”

Saving small businesses time and money

While we at Tide acknowledge that we can’t lessen the impact of Brexit, coronavirus or other larger-scale issues, we do what we can to help small businesses. Our business current account saves owners time and money – membership starts from free and UK business owners can usually open an account in just minutes.

As you’d expect from a modern account, with Tide all your spending is auto-categorised, you can send and chase invoices in the app, and sync with common accounting systems.

Hearing from small business owners about their concerns for 2020 drives us to deliver more innovation. If you have any suggestions or feedback you can email us: hello@tide.co 

If you’re already with Tide, we’ll make it worth your while if you encourage your friends and contacts to join our community. When you refer someone to open a free business bank account, we’ll give you both £50 (terms apply). For your unique referral code, just message us in the Tide app.

The Tide Small Business Confidence Index

Every quarter, we’ll be asking owners of small and medium-sized enterprises about their prospects for the months and year ahead. Our survey also asks whether they plan to invest and grow their business, and any other concerns they have.

Our survey, conducted by YouGov, targeted owners of UK businesses with less than 50 employees. In late February 2020, 1068 business owners responded. 

We’ll publish our next report in the second quarter of 2020.

All figures unless otherwise stated are from YouGov Plc. Total sample size was 1068 adults. Fieldwork was undertaken 24 – 27 February 2020. The survey was carried out online. The figures have been weighted and are representative of all GB adults aged 18+