Medium-Sized UK Businesses Show Optimism Amid Uncertainty, Azets Barometer Reveals

In a climate of cautious optimism, the latest Azets Barometer survey reveals that medium-sized UK businesses are more confident about their economic prospects than smaller firms.

Conducted in April 2024, the survey gathered responses from 353 UK businesses, revealing a mixed outlook on the country’s economic future.

Business Confidence on the Rise

UK businesses rated their economic prospects at an average of 5.5 out of 10, a slight improvement from the previous score of 5.1. However, despite this increase, UK businesses remain among the least optimistic of the six Northern European countries surveyed. Denmark and Ireland lead with scores of 6.8 and 6.1, respectively.

The survey highlights a positive trend in financial performance correlating with company size. Small businesses (10-49 employees) scored 6.1 out of 10, while medium-sized businesses (50-249 employees) scored 6.8. Large companies are the most optimistic, with a score of 7.3.

Key Concerns: Economic and Geopolitical Uncertainty

Economic and geopolitical uncertainties are the top concerns for UK businesses, scoring 5.8 and 5.4 out of 10, respectively. Talent recruitment and retention, along with regulatory compliance, are also significant challenges, each scoring 4.9.

Confidence in talent attraction stands at 5.6, while retention scores higher at 6.2. The survey reveals that 58% of businesses feel confident in their ability to retain top talent, but only 48% share the same confidence in attracting new talent. Competition from other employers (41%) and a skills shortage in the labour market (39%) are the primary recruitment challenges.

Investment Priorities: Cybersecurity and Talent Acquisition

Looking ahead, UK businesses plan to prioritise investments in cybersecurity and talent acquisition over the next 12 months. The survey shows that 84% of businesses will invest in cybersecurity, with other key areas including digitalisation (75%), employee retention (73%), and recruitment (69%).

Employee retention is set to receive significant investment, with 19% of businesses planning to invest at least £50,000 and 4% committing over £250,000. In contrast, 27% of medium-sized businesses do not plan to invest in artificial intelligence (AI) within the next year.

Succession Planning and Cashflow Forecasting

Succession planning is a high priority for UK businesses, with 58% scoring between 6-10 in this area and nearly half (47%) scoring 7 or higher. This contrasts with an average of 46% in other Northern European markets, indicating that succession planning is well integrated into UK business strategies.

Cashflow forecasting is another area of focus, with UK businesses preparing their forecasts an average of 9.4 months in advance. The most popular timeframe is 10-12 months, with 31% of companies planning within this range. Shorter-term forecasting of up to three months is practised by 22% of businesses.

Optimism Despite Challenges

Richard Goddard, Regional Managing Director at Azets, commented on the findings, noting that UK businesses are maintaining a cautious yet optimistic outlook. He emphasised the importance of investments in cybersecurity and talent to fortify businesses against ongoing economic instability.

“Despite more positive signs of a return to growth in the UK, it’s clear that smaller firms continue to struggle as the cost of business remains high,” Richard noted. He highlighted the need for strategic planning and investment to support smaller firms and help medium-sized businesses scale up their success.

With the General Election in July adding to the uncertainty, UK businesses are wisely adopting a pragmatic approach to their investments. The Azets Barometer provides valuable insights into the challenges and opportunities facing businesses today, underscoring the importance of strategic planning and investment for future growth.

Azets, which has offices in Launceston and Truro, Cornwall, is committed to supporting ambitious businesses across the UK. For more details on the Azets Barometer and to view the interactive dashboard, visit Azets Barometer.