Percentage Of Small Businesses Contracting Hits Record Low
Monday 12th July 2021
- Percentage of small business predicting contraction falls from 19% to 8% in a year
- Resurgent summer confidence from troubled sectors – hospitality, leisure and retail
- Scottish and Welsh enterprises lag behind English counterparts on growth predictions
With the end of social restrictions and Government advice to work from home, new research from Hitachi Capital Business Finance reveals that the percentage of small businesses predicting they will contract or scale down has hit its lowest level since the pandemic struck the UK – and there are now signs of bullish recovery from troubled sectors such as hospitality, leisure and retail for the summer months.
In April 2020, when the country was in its first lockdown, 31% of small business owners predicted their enterprise would contract or scale back in the next three months, with 29% fearing collapse. By January 2021, this had levelled off, with 14% predicting contraction and 13% collapse. Now, with news of restrictions falling away, and with two thirds of the country fully vaccinated, fears of negative growth have fallen to their lowest level in two years – with just 8% predicting contraction in the next three months and 8% fearing collapse.
Hitachi Capital’s quarterly Business Barometer reveals that an increase in the percentage of small businesses predicting either growth or stability this year has resulted in a decline in the percentage fearing contraction or collapse. Compared to this time last year, the percentage of small business predicting contraction has fallen from 19% to 8%.
Small business growth predictions for the three months ahead
A comparison over successive quarters (column percentages)
Q3 Jul 2021 | Q2 Apr 2021 | Q1 Jan 2021 | Q4 Oct 2020 | Q3 Jul 2020 | Q2 Apr 2020 | |
Significant expansion | 6% | 6% | 4% | 4% | 4% | 4% |
Organic / modest growth | 29% | 30% | 22% | 23% | 23% | 10% |
No change / stay the same | 49% | 47% | 45% | 46% | 43% | 26% |
Contract / scale down | 8% | 9% | 14% | 15% | 19% | 31% |
Struggle to survive | 8% | 7% | 13% | 12% | 11% | 29% |
Boost for troubled sectors
The research also suggests that some of the sectors that really struggled during successive lockdowns are now bouncing back for the summer months.
- In the hospitality and leisure sector, the percentage of small businesses predicting growth has more than doubled, compared to this time last year (rising from 16% to 35%) – and it has risen steeply in recent months as restrictions have eased (from 9% in January, to 28% in April and now at 35%).
- The retail sector has seen a similar rebound, the percentage of enterprises predicting growth rising from 27% to 44% since July 2020 – and rising by a third in the last three months (from 33% to 44%).
- The percentage of small businesses predicting growth also rose for the third successive quarter in the transportation and distribution sector – although agriculture saw a sharp fall from 22% to 15% in the last three months, perhaps a consequence of widely-discussed seasonal labour shortages.
Regional recovery
Whilst small businesses in London were most likely to predict growth for the next three months (42%), the Hitachi Capital research suggests that resurgent business confidence is remarkably even across English regions, with virtually all regions recording 35%-42% of business owners predicting growth.
Small businesses in Scotland and Wales were less likely than their English counterparts to predict growth (29% and 21% respectively), although the proportion predicting growth had risen over the last 12-months.
Joanna Morris, Head of Insight at Hitachi Capital Business Finance comments:
“With confirmation that Covid restrictions will be ending, a new era of confidence and hope for people across the UK has emerged, after a prolonged period of anxiety and fear. This summer optimism plays out in our latest piece of quarterly tracking research. Nationally, there is a solid basis to believe that the resurgent confidence we saw last quarter will be sustained – and, by sector, there is really welcome news for small business sectors that have had a torrid time during lockdown. It is a time to believe once again - and at Hitachi Capital we are gearing up to help small businesses rebuild, to invest in growth and to fulfil their true potential.”
Percentage of small business owners that predict net growth for the three-months to 30 June - by industry sector.
Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | |
Media & marketing | 48% | 55% | 36% | 36% | 31% | 17% | 46% | 38% | 37% | 36% |
Finance & accounting | 43% | 46% | 40% | 25% | 33% | 20% | 49% | 47% | 48% | 33% |
IT & telecoms | 43% | 44% | 36% | 37% | 44% | 21% | 49% | 36% | 41% | 38% |
Transport & distribution | 40% | 37% | 34% | 34% | 34% | 8% | 34% | 29% | 27% | 25% |
Manufacturing | 31% | 37% | 32% | 23% | 30% | 9% | 44% | 39% | 30% | 38% |
Real estate | 35% | 36% | 34% | 26% | 21% | 12% | 49% | 43% | 32% | 45% |
Construction | 31% | 34% | 16% | 21% | 20% | 14% | 33% | 32% | 26% | 31% |
Retail | 44% | 33% | 19% | 35% | 27% | 21% | 31% | 39% | 34% | 40% |
Legal | 26% | 31% | 24% | 23% | 24% | 11% | 47% | 30% | 44% | 41% |
Hospitality & leisure | 35% | 28% | 9% | 18% | 16% | 11% | 33% | 37% | 27% | 29% |
Agriculture | 15% | 22% | 22% | 16% | N/A | 18% | 29% | 25% | 32% | 27% |
Percentage of small business owners that predict net growth for the three-months to 30 June - by industry sector.
Q3 2021 | Q3 2020 | |
London | 42% | 29% |
West Midlands | 42% | 30% |
South East | 38% | 28% |
East Midlands | 37% | 31% |
North West | 36% | 22% |
North East | 35% | 28% |
Yorkshire/Humberside | 35% | 33% |
South West | 35% | 28% |
Scotland | 29% | 25% |
Wales | 21% | 14% |
East | 16% | 30% |
The research was conducted by YouGov among a representative sample of 1,232 small business decision makers during the first week of July 2021 spanning industry sectors.