7-year spike in small businesses looking to hire set against backdrop of caution

With the worst of COVID largely behind us and with continuing economic uncertainty, new research from Novuna Business Finance suggests a mixed picture of optimism and caution amongst small business’ plans for the next three months.

A poll of over 1,000 small business owners and senior decision makers showed that two thirds (67%) of businesses could point to specific plans to try and achieve business growth in the next three months – the highest proportion since the outbreak of the pandemic.

Tracking the responses from over 30 quarters previously, the results showed that the proportion of small businesses looking to hire in the next three months reached the highest point in seven years. One in six small businesses had plans to hire more people, over three times the proportion a year ago (5% in Q1 2021) and well above pre-pandemic levels.

The figures showed that small businesses in real estate (33%), IT and technology (27%), and manufacturing (27%) were the most likely to be hiring in Q1’22. By region, it was those in London (28%), Yorkshire and the Humber (26%), and the East of England (23%) that were hiring most.

Interestingly, there was a correlation between businesses that were hiring and their tech capabilities. Tech savvy businesses were almost twice as likely to be hiring as businesses who admit not fully embracing the full benefits of technology (22% vs 12%).

Investing in new equipment

Meanwhile, the proportion planning significant investment in new equipment remained high after peaking 6 months ago. 20% of small businesses in the manufacturing sector, 19% in construction and 15% in agriculture were looking to invest in new equipment – levels which were broadly on a par with those seen pre-pandemic.

This quarter saw a surge in investment for new equipment among businesses that had temporarily shut during the pandemic – a strong symbol suggesting the worst of the pandemic is now behind us. There was also a high proportion of businesses who were either already, or had plans to be, carbon neutral investing in new equipment (22%).

Earlier this month, Novena Business Finance data revealed that over a third of small businesses (36%) were anticipating either significant or modest growth in the next three months.

Keeping fixed costs down remains top priority

The research suggested that while the proportion of small businesses that were investing resources to achieve growth had increased, this was set against a backdrop of caution. This quarter, 35% of small businesses were looking to secure growth by keeping fixed costs down – the top priority cited by twice as many businesses as the next most popular option. 17% were looking to improve cash flow, while 13% intended to be stricter in the coming months about getting paid on time.

These figures varied considerably depending on business outlook. Businesses that said they were struggling to survive were almost twice as likely to be keeping fix costs down as those experiencing significant expansion (47% vs 25%).

Joanna Morris, Head of Marketing and Insight at Novuna Business Finance commented: “Following the prolonged uncertainty of the last two years, the mindset among small businesses is switching from survival to recovery. The results show clear signs of optimism as business leaders commit resources investing in the future – a clear sign of confidence. However, this is underpinned by a continued malaise of uncertainty, made worse by recent events in Ukraine which have exacerbated economic doubts. Until these doubts pass, small businesses are likely to remain cautious in their plans.

“Demand for talent in recent months has been fierce, which has been a growing issue across every sector and region of the UK. Small businesses, while lacking the same clout and capital of larger employers, can rely on their agility to gain the upper hand in recruiting by offering the right fit for the right candidate. Under pressure, thinking about the offer to staff and how to shape the future workforce in the long run will be key.”

The ways in which small businesses are looking to achieve business growth in the next three months