Retail enterprises bank on Christmas trading for uplift in growth prospects

Wednesday 2nd November 2022

The percentage of small businesses predicting significant or modest growth in the retail sector rose by 9% in the last three months, from 20% to 29% forecasting growth. With a tricky winter predicted ahead, it seems small businesses are banking on the Christmas period to provide a necessary increase in business for the sector. The proportion predicting growth was the highest figure since Q4 2021 (also 28%).

This quarter was also the first time this year where the proportion anticipating growth was higher than those anticipating decline. In Q4’22, the proportion predicting either significant or severe decline fell to 21%, following a two-year high in Q3’22 of 34%.

Growth outlook for next three months for small businesses in the retail sector

This comes from new research by Novuna Business Finance, who have tracked and studied small business growth predictions against prevailing market conditions every quarter since 2015. At the start of each quarter Novuna asks a representative sample of 1,200 small business owners about their growth predictions for the next three months. At a time of unprecedented economic strain and market uncertainty, the contraction of growth predictions is a cause of concern, although the scale of the dip in confidence this quarter is less pronounced than may have been expected.

Across the nation, the percentage of UK small businesses predicting growth has hit its lowest level in two years (31%), with the latest figures suggest a slight drop in growth predictions on last quarter (34%) and a bigger fall on this time last year (37%) - a time when the country was still coping with Covid restrictions.

In addition, 18% of small businesses fear they will contract or struggle to survive over the next three months. These figures have gradually risen quarter-on-quarter through 2022 and the percentage of small businesses fearing for the future is now at its highest level since January 2021.

However, the picture was much more mixed when it came to sectors, with some excelling and the many falling behind. Growth predictions fell for transport and distribution (falling from 30% to 24%), real estate (falling from 32% to 27%) and hospitality (31% to 26%). Despite holding firm on last quarter (35%), in the manufacturing sector, the percentage of small businesses predicting growth remained significantly down on 12-months ago (48%).

Despite a difficult picture for many sectors, small businesses in retail were not only predicting increased growth in the next three months, but also a decrease in those contracting or struggling to survive. With less than one in five retail enterprises predicting contraction or potential closure in the next three months (22%), this figure represents a marked decrease on last quarter, where more than one in three businesses predicted the same (35%) – a positive picture for retail businesses despite a difficult winter ahead.

We are all very aware of the seismic economic challenges that everyone is facing as we head into autumn and winter months. We were not surprised to see a dip in the proportion of small businesses that are predicting growth in the run-up to Christmas, although the fall was less severe than may have been expected - given the scale of economic volatility and the impact of price rises and inflation on running costs and the supply chain. Whilst in some regions and sectors there are grounds for concern, our findings also suggest there are strong levels of resilience from other businesses. We saw this during the lockdown era, a time many small businesses where quick to adapt their plans, some even re-purposed or re-engineered their businesses at a time of unforeseen change. For many enterprises, the same may be required this winter - and Novuna Business Finance will be there to support established enterprises that are working on plans to adapt, grow and fulfil their potential despite the enormously challenging context.

Jo Morris

Head of Insight

Novuna Business Finance

Growth outlook for next three months for small businesses in the retail sector

Q2'21

Q3'21

Q4'21

Q1'22

Q2'22

Q3'22

Q4'22

Significant expansion

3%

5%

3%

3%

1%

3%

1%

Modest organic growth

29%

36%

26%

20%

24%

17%

27%

Stay the same/ no change

41%

37%

46%

41%

44%

39%

48%

Contract/ scale down

9%

9%

12%

14%

10%

18%

11%

Struggle to survive

14%

9%

11%

16%

20%

16%

10%

Don't know

4%

4%

2%

5%

2%

6%

3%

Net growth

32%

42%

28%

23%

25%

21%

28%

Net decline

24%

18%

24%

31%

29%

34%

21%

Percentage of small business owners that predict net growth by sector: Quarterly findings and comparisons to a year ago

Q4

2022

Q3

2022

Q4

2021

Media & marketing

48%

36%

47%

IT & telecoms

40%

44%

36%

Finance & accounting

40%

44%

41%

Manufacturing

35%

34%

48%

Legal

33%

41%

40%

Retail

28%

20%

29%

Construction

27%

18%

26%

Real estate

27%

32%

24%

Hospitality & leisure

26%

31%

34%

Transport & distribution

24%

30%

29%

Agriculture

11%

25%

12%

Note to editors

The research was conducted by YouGov among a representative sample of 1,313 small business decision makers on 4 October 2022, spanning all key industry sectors.