Introduction
Starting, running and growing a business is full of uncertainty. At the centre, is the uncertainty over whether the business will be a success, but every day brings challenges to test an entrepreneur’s resolve. Of course, successful business owners can thrive and profit from this uncertainty, but the last thing they want is more of it.
However, 2016 delivered uncertainty by the bucket load. Whatever the medium to long-term impact of Brexit, there can few who doubt that in the short run there will be a bumpy ride. 2017 may be a little more interesting than many would want.
The findings of this report reflect this. Over the next 12 months, company leaders are most concerned about the economy, with 30 per cent now worried about political concerns – up by 90 per cent on last year.
And at the local level, company leaders think business support is getting worse. Though this isn’t the time to shake things up, it should be a prod to government at every level that many Local Enterprise Partnerships (LEPs) and Growth Hubs aren’t yet firing on all cylinders. Pumping more money into LEPs in the Autumn Statement and the rise of Metro Mayors should help. If delivered well, local support should be the first port of call for business owners with a problem.
But ultimately, the threat of political uncertainty and the weakness of government support won’t stop Britain being one of the best places in the world to start and grow a business. Three-quarters of company owners still expect their business to grow in 2017. This is critical as business owners understandably know a lot more about the fate of their own business than that of the UK economy.
At The Entrepreneurs Network we campaign to improve the tax incentives, regulatory burden, visa process – in fact, anything that impacts entrepreneurs. But policy only sets the scene for entrepreneurs. The most important actors are the entrepreneurs themselves – whose grit and 
determination overcome seemingly intractable barriers. Even those caused and exacerbated by governments. Surveys like this one shed light on what’s keeping business owners up at night – they are useful for peers to know they are not alone, but also policymakers who whose responsibility it is to allay some these fears.
Philip Salter is the Founder of The Entrepreneurs Network. He was previously the business editor at City AM and continues to be a contributor to Forbes.
Executive Summary
We’re a nation that likes statistics. Throughout everything that’s happened in 2016, statistics have played a huge part – you don’t have to look too much further than June’s ‘Brexit’ vote to see the impact of numbers and the controversy that arises when those numbers don’t match people’s expectations.
Company Check, as the UK’s most used source of free business data, believes in the power of data to inform decisions, guide strategies and show trends. But we also believe that all statistics are backed by human experience and that for every number, there’s a reason, a story, that has led to that point.
That’s why we launched our annual Business Census.
The Business Census is a survey which is promoted via the Company Check website and other online channels to give business owners an opportunity to share their thoughts, opinions and experiences of the year passed and the year to come. This year’s survey was completed during November of 2016 by 1,302 participants from across the UK, across over 3 million monthly Company Check users, ranging from sole traders to large companies with 1000+ employees.
The Census is a series of 14 questions, some multiple choice and some open, designed to extract the sentiment around some of the UK’s business issues. The responses revealed a number of key insights which shape the British economy today.
Overall, growth has been strong despite a turbulent year across many industries, with 65% of respondents reporting turnover growth in 2016 – up 3% from 2015’s figures – with marketing and production the fastest growing departments. The majority of businesses – almost three quarters – expect their businesses to grow in 2017. Interestingly, more than half report the Brexit decision to have had no impact on their business so far.
On a less positive note, the economy continues to be the biggest challenge for business owners and is expected to remain that way into 2017. 20% of respondents expect the economy to decline, with only 14% confident in its growth in the coming year. Uncertainty around the economy was reflected in respondent comments, citing issues such as a perceived lack of money, reducing budgets and a lack of willingness to invest as potential causes of the slowdown. Political uncertainty no doubt still plays a part, as the UK and the US continue to work out the challenges associated with some big decisions in 2016.
Closer to home, more than 70% of respondents felt their local government did not do a good job of supporting business growth. With local government officials calling for further devolution of power in 2017, these findings will play an important part in their strategy moving forward and they will need to consider the opinions of constituents when formulating their plans for budget allocation and business support.
Overall, 2016 has been another challenging year for UK businesses particularly with reference to the economy and political uncertainty, and fears for the coming year will no doubt play a large role in the narrative about business in the coming weeks. However, positive outlooks from our business leaders for growth in 2017 suggest there is hope for the economy yet.
UK Business Growth
The growth of businesses in terms of turnover is a key contributor to the British economy overall.
When asked if turnover increased in 2016, 65% of respondents reported that it had, suggesting strength across industries. At the same time, the Office for National Statistics reported that GDP (gross domestic product) in 2016 increased by 0.7% in quarter 3 and 0.5% in quarter 2. GDP was 2.3% higher in quarter 3 2016 than the same quarter a year ago, further proof that the economy has grown overall this year.
“This is the first release of GDP covering a full quarter of data following the EU referendum. The pattern of growth continues to be broadly unaffected following the EU referendum with a strong performance in the services industries offsetting falls in other industrial groups.”
The chart below shows the percentage of respondents within each sector who stated positive (yes) or no/flat growth (no) in 2016:
As the chart shows, the industry which reported the highest instance of growth was healthcare, though this industry only made up a small proportion of total respondents. Our biggest sector representation was in professional services, where 65% of responses were positive.
The chart below shows the responses to the question of turnover growth segmented by region:
Here, we see the West Midlands reported the highest instance of growth, with more than 75% of respondents in this region reporting growth. The best represented region was the South East, where 70% of respondents reported turnover growth in 2016. The UK’s capital, London, known for its business community, had 66% positive responses to this question, with just over a third stating no or flat growth.
Wales was once again, as it was in 2015, the only region where negative responses outweighed positive for this question.
The next chart shows the difference between regions with only the ‘yes’ answers plotted:
The West Midlands had the most positive responses as a percentage of that region’s total responses. Wales had the lowest.
“The most common thing I hear from our members though is the lack of certainty about the future. They need to know the direction of Brexit, they need to know what the Welsh economic strategy is and they need confidence that promised infrastructure such as the M4 Relief Road will be built. The Welsh and UK governments need to work together during 2017 to put boosting Wales’ economy at the top of their agenda. Otherwise we run the risk of Wales falling further behind the rest of the UK.”
Liz Maher, President of the South & Mid Wales Chamber of Commerce
Areas of Growth in 2016
2016 was a relatively turbulent year for businesses. Political changes, in particular those which affected the cost of exporting and importing, were reported to have an effect across the board and for those industries that rely on export, it’s been a challenging time.
That said, the economy is still showing key areas of growth. Recipients of the Census were asked which areas of their business were growing fastest; the results are shown below and are compared to 2015’s results:
In 2015, the department with the fastest growth was marketing, suggesting an investment into gaining new business as companies moved further from recession. This year, we see production as the main driver for growth, suggesting greater investment in making more to serve the customers generated by an ongoing growth in marketing too.
Challenges in 2016
In 2016, UK business owners were faced with a wide range of high profile challenges. Uncertainty around the UK’s position in the European Union is felt across the EU. Changes in the political landscape of the US were big news in 2016 too, with a change in power there having the potential to cause changes in the way the UK does business across the pond. Closer to home, rising property prices and the changing labour market have put a strain on some industries.
We asked respondents of the survey to tell us what their biggest challenge was in 2016.
The economy was cited as the biggest challenge for businesses in 2016 by the majority of respondents, receiving a quarter of all votes. When we asked the same question in 2015, the economy was the third biggest challenge after finance and recruitment, both of which have dropped in reported threat this year.
Despite a turbulent year in terms of politics, the challenge politics itself represented for businesses was far less prominent than the economy (though 13% of respondents still felt it to be their biggest challenge). Of course, politics itself is often not the core issue for businesses, but the impact of political choices on the economy cannot be ignored.
The chart below shows the responses by geographic region:
Recruitment is still an issue, as it was in 2015, with more than a quarter of respondents in the East Midlands, South East and North East reporting it to be their biggest challenge.
Finance was reported as the biggest issue by a quarter of all respondents in Scotland, Wales, the North West and Yorkshire and the Humber.
2017 Challenges to Come
Despite some potential challenges, respondents of the Census were optimistic about the year to come, with nearly three quarters expecting to grow in terms of turnover in 2017.
Broken down by location, results looked like this. Here, we see that Yorkshire and the Humber was the most positive about the outlook, with over 80% saying their business would grow in 2017:
“These results chime with our latest economic survey which showed that following the slowdowns caused by the EU referendum, confidence rose in the last quarter of 2016. The region’s manufacturing base reported increased export sales, likely down to favourable exchange rates. There is no doubt that Yorkshire is open for business and as we enter new economic waters, it is vital for companies to seek out new opportunities; ‘Made in Britain’ carries much kudos around the world.”
Mark Goldstone, Head of Policy, West & North Yorkshire Chamber
The main challenges our respondents expect to face in 2017 is the economy, as shown below:
This is the same result as last year, where respondents expected 2016 to be a challenging year economically. However, in 2015, businesses were almost as concerned about politics as they were the economy.
This year, concerns over recruitment have grown as well as those regarding finance, with politics based concerns up significantly from just under 20% to over 30% of respondents stating it as their biggest challenge.
“While members have concerns about Brexit and the potential long-term impact on their businesses, until such time as we start to see some positive movement from Government they intend to keep calm and carry on doing what they do best, ie, creating jobs and wealth and driving the regional and national economy.
Our survey work suggests 2016 ended more strongly than it began. A significant number of businesses, particularly exporters, are telling us that they have recruited in the past three months or expect to take on new staff in the next three months to meet growing demand for their products, in part created by the recent fall in the value of Sterling.
Key emerging issues that businesses want further clarity on include the future status of EU workers, the nature and emphasis of the future trade deals Government will seek and how the measures Government will take to reduce the day-to-day costs of doing business will ensure the UK is an attractive investment proposition in a post-Brexit environment.
Chris Hobson, Director of Policy at East Midlands Chamber
Respondents of the Business Census at the end of 2015 were also asked what they expected the biggest challenge of the coming year to be. We compared the results back then to the what respondents of this year’s Census told us was their biggest challenge of 2016 and the results are shown below.
Here, we see that the expected impact of the economy (shown by the blue line) was much more than the actual impact as reported by our respondents a year on. We see marketing was more of a challenge than anticipated:
“Marketing is an essential part of business growth. If companies are to grow in the coming year, they’ll need to invest in existing channels as well as exploring new developments, particularly around digital.
2016 was a big year in terms of online marketing in particular, with an increasing focus on mobile meaning any business without a cross-device strategy will struggle in the months to come. More broadly though, new technologies are making it easier for businesses to qualify and quantify the effects of their marketing campaigns and for that reason, I’d expect to see more businesses investing in and benefitting from marketing in the new year.”
Tom Craig, founder, Impression Digital
Responses on the question of challenges to come can be split by region, as shown here:
The economy was stated as the biggest challenge by the highest proportion of East Midlands based businesses. 43% of respondents in the East Midlands predict the economy will be their biggest struggle.
Meanwhile, recruitment was cited by the largest proportion of respondents in Wales and Yorkshire and the Humber.
“Key emerging issues that businesses want further clarity on include the future status of EU workers, the nature and emphasis of the future trade deals Government will seek and how the measures Government will take to reduce the day-to-day costs of doing business and ensure the UK is an attractive investment proposition in a post-Brexit environment.”
Chris Hobson, Director of Policy at East Midlands Chamber
The following are the same business challenges segmented by industry:
Here, we see the biggest challenge expected for businesses in the manufacturing industry is the economy.
In its Annual Manufacturing Report for 2016, released in November 2015, Hennik Research stated that:
“More than four-fifths (85%) of UK manufacturers are either “very” or “quite optimistic” about the British economy over the coming 12-36 months, which is the second-highest figure recorded since the AMR was launched in 2008.
“Slightly more (86%) maintain that they economy generally is being managed “well”, however confidence in government policy is a little lower when it comes to manufacturing in particular at 70%.
“This year’s key business focus has been “new product development” (81%), followed by “improved customer relationship management/exploitation of sales opportunities” (71%). That is expected to be reversed in the coming year.”
The retail sector is also concerned about economic challenges, with nearly 50% of retail based respondents stating it as their biggest expected issue.
The construction industry had the greatest instance of concern over recruitment, with 15% rating it the biggest challenge. Politics was expected to be a concern for around 30% of businesses across all sectors, with 35% of respondents in the finance sector stating it to be their biggest concern.
Nearly 10% of respondents in both manufacturing and finance expect marketing to be their biggest challenge.
“The manufacturing industry has experienced some challenges, but the latest GDP figures are proof that we are growing through uncertainty. In a post-Brexit economy, manufacturing in the UK will be more important than ever. We need bold action and certainty to give companies a reason to stay here and invest.
“The results of the Business Census show that the economy is still a concern in our industry and we recognise there are some potentially challenging times ahead. But we’re confident in our future as a British family business and are positioned for growth, with plans to invest significantly in the local area and R&D.”
Martin Hurworth, Managing Director, Harvey Water Softeners
The impact of the Brexit vote
One of the biggest stories of the year for the UK was the decision to exit the European Union – something which, at the time of this report, still does not have a confirmed date.
Reports about the so-called Brexit have focused heavily on its impact for businesses in the UK, with many economists predicting widespread negative effects following the vote. But despite fears, the economy, so far, seems to be holding up and reports from the likes of the BBC and the Guardian suggest a brighter outlook, for now at least.
“Business surveys have suggested some firms are reluctant to hire new workers since the vote and some reports have pointed to jobs being cut.
“But if the last recession is anything to go by, employers will be reluctant to part with skilled workers before they have a clearer idea of the business climate. Still, the Bank of England is predicting 250,000 job losses and believes the unemployment rate will rise from 4.9% now to 5.6% in two years’ time.”
Katie Allen, The Guardian
In the wake of the Brexit vote, we asked respondents of the Business Census to tell us what effect the vote has had on their business so far. The results are shown below:
Here, we see the majority of businesses had felt no change at all. However, nearly 30% felt they had experienced a negative impact, with just 15% feeling it was a positive decision as far as their business is concerned.
This can be seen broken down by region here:
The regions most positive about the Brexit vote were Wales and Yorkshire and the Humber in the Census, which both voted to leave.
“These results don’t match with our experience; we’re an importer, importing in US dollars so Brexit has had a serious impact on us. I know Wales voted for Brexit, even though it gains more from the EU than anywhere else, but as an SME we don’t have the luxury of long-term price deals like bigger firms, so costs have already risen. Things have bounced back a little but I think eventually prices will rise across the board.”
Mark Fleming, General Manager of Solon Security in Wales
The regions who were most negative about the vote and had the highest proportion of respondents reporting a negative impact were Northern Ireland, London (which both voted remain) and the North West (which voted to leave).
The regions least affected overall, according to Census responses, were Scotland (which voted remain) and the South East (which voted to leave) – though we know there is still uncertainty surrounding Scotland’s position in the UK following the vote.
“The results of this survey confirm much of what we have heard from speaking to our members since last June’s vote.
“We know that Essex is an enterprising and entrepreneurial county and we are confident that many of them will continue to grow in the coming year and face any challenges thrown up by Brexit head on. Having said that there is still much that needs to be done to improve the county’s infrastructure to support businesses and we trust that our local councils will put that high on their priorities for 2017.”
David Burch, Director of Policy at Essex Chambers of Commerce
2017 Business Sentiment
Business Census respondents were asked how optimistic they are about the UK economy for the coming year. Their responses are shown below:
Over a quarter of all respondents predict a decline in the UK economy. Nearly half expect a slight improvement, while only 16.5% anticipate large scale economic growth in 2017.
The graph above shows sentiment by region. The least optimistic for the economy in 2017 was Northern Ireland, where 44% stated the economy will decline in the coming year.
The most optimistic was the North East, where 21% feel the economy will improve a lot.
The following graph shows this broken down by industry:
The industry most optimistic about the economy was finance, where nearly a quarter expect high growth. In the manufacturing industry, where turbulence over the future of the industry has been rife in 2016, nearly half were ‘quite optimistic’, with nearly 30% expecting a decline and only 13% positive for the economic future.
“The results of the 2017 Business Census Report offer a heartening riposte to the air of uncertainty that marked much of last year. In particular, it’s great to see so many local businesses reporting growth and predicting this trend to continue throughout the next 12 months.
“We have recently published our latest Quarterly Economic Report and the findings are broadly reflective of the results of the Census Report. Our research found that both manufacturers and services firms reported a welcome upturn in their domestic and international output and, furthermore, we have seen an increase in the number of firms planning to increase their headcount into Quarter 1 of this year.”
Paul Faulkner, Chief Executive of Greater Birmingham Chamber of Commerce
Recruitment is a key part of continued growth. We also asked respondents to tell us how likely they were to recruit in 2017, and more than half said they would:
Broken down by industry, this looks like this:
Supporting Business Growth
As the UK moves into 2017, local government leaders are calling for greater devolution post Brexit. Their request would see more of the currently centralised powers passed down to the local authorities.
In a joint statement, the Local Government Association (LGA), Welsh Local Government Association (WLGA), Convention of Scottish Local Authorities (COSLA), and Northern Ireland Local Government Association, reported by Local Gov, said:
“The EU referendum gave a clear signal that views on politics, growth and prospects differ widely across the UK.
“Recasting the position of local government and broadening the scope of decision making across the UK is the only way to meet the different needs of our different communities.”
We asked Census respondents their opinion on the job currently done by their local authorities to support local business growth and the results were as follows:
Here, we see the vast majority of respondents responded ‘no’ when asked if their local government does a good job of supporting business growth. This is similar to last year, where 60% responded negatively, with that number increasing to 70% for 2016.
“Local business support is now directed through Local Enterprise Partnerships. To make this more effective, we want all LEPs to honour the commitment to have small firms represented on each and every LEP Board, and to be more transparent and accountable to their local business communities.”
Mike Cherry, National Chairman at the Federation of Small Businesses
The graph below shows how respondents responded by region:
This shows that the areas least satisfied with their local government were the East of England and Northern Ireland. London and Scotland were the most satisfied, but local government optimism is low across all regions once again.
Respondents
The Company Check Business Census was conducted as a survey comprising 14 questions and was available for subscribers to and users of companycheck.co.uk to complete in November 2016. It was completed by a total of 1,302 respondents.
Respondents were from across the UK and the percentage of respondents by region is shown below:
Respondents represented a wide range of business sizes, and the percentage of respondents by employee number is shown below:
Finally, our respondents represented a number of industries and the percentage of respondents from each industry is shown below:
PRESS
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INFOGRAPHIC OVERVIEW OF BUSINESS CENSUS
The infographic below shows an overview of the Business Census findings.
For a copy of the infographic, email Laura Hampton at pr@companycheck.co.uk and you will be welcome to use it within your own content.
