Business under pressure: Q2 survey reveals ongoing recruitment challenges, cashflow struggles, and economic uncertainty
The latest Quarterly Economic Survey (QES) from Business West reveals a challenging and uncertain economic landscape for businesses across the South West. Covering the second quarter of 2025, the findings highlight persistent recruitment difficulties, deteriorating trading conditions, and a cautious outlook on investment and profitability.
Download the full Q2 2025 Quarterly Economic Survey report here.
As a key barometer of business sentiment in the region, the QES provides vital insights for policymakers, business leaders, and support organisations. This quarter’s results underscore the need for continued refinement and development of policies to strengthen business resilience and growth.
Recruitment: a persistent and growing challenge
One of the most striking findings from the Q2 survey is the continued difficulty businesses face in hiring the right talent. Of the businesses that attempted to recruit during the quarter, 67 percent reported challenges in finding suitable candidates. This figure reflects a labour market that remains tight, with skills shortages affecting a wide range of sectors.
The implications are significant. Without access to the right people, businesses are unable to grow, innovate, or even maintain current operations. This bottleneck appears to be more than a short-term challenge as many local businesses continue to face persistent difficulties in recruiting the talent they need, despite signs of a cooling labour market.
“We are confident in growth potential, but this will only succeed if I can get skilled staff.”
Bristol-based education business
Economic uncertainty: the dominant concern
Economic uncertainty remains the most pressing concern for South West businesses, cited by 77 percent of respondents. This is closely followed by broader business uncertainty at 72 percent and the impact of taxation at 45 percent. These figures reflect a business environment that is increasingly difficult to navigate, with shifting policies, global instability, and domestic economic pressures all contributing to a sense of unpredictability.
This uncertainty is having a tangible impact on business confidence. Many firms are holding back on investment and expansion plans, waiting for clearer signals from the economy and government.
“Due to cash flow issues, tax payments and business uncertainty because of AI then I am feeling that business is going to be very tough.”
Somerset-based professional services business
Sales and cashflow: signs of strain
The Q2 data also reveals a worrying trend in trading conditions. UK sales declined for 41 percent of businesses, while only 21 percent reported growth. Export sales were even weaker, with just 9 percent of firms seeing an increase. These figures suggest that demand—both domestic and international—is softening.
Compounding this issue is the state of business cashflow. Nearly half of respondents, 49 percent, reported worsening cashflow, a clear indicator of financial stress. For many businesses, this means tighter margins, delayed payments, and increased reliance on credit—factors that can quickly spiral into more serious financial difficulties.
“Due to cash flow issues, tax payments and business uncertainty because of AI then I am feeling that business is going to be very tough.”
Somerset-based professional services business
Rising costs and inflationary pressures
Cost pressures continue to mount, with labour at 67 percent, utilities at 49 percent, and raw materials at 35 percent identified as the top drivers of rising expenses. As a result, 39 percent of businesses were forced to raise their prices during the quarter.
While price increases may be necessary for survival, they also risk fuelling inflation and reducing consumer demand. It’s a delicate balancing act, and one that many businesses are struggling to manage.
“Customers are cutting their orders in response to bad economic conditions resulting from increased taxation and labour costs.”
Gloucestershire-based financial services business
Investment and profitability: a cautious outlook
Looking ahead, the outlook for investment and profitability remains subdued. Only 14 percent of businesses plan to increase investment in the next quarter, reflecting a lack of confidence in the near-term economic environment. Meanwhile, 47 percent expect profitability to decline—a stark indicator of the pressures facing the region’s business community.
Despite these challenges, there are some signs of cautious optimism. Over a third of businesses, 37 percent, anticipate improved turnover in the coming year, suggesting that while the current climate is tough, many firms are still looking for opportunities to grow.
“We have low overheads and a good geographical spread of markets. UK is difficult but our main export markets are OK. We are researching new products which should help increase sales.”
Gloucestershire-based manufacturer
Business West insight
“These results highlight the depth of the challenges facing South West businesses. The data shows a clear pattern of strain across recruitment, sales, and cashflow, all set against a backdrop of economic uncertainty. It’s essential that we use this insight to inform policy and support measures that enable businesses to better respond to ongoing pressures while building long-term confidence in the regional economy.”
Gustavo Guntren, Qualitative Researcher, Business West Policy Team
Why This Matters
The QES is more than just a snapshot of business sentiment, it’s a vital tool for understanding the real-world challenges facing our economy. By listening to the voices of businesses across the South West, we can better shape the policies and support systems needed to drive recovery and long-term prosperity.
Download the full Q2 2025 Quarterly Economic Survey report here.