Businesses Under Tax Pressure: Key Q4 Survey Findings
The latest Quarterly Economic Survey (QES) from Business West provides a snapshot of the challenges and opportunities facing businesses in the South West as 2024 came to a close. This report offers valuable insights into the current economic landscape and serves as a barometer for business sentiment in the region.
The findings of the Q4 survey reveal a cautious business environment, shaped by economic pressures and a sense of uncertainty. While there are pockets of optimism, particularly around individual business prospects, the overarching sentiment reflects the challenges that many companies continue to face.
Notably, the survey revealed a significant rise in concerns over taxation, with 62% of businesses identifying it as a pressing issue, up from 33% last quarter. This marks a substantial increase compared to previous quarters and underscores the growing frustration among businesses regarding the current tax system. Many respondents expressed concerns about how taxation policies are impeding their ability to compete, grow, and invest in the future.
Domestic Sales Take a Hit
One of the most striking findings in Q4 is the downturn in UK sales. The net balance for domestic sales dropped sharply, falling from -1% in Q3 to -11% in Q4. While 21% of businesses reported increased sales, a larger proportion (32%) experienced declines. This decline underscores the difficulties businesses are encountering in the current economic climate, with weakened consumer confidence and spending power likely contributing factors.
Note that this data was collected in November and early December, so is not necessarily reflective of the entirety of Q4 and the holiday shopping season. Data covering this will be shown in the Q1 2025 report.
Export Markets Face Challenges
Export performance also weakened during the quarter, with the net balance for export sales slipping further into negative territory (-7% in Q4 compared to -5% in Q3). Only 11% of businesses saw growth in export sales, while 18% reported declines. This reflects the ongoing struggles of companies operating in international markets, compounded by global economic uncertainty and potential trade barriers.
Cash Flow Under Pressure
Cash flow remains a critical concern for businesses. Just 17% of respondents reported improvements in their cash positions, while 39% faced worsening conditions. These figures highlight the financial strain many companies are under, exacerbated by rising costs and economic unpredictability.
Recruitment and Skills Gaps
Recruitment activity held steady in Q4, with 45% of businesses actively seeking new staff. However, finding the right talent remains a persistent issue, with 64% of respondents reporting difficulties in recruiting skilled candidates. Managerial and specialist roles are proving particularly hard to fill, a trend that threatens to stifle business growth and innovation.
Emma Carter, Membership Director at Business West, said: “Our members are telling us that the recruitment landscape remains one of their biggest challenges right now. The difficulty in finding skilled candidates not only affects day-to-day operations but also impacts long-term strategic planning.”
Prices and Profitability
While 70% of businesses maintained stable prices over the past three months, 27% raised their prices, and only 3% reduced them. This pricing behaviour reflects the balancing act businesses face in managing rising input costs while remaining competitive. On profitability, the outlook is mixed: 31% of businesses forecast improvement, 25% expect stability, and 43% anticipate a decline.
Confidence in the Economy Plummets
Confidence in the UK economy deteriorated significantly this quarter, with a net balance of -53%, compared to -12% in Q3. Only 8% of businesses expressed positivity, while 61% felt negative about the economic outlook. This sharp decline in confidence underscores the broader challenges affecting businesses, from geopolitical instability to domestic economic policies.
Gus Guntren, Policy Analyst at Business West, commented: “One of the recurring themes in this quarter’s survey is the increasing concern over taxation. Over 62% of respondents highlighted tax as a significant issue, a large increase from 33% in our Q3 survey. Having endured the challenges of the energy crisis and the recent inflationary period, many respondents now fear that the announced tax changes will further complicate their operations.”
A Glimmer of Optimism
Despite the difficult operating environment, businesses remain cautiously optimistic about their individual prospects. The net balance for confidence in business prospects stood at 14% in Q4, down from 35% in Q3 but still in positive territory. Additionally, 43% of businesses expect turnover to improve, and 32% predict stability in the coming months.
Key Concerns for Businesses
General economic conditions remain the top concern for 75% of respondents, followed closely by business uncertainty (63%) and taxation (62%). These issues are at the forefront of business leaders’ minds as they navigate the complexities of a challenging economic landscape.
Why This Matters
The findings from the Q4 2024 Quarterly Economic Survey provide invaluable insights into the challenges and opportunities faced by businesses in our region. They highlight the need for targeted support and policies that address the specific concerns of businesses, from taxation and skills shortages to economic stability and cash flow management.
To delve deeper into the data and gain a comprehensive understanding of the current economic landscape, we invite you to download the full report. It’s a must-read for anyone invested in the future of business in the South West.
Download the full report here.
Thank you to all the businesses that participated in the survey. Your input is essential in helping us advocate for the support and solutions you need to thrive in these challenging times.