Small businesses in Wales are among the least likely to predict growth of any region in the UK this quarter, according to new research.
The results showed that while 27% of Welsh firms anticipate moderate to significant growth in the next three months, this trailed behind businesses in England (32%) and Scotland (35%). This marks a decline from the first quarter of the year when 30% of Welsh businesses were optimistic about growth.
Concurrently, the percentage of Welsh businesses expecting contraction has risen sharply, moving from 14% last quarter to 20% in the current quarter.
Businesses in Wales less likely to have expansion prospects
The latest data indicates that Welsh businesses are notably less optimistic about growth plans for the upcoming quarter compared to the national average. Just 65% of Welsh firms have concrete expansion plans, falling short of the UK-wide average of 71%.
Among those with growth strategies, the focus is predominantly on cost-cutting measures. Specifically, 56% are exploring ways to reduce fixed costs, while 29% aim to improve cash flow, and 14% are actively pursuing overdue payments.
Despite these cautious stances, there are some areas of optimism. Approximately 22% are considering investing in new equipment, 17% are exploring overseas market expansion, and 19% are planning to increase their workforce.
From a financial perspective, one in seven (14%) said they were reassessing their finance commitments, while 7% are exploring the option of securing funding through a partner or another company that is not a bank.
Welsh firms least likely to capitalise on technological advantages
In the past year, Welsh businesses have been among the least likely to report benefits from the adoption of innovative technology. Only 59% cited tangible advantages from utilising technology, significantly lower than businesses in Scotland (69%) or England (67%).
However, among the Welsh businesses that did find value in technology, 40% noted that it enabled them to offer faster services and 35% reported increased productivity. Interestingly, Welsh firms were more likely than the national average to emphasise cost-saving benefits. Specifically, 25% highlighted reductions in overheads compared to the national average of 23%, and 22% pointed to decreased staff costs (versus 17% national average).
Jo Morris, Head of Insight at Novuna Business Finance, said:
“Against a backdrop of inflationary headwinds, supply chain disruptions, and labour shortages, one would expect business confidence to have taken a knock. The fact that a quarter of businesses are anticipating growth at this time is a testament to the resilience of small businesses and their ability to adapt to the circumstances. Looking at plans, the fact that so many are focused on cost-saving strategies may indicate a pragmatic approach to current economic challenges.
“We also note from the research that, beyond cost control, many enterprises are looking to invest in new equipment and to review their funding relationships. At Novuna Business Finance, we are a specialist alternative to high street banks for small businesses — and we are committed to supporting established enterprises that are working on strategies to adapt, grow, and fulfil their potential despite the enormously challenging context.”