Confidence levels among London’s small business owners has plummeted to a near two year low after a post election bounce. In the capital the percentage of small business owners predicting growth slumped from 57% to 39% in just three months during the fourth quarter. That is the lowest reading since the second quarter of 2023. The figures, compiled for Novuna Business Finance’s Business Barometer study, points to an alarming deterioration in sentiment since the relative optimism around the time of the election in early July.
Since then Labour’s warnings about its dire economic inheritance, the October Budget - with its £25 billion tax raid on business - and weak growth figures have all eroded confidence. The third quarter research was conducted a week after polling day and the results revealed the first solid rise in small business growth forecasts in nine months. Whilst London enterprises were those most likely in the UK to predict growth last quarter, the sharp fall this quarter is more marked than anywhere else in the UK.
In the first quarter of this year almost nine out of ten London-based small business owners cited major concerns for the year ahead. Their key concerns included: the prospect of further market volatility (41%), fears over hikes to interest rates and taxes (40%), managing cash flow (26%), retaining business (24%), recruitment (16%) and plugging skills shortages in the business (15%). Novuna Business Finance has tracked the growth forecasts of more than 1,000 small business owners every quarter for the last 11 years.
The new Trump administration taking office has also been met with concern by small businesses in recent weeks. Novuna Business Finance’s survey found that more than seven in 10 small businesses (77%) said they were fearful of how the new US administration could have a knock on effect for the UK. Chief among small business worries were the possibility of tariffs on UK exports to the USA (43%) and concern over the impact on UK economic growth forecasts and interest rates (33%).
Joanna Morris, head of insight at Novuna Business Finance said: “For many years, London has been the engine room of small business confidence, more business owners in the capital predicting growth than any other region of the UK. “The ‘election bounce’ in July 2024 was also the steepest in London. This quarter’s fall in growth forecasts is sharper in London that anywhere else in the UK. “The concern here is London’s fall goes further than simply a correction of the election bounce – today, London growth forecasts are closer to the national average than they have been for some years.”.
