Small and medium-sized enterprises (SMEs) in the United Kingdom are facing a challenging economic outlook for the remainder of 2024, according to the latest Prism Research SME Barometer. A survey of over 500 SME leaders revealed that more than three-quarters believe ongoing fiscal instability and political turmoil have already hindered their performance in 2023.
The data has raised concerns about a potential recession, leading SMEs to adopt a cautious approach to hiring, investment, and costs. Fragile demand and persistent inflationary pressures are further exacerbating the situation. Industry experts predict that growth will remain subdued throughout 2024, with the annual GDP rate dropping to just 0.4% this year and inching up slightly to 0.6% in 2025.
The British Chambers of Commerce (BCC) highlights the challenges faced by SMEs, citing high inflation, elevated interest rates, policy uncertainty, and barriers to EU trade as factors hindering long-term planning. The BCC forecasts that interest rates have likely reached their peak but will remain at higher levels for an extended period, resulting in stagnant GDP growth for the next three years.
Despite a recent mild pick-up in quarterly GDP, growth remains significantly below the post-financial crisis average of around 2%. The Confederation of British Industry (CBI) acknowledges the resilience of businesses in the face of economic headwinds, but cautions that disappointing growth is expected to persist throughout 2024.
The Institute of Directors (IoD) reports that business leaders remain pessimistic, with the latest economic confidence index showing a decline in morale. Despite improvements in certain aspects of the operating environment, such as inflation, this has not yet translated into meaningful decision-making. Business leaders remain cautious about the economic outlook, although they are more optimistic about their own firm's prospects.