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Essential reading on the factors influencing UK business sentiment

Q2 2013 EDITION

June brings a welcome boost to business confidence


BDRC Continental Business Horizons Q2 2013 Edition

June brings a welcome boost to business confidence With recent reports of possible “green shoots”, how are businesses feeling about their own performance, and the economy? Are things improving, or is this another “false dawn”? Since March 2013, BDRC Continental has been researching these questions and others on our Business Opinion Omnibus to understand sentiments in the business market. We can now segment businesses into four groups, based on how they feel they are doing:

Those who say the business is forging ahead – they have in fact emerged stronger from the economic downturn

More businesses forging ahead in June

Those who say the business is progressing steadily – they have been resilient in the face of challenging trading conditions

Those who are coping cautiously – by planning their business activities very carefully in the current climate

Those who say their business has been hard hit – they have had to make difficult business decisions to stay solvent

From March to May the results were consistent, with half of the businesses interviewed feeling that they were either “forging ahead” or “progressing steadily”. Around a third were “coping cautiously”, and around one in ten said they had been “hard hit”. The June figures show a change. In line with other reports of green shoots and increased optimism, one in five businesses interviewed in June said they were “forging ahead”, almost twice the number of previous months. They appear to have moved up from the “progressing steadily” category, as the proportion “coping cautiously” or “hard hit” changed very little May to June. March April May

June

Forging Ahead

12% 8% 13% 21%

Progressing Steadily

40% 42% 43% 34%

Coping Cautiously

33% 38% 35% 33%

Hard Hit

15% 11% 10% 11%

This improvement was seen across size, sector and region, but most notably for sole traders, businesses in the Midlands and those in the service sector. Whether this is a temporary or permanent improvement in business sentiments remains to be seen from future Business Opinion Omnibus research.


BDRC Continental Business Horizons Q2 2013 Edition

Who is “forging ahead” in the current climate? Analysis of the initial months showed that, not surprisingly, the bottom line is the primary determinant of how a business is feeling. Making a profit (or not) is key, which if coupled with taking on staff, and spending more on Research & Development (R&D) pushes a business up our scale, while lower profits coupled with declines in staff numbers or marketing spend pushes them down the scale. As the table below shows, businesses that are “forging ahead” are more likely to be younger, smaller businesses with a web presence, and a growing international footprint. Taken with the analysis above, it is the innovative businesses, spending on R&D and using digital channels that are currently prospering:

Forging ahead are more likely to be

Hard hit are more likely to be

Sole traders

Seen across all size bands and regions

Younger businesses established since 2006

Older businesses set up before 2000

In finance / property / businesses services

In construction

More likely to have a web presence

Less likely to have a web presence

More likely to have started trading internationally, or increased the amount of international trade in the last 12 months

Unlikely to have expanded or started to trade, internationally

Younger, innovative businesses are currently prospering


BDRC Continental Business Horizons Q2 2013 Edition

But a quarter of those currently “hard hit” think things might get worse Businesses were asked whether they were feeling more or less optimistic about the economy than they were three months ago, and if they expected trade activity to increase or decrease in the next 12 months. Taking these two elements together, for Q2 2013, there are four times as many businesses feeling both more optimistic and predicting an increase in activity (26%) as there are businesses feeling more pessimistic and predicting a decline in activity (6%). Not surprisingly, there are clear differences by segment:

All Forging Progressing Coping Ahead Steadily Cautiously

Hard Hit

More optimistic and increasing activity

26%

47%

30%

19%

10%

More pessimistic and declining activity

6%

-

3%

7%

24%

This suggests that over the coming months some more of the businesses currently “progressing steadily” might be moving up into the “forging ahead” category. However, we have to question what might happen to the “hard hit” who see things getting worse. Commenting on the Business Horizons findings, Shiona Davies, Director at BDRC Continental, says: “This new research reveals how businesses are feeling about their performance and the economy in general. Our results reflect other reports of ‘green shoots’ and increased optimism. In this recent period of March to June, there are clear signs of an improved business mood and confidence, especially among younger businesses with a digital presence and an international outlook.” Will the perceptions of UK firms regarding their business health improve in the next quarter? Will we see more optimism or a return to pessimism? Are we really looking at evidence of “green shoots” of a recovery? We will try to answer these questions and more in the second edition of Business Horizons, to be released in early October.


BDRC Continental Business Horizons Q2 2013 Edition

About Business Horizons The Business Horizons report is based on questions put to 500 UK businesses via BDRC Continental’s monthly Business Opinion Omnibus. Questions are asked of a nationally representative sample of senior financial decision makers across the UK, weighted by size, region and sector. To learn more about Business Horizons or to discuss how the Business Opinion Omnibus can help you, please contact a member of the team.

Key Contacts

United Kingdom office Kingsbourne House 229-231 High Holborn London WC1V 7DA United Kingdom +44 (0)20 7400 1000 www.bdrc-continental.com

Swagata Sen Business Opinion Omnibus Business Development Manager

Annette White Business Opinion Omnibus Operations Manager

swagata.sen@bdrc-continental.com Phone 0207 400 0383 Mobile 07854 146855

annette.white@bdrc-continental.com Phone 0207 400 1007 Mobile 07854 146792

Shiona Davies Director

Caroline Ahmed Commercial Director

shiona.davies@bdrc-continental.com Phone 0207 490 9124 Mobile 07748 036776

caroline.ahmed@bdrc-continental.com Phone 0207 400 1011 Mobile 07919 383728

About BDRC Continental BDRC Continental is an award-winning insight agency. We help our clients get closer to their customers by translating data into actionable business intelligence. We do this through our range of market-leading insight tools, a dedicated suite of advanced analytics and over two decades of experience working with leading service sector brands across the globe. Established in 1991, we have an unrivalled reputation as a full service research consultancy with specialist expertise across a number of sectors including hotels, meetings & hospitality, financial services, media & advertising, Government & not for profit, culture & leisure, tourism, travel & transport and sports & sponsorship. As well as undertaking bespoke research for a wide variety of clients, we conduct a number of syndicated studies and have developed proprietary techniques including the Business Opinion Omnibus, SME Finance Monitor, Tracktion, Grapevine, Service Intensity and ZMET Visionary Thinking. www.bdrc-continental.com

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BDRC Business Horizons Q2 edition