Business growth expectations rebound despite recession, Grant Thornton reveals

Business revenue growth expectations have rebounded this month as inflation remains steady and interest rates were held for the fourth time in a row, new research from Grant Thornton UK found. 

The firm’s latest business outlook tracker, which surveyed 600 mid-sized businesses in early February, found that respondents’ confidence in their revenue growth expectations has jumped 21 percentage points compared to December to 79%. 

This is the highest level seen since August last year and is 8 percentage points (pp) higher than the rolling average. Pessimism around revenue growth also dropped significantly to one of the lowest levels recorded. 

The research finds that business optimism is increasing, not only around revenue growth, but across the board. Following a stark decline since August last year, confidence in their funding position has rocketed to one of the highest levels seen in the Tracker, jumping 22pp from December to 79%.

Over two thirds (69%) of respondents also expect their profits to increase – a significant 23 points rise from the last round and one of the highest levels recorded since January 2021. Those expecting their profits to decrease also dropped by 12pp. 

This increase in confidence is having a positive impact on businesses’ investment decisions, with more respondents expecting to boost investment across all areas. The biggest increases are expected in skills development (+14pp), growth in international markets (14pp), recruitment (12pp), and technology (10pp).  

As we head towards the Chancellor’s Budget on 6 March, business optimism around the outlook of the UK economy has also increased (17pp) since December, to 75%, significantly above the rolling average (69%).  

 Schellion Horn, partner and head of economic consulting, Grant Thornton UK LLP, said:  “While it’s now been confirmed that the UK fell into a technical recession at the end of last year, businesses still have good reason to be feeling optimistic. Inflation has more than halved from its double digit high and remains steady, and interest rates seem to have reached their peak and are expected to drop through this year. 

“Renewed confidence in the outlook of the UK economy in turn boosts confidence about businesses’ own growth potential and ability to increase investment across core areas – this is a recurring trend that we’ve seen in our tracker. But it’s not just confidence in the UK’s economic performance that drives this, businesses also want certainty. Certainty in how they expect the economy to perform and certainty around economic policy. It’s much harder for businesses to plan and confidently make investment decisions if there’s uncertainty.” 

 Horn added: “While optimism is high, with an upcoming Budget in March and election likely at some point this year, businesses need to seize this opportunity. The government and major parties are listening, so businesses should prioritise outlining what they want and need from the government, to boost growth and productivity across the country.”