Economic Confidence Grows Across the UK and Ireland SMEs Ahead of the General Election

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Today, Vistage, the world’s most trusted CEO coaching & peer advisory organisation, has released results from its quarterly SME CEO Confidence Index for Q2 2024.
Ahead of the upcoming General Election on July 4th, business leaders have expressed cautious optimism about the nation’s economy over the next 12 months. Overall business confidence in the UK and Ireland increased to 111.6 up 3.9 points since Q1.

PROFITS EXPECTED TO GROW DESPITE RISING COSTS

This quarter’s report found that almost half (44%) of business owners remain optimistic and expect that economic conditions across the UK and Ireland will continue to improve, but a smaller portion (15%) foresee a worsening of conditions, reflecting concerns over potential economic downturns.

As such, a significant percentage of business leaders (62%) remain largely optimistic that their sales revenue will increase over the coming year, with only 30% expecting it to remain the same, suggesting expectations of stable business performance. Further to this, exactly half (50%) of all business leaders feel confident that their firm’s profitability will also improve.

Interestingly, higher interest rates do not seem to have had a significant impact on businesses thus far. Almost half of all respondents (47%) reported that higher interest rates are not currently impacting their business. Overall, SMEs seem confident about the future, with a significant portion (42%) also increasing their investment expenditures to meet future consumer demand.

BOSSES PRIORITISE LABOUR AND EMPLOYEE COMPENSATION

For most SMEs, navigating inflationary change remains a top priority. A significant percentage (66%) of business leaders have identified labour as the primary source of current inflation affecting their business operations. However, just under half (42%) of SMEs predict inflationary pressures to increase more slowly in the coming year.

Amidst rising labour costs, most businesses have seen modest increases in workers’ compensation, with 40% reporting increases of less than 10%. Meanwhile, a combined 18% reported either no change (15%) or a decrease (3%) in salary compensation over the past year. While businesses are managing various inflationary pressures, labour costs remain the most critical challenge, influencing both compensation and overall expense management strategies.

KEEPING PACE WITH AI DEMAND

SMEs remain cautious of Open and Generative AI adoption, with only 35% actively testing for select functions. However, only 12% of surveyed SMEs are currently using AI as part of their daily operations.

Further analysis shows that a small percentage of SMEs (33%) have increased technology spending to incorporate AI capabilities, whereas more than half (52%) reported no change in their investments.

As a result, a notable 47% have reported no adjustments in personnel staffing and training in response to AI rising development, while only 35% of total SMEs are actively training their existing personnel. But a small portion of businesses are otherwise investing in upskilling their current workforce, with 11% redefining existing job roles to integrate AI functionalities and 10% creating new roles or teams dedicated to AI.

Vistage, MD International Operations (UK), Andy Perkins, said: “Despite facing significant challenges from rising labour costs, inflationary pressures, and the rapid advancement of AI technologies, UK and Irish SMEs continue to show strong resilience and general optimism regarding their future prospects. Regardless of this the upcoming election could usher in an era of change. SME bosses who can demonstrate strategic foresight and adaptability, while also investing in innovation and workforce upskilling will be able to better maintain competitiveness amongst any upcoming political and economic change.”

ABOUT VISTAGE

Vistage is the world’s leading organisation dedicated to enhancing business performance and leadership in small and medium-sized businesses. For over 65 years, we have been assisting CEOs, business owners, and senior executives in overcoming their greatest challenges through confidential peer advisory groups and one-to-one executive coaching sessions with accomplished business leaders. Today, more than 45,000 members in 35 countries rely on Vistage to make better decisions for their companies, families, and communities. According to Dun & Bradstreet data, Vistage CEO members saw an average revenue growth of 4.6% in 2020, while non-members with comparable small and medium-sized businesses experienced a revenue decrease of 4.7%. Learn more at http://www.vistage.co.uk.