Caution Underpins 2010 Business Trading

Bibby Financial Services Business Factors Index

Bibby Financial Services Business Factors Index Second Index report tracks small business debt factoring volumes and economic opinion across end of 2009.

A third of UK businesses are not expecting trading conditions to recover from current levels for at least a year, suggesting firms are taking only tentative steps towards recovery despite expected GDP growth in Q4 of 2009, according to the latest Bibby Financial Services Business Factors Index.

The study reveals:

  • Q4 2009 saw the Index average – the measure of output across all of the sectors within the Index – rise 2.5 points higher than the previous quarter, signalling a slight return to growth at the end of 2009.
  • Despite an improved outlook in Q4, business owners remain as reluctant about a recovery over the next six months as they were in Q3 of 2009. Almost half (48%) feel their business is experiencing the same conditions as six months ago – a slight increase from 46% for the previous quarter’s Index
  • Indeed, businesses are more negative about the long-term, with the number of businesses stating they do not expect trading conditions to improve for at least a year rising to 33% from 19% from the last Index
  • One in 10 (13%) do not expect trading conditions to improve for at least two years – this has increased slightly from 11% reported in the last Index – indicating most businesses feel they are not out of the woods yet
  • One in 10 (10%) predict the market will remain in recession for three years or more – suggesting there are a number of business owners for whom the outlook remains bleak

More encouragingly, however:

  • The number of businesses expecting a recovery by Summer this year has increased from one in 10 to one in five (18%) and 11% of businesses surveyed believe that trading conditions will improve come Springtime
  • In 2009, the Index was at its highest in September, in line with market activity in the lead-up to Christmas, mirroring CBI predictions that UK GDP was set to grow by 0.5% in Q4 with consumers bringing spending forward in advance of the VAT increase
  • Businesses in Scotland (10%), the South West (8%) and the North West (5%) are most optimistic about seeing green shoots from the last quarter of 2009 – no other regions felt that they would experience this kind of recovery
  • The manufacturing and transport & storage sectors are more positive about the future. The percentage of manufacturers stating that their sector will improve faster than others is now 15 compared to nine per cent reported in the previous Index.
  • The number of businesses in the transport and storage sector anticipating a recovery in line with other sectors remains at three quarters (77%) showing consensus in expected recovery for this sector.

The Business Factors Index, compiled by specialist business finance provider Bibby Financial Services, tracks movements in small business turnover since July 2007. The trends derived from this data have been collated alongside the results of a series of interviews conducted with more than 300 business owners from a range of businesses across the UK.

Findings from the Index are supported by the CBI’s New Year forecast which highlights both opportunities and risks for UK businesses over the coming months. Indeed, bank lending figures to small businesses are up four% year on year, suggesting that business owners now have more of a chance to start taking small steps on the road to recovery. The Index also highlights that the businesses believe Government legislation may also hinder this process causing more expense for business, and limiting access to cash – an opinion expressed by the CBI in their New Year forecast and indeed shared by Bibby Financial Services.

Edward Rimmer, UK and Ireland chief executive at Bibby Financial Services commented:

“Following the economic turmoil of the last two years, it is no surprise that UK businesses remain cautious about recovery and it is encouraging to hear that despite this, firms from different sectors and regions are trying to remain upbeat. It is important in the current climate to ensure they are prepared for growth and can make investments in their business where needed.

“While the latest Business Factors Index highlights signs of positivity and pro-activity among UK businesses in the face of recession, it is this further access to finance which is so desperately needed in order for businesses to move forward. However, despite this it is unlikely increased access to finance can be achieved in the current climate of ‘red tape’ and legislative change.”

“Particularly in the lead up to the Budget and impending general election, it is important to note that the Index shows 30% of businesses believe a change in Government would aid economic recovery. The current economic climate is clearly still having an impact on business confidence and as such, we don’t see an improvement in mood until after the general election.”

The Bibby Business Factors Index also showed:

The Index also looked at confidence across the UK’s different business sectors and showed:

  • The construction sector remains one of the worst hit by the current recession with a third of construction managers stating that conditions are tough and they are only just surviving.
  • The wholesale sector has been boosted by the Christmas period but the mood of the industry is worse than ever – nearly half the industry believes that conditions are worse than six months ago.
  • A cautious attitude underpins an upturn in the manufacturing sector. While 65% have experienced an increase in new customers in recent months, a third (31%) believe the industry will lag behind others.
  • Apprehension about the rise in VAT and increasing fuel prices has dampened conditions for the transport and storage sector – almost a third (32%) are finding conditions tough, despite 43% feeling that their business is performing better than the previous six months.
  • Recovery of the business services sector remains the slowest behind other industries, but the sector is positive about the future with one in five anticipating a recovery by this spring, even after an unexpected fall in sales in 2009.

Edward Rimmer concluded:

“While there is much talk about the end of the downturn, it is evident that worse hit sectors, such as construction and business services, remain stuck in recession and will struggle to see a positive upturn in trading conditions in Q1 or indeed Q2 of 2010. However, the Index does highlight a general feeling towards a tentative recovery, irrespective of whether or not trading conditions have improved. Even more revealing is the change of attitudes in relation to a recovery – more businesses believe that a change in Government will aid recovery more than support from the banks – this indicates the alternative finance sector will continue to grow in 2010 as less reliance is placed by UK businesses on the banks.”

“The finance industry is seeing a shift towards alternative finance providers with latest figures from the Asset Based Finance Association (ABFA) showing that the amount of funding advanced to businesses in the UK in Q3 of 2009 has risen to £48,667 million, an increase of four% on Q2 figures – this is supported by our own figures.”

“Bibby Financial Services will ensure our insights into recovery are utilised in supporting business recovery in 2010.”

Kate Sharp, CEO Asset Based Finance Association said of the report:

“The latest Business Factors Index shows that UK businesses are still working through the tough economic conditions suggesting that 2010 will be a key year in terms of access to finance. Securing funding both to invest and grow could go some way to restoring confidence within industry sectors and in the economy as whole. As banks continue to keep their lending criteria as narrow as possible, businesses must prepare to ride out the final difficult months of the recession by making sure they seek the best financial advice, prepare as best they can to allow cash to flow throughout the business, and explore all finance options available to them. This is a pioneering review of our industry and provides an insightful overview of the current climate.”

This and subsequent quarterly updates to the Business Factor Index will be issued by Bibby Financial Services and is available online at

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