[1] The South East Small Business Index is a weighted index of the responses to the question: ‘Considering your overall business performance, and ignoring any normal seasonal variations at this time of the year, how do you view business prospects over the next three months, compared with the previous three months?’ The share of firms reporting ‘much improved’ are given the following weightings: +2, slightly improved +1, approximately the same 0, slightly worse -1 and much worse -2; the Small Business Index is derived from the sum of these factors.

The first quarter of 2024 showed little improvement from the lows of 2023.  From a slump of -27 at the end of 2023, business confidence in the South East stands at -7.  By comparison, in Q1 of 2023, business confidence was in positive territory at 4.  We remain below the national average, which is in positive territory at 5, and the lowest amongst the 8 English regions.

Worryingly, over four in ten small businesses (42%) reported a decrease in revenue in the first quarter of 2024.  Looking ahead, SMEs in the South East forecast an increase in revenue of 18% over the next 3 months, but this is itself a concerning figure.  It is below the UK average of 22%, and these figures are usually the high-water mark.  Our surveys show this figure declines as the year progresses.

Employment has fallen across the South East, but only marginally.  12% of firms reported a reduction in staff, with 11% reporting an increase.  This is better than the national average of -4%.  SMEs forecast no drastic changes in this picture, 10% expect to increase staff numbers and 8% anticipate a decrease.  The majority of businesses have reported, and expect, stability in their workforce.  Yet wage growth is slowing.  57% more SMEs reported an increase in staff wages than those that decreased the average pay.  This is a fall from Q3 2023, where the net score was 61%. 

Looking forward, 72% of firms expect to increase average wages.  Compared to last year, where 77% expected to pay more, this is a more pessimistic outlook from small businesses.  This is matched in growth expectations.  Under half (47%) of firms expect to grow, with 10% expecting to downsize.  This net score of 37% is significantly down on the net score of 48% this time last year.

Ian Ross, FSB Chair for the South East, said: ‘These figures show the economy in the South East slowing down.  Whilst the mood in the rest of the country is on the up, these statistics show economic growth stalling in the South East.  Our respondents reported the domestic economy, consumer demand, labour costs, the tax burden, and finding skilled staff, as the greatest challenges to their development.’

In the South East, the domestic economy (70%), consumer demand (33%), labour costs (26%), tax burden (24%) and appropriately skilled staff (23%) are the greatest perceived barriers to growth over the coming twelve months. Since the previous quarter, the proportion that perceive utility costs to be a barrier to growth has decreased, from 24% to 17%.