A fall in consumer numbers and spending remains a top concern for North West businesses, as companies brace themselves for a challenging first quarter of 2024, according to accountancy and business advisory firm, BDO.
BDO LLP’s latest bi-monthly Economic Engine survey of 500 mid-market businesses, revealed that two-fifths (40%) of regional businesses rank dwindling customer numbers and a reduction in spending as one of the biggest challenges facing their business over the next six months, as inflation and the high cost of living continue to hit customer pockets. The regional trend is also mirrored in the retail sector, with more than a third (37%) of retailers placing this as their number one concern.
It follows the latest BDO High Street Tracker that shows total like-for-like retail sales were negative in the last three months of 2023, the so-called ‘Golden Quarter’, pulled down by poor fashion sales as customers held back on their discretionary spend.
The survey of mid-sized businesses also showed that supply chain pressure, exacerbated by geopolitical events and staff and skills shortages, is still proving to be a thorn in the side of North West businesses, with more than half of regional companies (60%) admitting it will be their biggest challenge in the first half of 2024. A third (33%) ranked high interest rates and borrowing costs as one of their top concerns.
Angela Cross, Head of BDO in the North West, commented: “There are a number of enduring themes that continue to blight North West businesses, centring predominantly around reduced customer spending, supply chains, and the cost of doing business.
“While these will remain a cause for concern in the coming months, in the longer-term it is the crippling costs of borrowing that will significantly hamper growth. Unsurprisingly, high monthly loan repayments and fees are proving to be a significant concern for North West businesses, with many calling on the Government for greater support.
“The Government should ensure it focuses on regulatory changes to tackle difficulty accessing capital, as well as providing greater financial incentives that are specifically targeted at mid-sized businesses, whose growth will play a key role in the overall economic recovery of the UK.”
Despite the ongoing pressures facing North West businesses, almost all (97%) regional companies said they had achieved forecasted growth in 2023. When asked what steps they intended to take to help drive growth in 2024, nearly half (43%) of regional businesses said they plan to expand the physical footprint of their business, with 30% intending to seek new funding to refinance or pay down debt. More than a quarter (27%) have set their sights on investing in new efficiencies to trigger growth.
Cross added: “While the outlook is beginning to improve, with inflation heading in the right direction, there is still a huge amount of uncertainty on the horizon. 2024 will throw up its own challenges, in the form of potential political change and more economic volatility. As such, businesses in the region must clearly define their priorities in the coming months, while continuing to address ongoing challenges.”
