Mid-sized businesses in the UK report dwindling economic optimism while managing rising energy prices and supply chain challenges
LONDON, January 11, 2023–(BUSINESS WIRE)–Nearly three in four (74%) UK medium-sized business leaders plan to grow in the coming year by increasing or maintaining their current workforce, according to the second annual survey from JP Morgan on the outlook for business leaders in the UK published today. This despite less than half (46%) of mid-sized UK business leaders feeling optimistic about the global economy in the year ahead, down 20% from 2022, and almost seven in ten (69%) are preparing for a recession in 2023, more than any other country surveyed in this year’s survey.
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Optimism in the global economy (Graphic: Business Wire)
“We know 2022 has been a difficult year for many businesses as they attempt to recover from the pandemic amid severe economic headwinds, and this coming year will bring its own set of challenges,” Catherine said. Pierre, Head of Commercial Banking, UK, JP Morgan. . “However, it is encouraging to see the resilience shown by UK policymakers in focusing on resilience to recession and remaining optimistic about growth. It gives hope that UK businesses can weather the storm and emerge from the other side stronger.”
In a survey of more than 300 senior managers of mid-sized UK companies, many feel confident in what they can control: their own businesses. Nearly three in four business leaders (73%) say they are optimistic about their company’s performance, down 7% from 2022, and nearly nine in ten (89%) expect their income increases or stays the same in the coming year.
“While optimism for the economy as a whole may have waned, local policymakers are still planning for a brighter future with expected business growth,” said Vis Raghavan, managing director EMEA, JP Morgan. “UK business leaders are pragmatic and need to make strategic decisions with tough choices given the cards currently dealt and what is expected in the future.”
Energy prices threaten business success
While businesses focus on resilience, they remain concerned about threats beyond their control.
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The main threat: Energy prices were cited as the biggest external threat to businesses by a quarter (25%) of respondents, eclipsing general market volatility (15%), the cost of debt and interest rates interest (13%) and competitive threats (11%) .
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The business impact: Seven in 10 business leaders concerned about inflationary challenges and rising costs said rising energy costs are making business more expensive, far outweighing pressures from rising interest rates ( 53%) and rising raw material costs (56%).
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The impact on the consumer: With costs soaring due to inflation, almost half (48%) said they had already had to raise prices. Many (68%) raised prices by up to 50%, while just under a quarter (22%) of those who had to raise prices did so between 51% and 75%.
Supply chain challenges drive business change
Although energy price concerns dominate, supply chain issues remain.
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Supply chain issues: While some acute supply chain issues related to the pandemic and Brexit have faded from the headlines, nearly two-thirds (63%) of business leaders say supply chain pressures have eased. worsened over the past year. A similar number (62%) say rising costs related to supply chain issues are driving up business costs.
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Relocation: As supply chain concerns escalated throughout the year, more UK businesses took decisive action to address them, with almost half (42%) bringing manufacturing and distribution closer together of their key markets, up 12% compared to 2022.
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Other adjustments: Almost half (46%) are now allocating more money to cover the rising cost of moving products, up 10% from 2022, and less than a third (32%) have opted for the strategic storage to manage problems.
The rise of the “S” in the ESG
The range of considerations for business leaders is wide and the focus on environmental, social and governance (ESG) measures remains strong. In fact, social concerns around employees and customers are now joining the concern for environmental issues.
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Increased focus on social norms: Social factors such as customer satisfaction, occupational health and safety, and data privacy were reported by 56% as important to their business strategy, up 25% from 2022. They now rank as high as environmental factors (56%), such as reducing carbon emissions and energy efficiency.
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Benefits: The most frequently cited reason for emphasizing corporate responsibility was to improve employee retention (52%). The desire to strengthen the company’s position in the community (51%) and to improve marketing and find new customers (49%) are almost as often cited.
Business transitions decline as leaders weather tough times
The number of executives who do not plan to sell or transfer ownership of their business in the next year has risen dramatically to 45%, up 16% from 2022.
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Future plans: Of those considering a full or partial transfer, more than half (56%) are looking to do so through a sale or gift to family, and 74% expect the transition be completed within the next two years, up 24% from 2022 .
For more information on the 2023 Business Leaders Outlook, visit jpmorgan.com/business-outlook-GBR.
Survey methodology
The JP Morgan Business Leaders Outlook survey was conducted online from November 21 to December 8, 2022. A total of 306 business leaders (CEOs, CFOs, CFOs and owners) of mid-sized UK businesses ( annual turnover ranging from £20 million to £2 billion) in various industries participated in the survey. The results conform to the statistical parameters of validity and the error rate is +/- 5.6% with a confidence level of 95%.
About JPMorgan Chase
JPMorgan Chase & Co. (NYSE: JPM) is a leading financial services company based in the United States of America (“US”), with operations around the world. JPMorgan Chase had $3.8 trillion in assets and $288 billion in equity as of September 30, 2022. The company is a leader in investment banking, consumer financial services and small corporate, commercial banking, financial transaction processing and asset management. Under the JP Morgan and Chase brands, the company serves millions of customers in the United States and many of the world’s largest businesses, institutions and governments. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.
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contacts
JP Morgan UK: Alice Gasson, alice.gasson@jpmorgan.com
JP Morgan Commercial Bank: Bentley Weisel, bentley.r.weisel@chase.com