Growth forecasts in the Transport & Distribution sector have bucked the national trend over the last 12-months. Whereas UK small business confidence rose following the Labour Government taking office in July 2024 – in Transport and Distribution it started falling. Over the last 12 months, small business growth forecasts in this sector have fallen over each of the last four consecutive quarters.
The quarterly falls have been gradual but overall growth forecasts in the Transport and Distribution sector are now significantly lower than they were in the second half of 2023.
The sector was significantly affected by the ripple effect from the cost-of-living crisis – with nine in ten business owners saying they experienced adverse impacts. Coping with rising costs from suppliers was a key concern through 2024 (30%) and Transport and Distribution was the sector most impacted by rising energy costs, in terms of the cost of running a business (27%).
Autumn Budget concerns in 2024
Whilst small businesses in other sectors welcomed the change of government in July 2024, 82% of small businesses in the Transport and Distribution sector were worried about the Autumn Budget that followed. Chief concerns included:
- A potential rise in fuel duty – 62%
- A rise in Employer’s National Insurance – 52%
- The possibility of an increase to the National Living Wage – 24%
Access to finance
Whilst many business owners in Transport and Distribution are looking to back new growth initiatives, 57% of small business owners said they needed to secure funding or finance to activate these plans. Without finance, many growth initiatives would have to be dropped, including:
- Investing in new vehicles – 49%
- Moving to a bigger premises -21%
Growth held back
In addition to needing finance, business owners in this sector have consistently felt there are external barriers holding back their attempts to secure business growth. The key barriers to growth mentioned included: absorbing high fixed operating costs (28%), the cost of attracting skilled labour (20%), the burden of red tape (18%) – and 17% of respondents said they still felt the negative legacy of Brexit on their business.
A positive reset for the future
Despite the falling growth forecasts over the last 12 months – and the perception of market-induced burdens and barriers – many small business owners in the sector are working on long-term growth initiatives during the early months of 2025. In fact, Transport and Distribution as a sector sees a big upturn in Q1 2025, above the national average. With many looking to expand into new markets, re-assess the structure of their finance agreements and investing in new equipment – there is promise of a positive upturn for the sector’s small businesses later in 2025.
Joanna Morris, Head of Insight at Novuna Business Finance comments on 2025 market overview: “The final months of 2024 were to some extent a tale of two elections – and both had an impact on small business confidence. As the new Labour Government took office in July 2024, our research indicated an immediate election bounce in small business confidence. However, this uplift was tempered a few months later, when 86% of UK small business owners expressed fears on what they thought could be on the way in the Autumn Budget. Beyond this, our Christmas 2024 research indicated that political developments over the Atlantic were also concerning small businesses in the UK. More than seven in 10 small businesses (77%) said they are fearful that policies from the new US administration could have a ripple effect on the outlook for UK small businesses. The most significant concerns included the possibility of tariffs on UK exports to the USA (43%) and fresh uncertainty around the UK’s trading position in the world – with 30% fearing a weakening of the UK’s special relationship with the US and 29% concerned about the UK now finding itself isolated – outside the EU and no longer as close to the USA. Further, the possibility of increased market volatility impacting the UK was also a major concern and on two counts: 33% were concerned about the impact on UK economic growth forecasts and interest rates, whilst 22% feared the impact on their own trading relationships.”
“All this is context, but our research of small business owners spanning 11 years tells us that their growth forecasts are, so often, heavily rooted in the prevailing economic context – and how this shapes confidence, stability and a sense of certainty.”
“It is therefore perhaps unsurprising that, as 2025 started, the percentage of UK small business owners predicting growth had dipped to a nine-month low. Whilst the percentage of small businesses predicting growth for the three months ahead (to 31 March) had fallen back to 33% – the Q1 2025 data also indicates a four-year high in the percentage of small business saying they will scale down or contract (13%). In addition, the percentage of enterprises that fear closure has hit a two-year peak (8%). For those forecasting contraction, Q1 2025 is the first time in five quarters that the figure has exceeded single digits.”
“These findings are all from The Business Barometer study, which has tracked small business growth outlook every quarter since 2015. The latest data suggests a mood of caution offset by a deep resilience. Ever since Brexit and Covid, small businesses have responded to short-term challenges with resilience and by investing in new initiatives to power future growth. And already, we are seeing this for 2025.”
“At Novuna Business Finance, we are committed to supporting established small businesses across a range of sectors with flexible funding solutions. To help small businesses fulfil their true potential we also need to stop and listen. The Business Barometer study has proven to be a helpful resource to give us a glimpse into the minds of small business owners – how they plan, how they grow and how their react to the world events and issues that shape their market, present challenges and allow for opportunities.”