Market Insight Report Business confidence in 2024 amidst market concerns

Despite the volatile state of the economy, businesses are optimistic about what the upcoming year will bring in terms of energy prices. Happenings in the Middle East slightly dampened hopes of a recovering energy market but stability in Q3 (July to September) offered light at the end of the tunnel for businesses.

Business confidence

75% of confidence surveys shows improvements in Q1 (January to March) of 2024 compared to the Q4 of 2023 (October to December). The British Chambers of Commerce (BCC) reported an unchanging 56% confidence level when it comes to future revenue ². The survey measures the number of businesses expecting a greater economic income over the next 12 months, revealing a standstill in mindsets. Looking at the Lloyds Bank Business Barometer, confidence in Q1 rose by 4% to 43% ³. The confidence index is on a promising upwards trend.
 

UK finance chiefs have also shown a 6% rise in positive sentiment. The greatest shift in optimism, however, has been from the Institute of Directors (IoD). Their Economic Confidence Index disclosed an 8% increase in confidence ⁴. This index remains in the negative but rising in positivity.

The Deloitte Consumer Tracker confirmed that consumer confidence is on the rise too ⁵, by 0.5%. The change may be marginal, but it follows an ongoing trend of improvement throughout the year. Their most recent survey shows a 6% increase to 17% in Q1 of 2024 ⁶.

General assurance about the economic future is true for employees too. Companies with 10 or more employees reported no concerns for their businesses at the end of 2023 increased by 3% between August and October.

Inflation in the last 12 months

Inflation is the increase in prices of goods. Within the past 12 months, these prices have dipped by 0.8% in Q1 2024 ⁷. The drop was mainly credited to lower energy prices and slight increases in food and drink prices. We expect inflation to fall below 2% in the future ⁸ due to Ofgem's energy price cap before rising again to 3% ⁹.

Less inflation has convinced financial markets that interest rates could reduce in the next few months.

Economic growth

As confidence returned, businesses ended the first quarter well. Manufacturing and servicing activities showed an extended output in March. The UK Purchase Manager's Index (PMI) predicts strong economic recovery this year ¹⁰.

Current affairs that affect Economic Growth

Slow economic growth is likely to mean that the cost of performing businesses transactions will be unachievably high for many businesses.

To avoid insolvency, which is the state of businesses being unable to pay their bills or debts, businesses are focused on first reducing costs. Investing in new equipment and machinery has fallen to the lowest level in the last three years.

Energy prices are consistently the main concern. However, the number of companies that report they have been impacted by high energy prices has hit its lowest point since February 2022 ¹².

Geopolitical uncertainty

While concerns over energy prices have reduced, one of the greatest risks businesses face is geopolitical uncertainty. Conflicts in Ukraine and the Middle East weaken global trade and economic growth, affecting supply and business. This sort of instability is extremely harmful to the energy market.

There are also worries of civil unrest in Western democracies following an unexpectedly high number of the world's population voting in elections.

To put into perspective the influence of conflicts, Allianz Commercial reports that political risk and violence is the eighth largest concern for companies globally in 2024 ¹³.

Oil and gas prices were more affected by Russia's invasion of Ukraine last year than crises in the Middle East. Although oil flows haven't been affected, prices have shot up by $3.60 after the Middle Eastern conflict in October 2023. Prices rose to $88.15 per barrel.

Ultimately, business leaders worries have strayed from energy prices which perhaps is a reassuring indicator despite other threats to the market. The volatility of the market has been counteracted by business optimism, brightening hopes for a stable energy market.

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