Introduction
Barclays introduces its Business Prosperity Index, which integrates market research with proprietary data from one million business customers. A quarterly business performance tracker has been created by Barclays. This tracker integrates lending, liquidity, and international payments data from approximately one million UK business customers with external market research to assess economic confidence. The Business Prosperity Index, which was created in collaboration with the Centre for Economics and Business Research (Cebr), assesses the current performance and development prospects of the UK business sector by utilizing quarterly surveys of 1,000 business leaders and anonymized transaction data. The index endeavors to offer a comprehensive perspective on business sentiment by integrating forward-thinking survey responses with actual financial data. The inaugural index indicates that UK businesses intend to increase investment by 1.4% in Q3 2024 compared to the same period last year, a 0.7% increase from Q2. The data indicates that businesses are prioritizing staff training and research and development, with 44% of firms concentrating on workforce development and 35% on product enhancement.
Transaction data from Barclays business accounts suggests that financial resilience improved in Q3 2024 compared to Q3 2023. Although cash inflows decreased by 3% year-over-year, a more substantial decrease in outflows resulted in a 17% increase in net cash flow, which is the difference between the amount of money that enters and exits business accounts. The value of drawn loans, which is the total quantity borrowed against available credit facilities, increased by 4.8% annually in Q3 2024, a significant increase from the 3.6% increase in Q2.
46% of firms had previously suspended investment plans but now intend to proceed, according to a supplementary survey of 500 business executives conducted following the UK government’s recent budget. The research suggests that 37% of businesses are more inclined to pursue additional funding to invest in development, while 61% are confident in the budget’s economic impact. Barclays has implemented a £22bn ($27.8bn) Business Prosperity Fund for its corporate and business banking clients, both existing and new, in response to these discoveries. Supporting both new lending and refinancing of existing facilities is the objective of the fund. The index underscores the current workforce challenges in the United Kingdom, with 62% of business executives reporting that they are having difficulty obtaining skilled labor.
Of these, 77% say that the shortage has a detrimental effect on their growth potential. The issue is most severe in Scotland, where 92% of businesses report skills shortages, followed by Yorkshire and the Humber at 90% and the West Midlands at 88%, as evidenced by regional variations. The data also indicates that consumer behavior patterns are evolving. Businesses are reporting that customers are scrutinizing value propositions (20%), pursuing lower-cost alternatives (25%), and extending purchase decision timelines (25%). Retention strategies, such as supply chain restructuring and product modifications, have been implemented by 84% of firms in response. The index indicates a period of post-peak inflation, during which inflation rates have decelerated but businesses continue to encounter elevated production costs.
In order to preserve customer relationships, 65% of organizations have implemented price reductions, either throughout their entire product line (31%), or through targeted promotions (41%). 52% of businesses have committed to expanding their product and service offerings in response to the budget announcement, despite the pressures they face. 42% of organizations prioritize staff development as an investment priority, indicating that the emphasis on training remains robust.
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Industry Comments
“Our new Index is designed to be a bellwether of business sentiment, performance and future growth opportunities” Hannah Bernard, Head of Barclays Business Banking.
Hannah Bernard, Head of Barclays Business Banking, says: “Our new Index is designed to be a bellwether of business sentiment, performance and future growth opportunities. It’s reassuring that businesses remain committed to investing to grow, despite the extra financial pressures faced by many.”
Matt Hammerstein, Chief Executive of Barclays UK Corporate Banking, adds: “The economic environment remains challenging for those on tight margins, but there are signs of cautious optimism emerging. Our data shows many businesses with investment plans on hold are now confident to kick-start growth by seeking the funding they need.”
FAQs
1. What is the Barclays Business Prosperity Index?
The Barclays Business Prosperity Index is a quarterly performance tracker that blends data from approximately one million UK business customers with market research to measure economic confidence. Developed with the Centre for Economics and Business Research (Cebr), the index uses anonymized transaction data and quarterly surveys of 1,000 business leaders to evaluate business sentiment, performance, and growth opportunities. It reveals trends like increased investment plans and workforce development priorities, providing valuable insights for businesses and policymakers to understand economic dynamics and address challenges like skills shortages.
2. What are the key findings from the inaugural index?
The inaugural index shows that UK businesses plan to increase investments by 1.4% in Q3 2024 compared to last year, focusing on staff training (44%) and product improvements (35%). Net cash flow has risen by 17% year-on-year, reflecting improved financial resilience. Additionally, a survey following the UK budget indicates 46% of businesses are resuming suspended investments, with 37% seeking extra funding for growth. However, workforce challenges remain significant, as 62% of leaders face skilled labour shortages, which negatively impact growth, especially in regions like Scotland and Yorkshire.
3. How is Barclays supporting businesses in response to the index findings?
Barclays has launched a £22bn Business Prosperity Fund to support business banking and corporate clients. This fund provides refinancing for existing facilities and new lending opportunities, helping businesses invest in growth and overcome financial challenges. Barclays’ data also highlights changing customer behaviors, prompting businesses to adopt strategies like price reductions (65%) and product modifications (84%) to maintain relationships. The fund and index insights aim to assist businesses in navigating high production costs and inflationary pressures while fostering innovation and workforce development.
Conclusion
The Barclays Business Prosperity Index marks a significant step in understanding and supporting UK businesses. Integrating real-time financial data with forward-looking surveys offers a comprehensive view of economic confidence, highlighting trends like increased investment, workforce challenges, and changing consumer behaviors. With initiatives like the £22bn Business Prosperity Fund, Barclays demonstrates its commitment to addressing business needs, from refinancing to new lending. As companies focus on innovation, staff training, and value-driven strategies, the index provides actionable insights, empowering businesses to navigate economic pressures and seize growth opportunities effectively.
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