Introduction
Barclays introduces its Business Prosperity Index, which integrates market research with proprietary data from one million business customers.
Barclays has created a quarterly business performance tracker that 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.
UK businesses intend to increase investment by 1.4% in Q3 2024 compared to the same period last year, an increase from 0.7% in Q2. This information is revealed in the inaugural index. 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.
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, 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
- What is the Barclays Business Prosperity Index? The Barclays Business Prosperity Index is a quarterly business performance tracker that combines proprietary data from Barclays’ one million UK business customers with external market research. It assesses the economic confidence, current performance, and growth prospects of the UK business sector. The index integrates survey responses from 1,000 business leaders with anonymized transaction data to provide insights into business sentiment and financial trends.
- What key trends are revealed in the inaugural Business Prosperity Index? Key trends include an expected 1.4% increase in investment by UK businesses in Q3 2024 compared to Q3 2023, focusing on workforce development (44%) and product enhancement (35%). Additionally, businesses are seeing improvements in financial resilience, with a 17% increase in net cash flow. However, challenges like skilled labor shortages are prevalent, with 62% of business executives reporting difficulty obtaining skilled workers.
- How is Barclays supporting businesses in light of these findings? In response to the findings, Barclays has launched a £22bn ($27.8bn) Business Prosperity Fund. This fund is designed to support new lending and the refinancing of existing credit facilities for corporate and business banking clients. The goal is to help businesses access the funding needed to pursue growth despite economic pressures.
- What are the regional disparities in skills shortages? The index highlights significant regional variations in skills shortages, with the most severe issues reported in Scotland (92% of businesses facing shortages), followed by Yorkshire and the Humber (90%), and the West Midlands (88%). This shortage is impacting businesses’ growth potential, with 77% of businesses reporting a negative effect.
- How are businesses responding to changes in consumer behavior? In response to evolving consumer behavior, 65% of businesses have implemented price reductions, either across their product lines (31%) or through targeted promotions (41%). Additionally, businesses are focusing on customer retention strategies, such as restructuring supply chains and modifying products, with 84% taking action to maintain their customer base.
Conclusion
The Barclays Business Prosperity Index provides a valuable snapshot of the current economic landscape for UK businesses, revealing trends in investment, financial resilience, and workforce challenges. The index underscores cautious optimism, with many businesses moving forward with investment plans and seeking funding for growth. Barclays’ £22bn Business Prosperity Fund offers crucial support as companies navigate these complex economic conditions.
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