Improving sales and cashflow in the second quarter of 2024 saw UK business conditions returning to pre-pandemic levels, according to the British Chamber of Commerce (BCC). Over half (58 per cent) of small and medium-sized enterprises (SMEs) responding to the body’s quarterly survey expected their turnover to grow over the coming year.

“The latest results from our [survey] show that both business conditions and business confidence have improved, albeit from a relatively low base,” David Bharier, head of BCC’s research, said. “The data also show that concern about inflation among businesses has dropped to levels last seen in 2021 as fewer firms expect to raise prices.”

Low investment

Yet only a quarter of firms reported an increase to investment in plant and machinery during the last quarter – with 14 per cent saying they had decreased investment. But the picture on investment is not uniform. For example, 42 per cent of those in the transport sector said they had increased investment, compared with only 23 per cent of firms working in hospitality.

In fact, confidence is rising in other global regions, according to a survey by the accountancy firm Grant Thornton. For example, over half (58 per cent) of chief finance officers (CFOs) in the US also reported confidence in the economic conditions – with three-fourths saying they expected net profits to grow over the next year.

Reigning in costs

While organisations saw investment in advanced technologies, such as generative artificial intelligence, as a must, most said they were under cost constraints.

“These digital investments are being made with a goal of producing cost savings later,” the report said. “But in the meantime, to maintain profit margins CFOs are finding themselves needing to cut somewhere to finance the digital transformation that’s necessary to get ahead of competitors — or at least avoid falling behind.”

Investment in human capital is a main casualty of cost cutting, the report said. That was making hiring difficult at many businesses where a top hiring challenge is a limited talent pool.