Seasonal businesses drive summer bounce in small business growth forecasts

This summer sees a two-year high for the proportion of seasonal businesses predicting growth for the quarter ahead. New tracking data from Novuna Business Finance reveals that 40% of small businesses that have a seasonal business model predict growth for this summer – a 25% rise on the start of the year and a favourable position compared to non-seasonal businesses, where growth forecasts have fallen for the fourth consecutive quarter.

Percentage of small businesses predicting growth each quarter

	2023 Q3	2023 Q2	2023 Q1	2022 Q4	2022 Q3	2022 Q2	2022 Q1
Seasonal	40	37	36	30	36	36	36
Non Seasonal	29	31	31	34	35	35	38

The findings are from Novuna Business Finance’s Business Barometer study, which has tracked small business growth forecasts every quarter for the last nine years. Whilst the national picture remains unchanged on previous quarters – with the percentage of small businesses predicting growth holding firm at 31% – the representative survey of 1,103 small business owners revealed significant divergence by sector, age and region.

Age of businesses: Young enterprises drive growth

In addition to seasonal businesses enjoying a summer bounce this summer, the research also revealed that younger businesses were significantly more likely to be predicting growth for the three-months to September.

For small businesses that had been trading for less than five years, 51% predicted growth over the summer, a sharp rise on 42% last quarter and the highest figure on record since the Novuna tracking study began. In contrast, older enterprises (trading for more than 20 years) saw the percentage predicting growth fall to a two-year low of 24%.

Sector analysis: Contrasting fortunes with highs and lows

Aligning to the positive findings for seasonal businesses, the latest data for small businesses in the agriculture and hospitality sectors showed signs of much needed stability after a torrid time through the lockdown era. In agriculture, for the third consecutive quarter more than 30% of business owners predicted growth (31% for the current quarter) – a significant rise on the previous two years where the percentage of enterprises predicting growth ranged between 11%-22%.

In the hospitality sector, growth forecasts have also improved – up from 24% to 36% over the last six months. In the transport and distribution sector, growth forecasts hit an 18-month high at 35%.

Set against this, growth forecasts in the retail sector hit a 12-month low, falling to 27% and the percentage of small businesses predicting growth in both manufacturing and IT/telecoms hit a two-year low (32% and 35% respectively).

In the construction sector, growth predictions remained volatile quarter by quarter. For the current period, the prcentage of small business owners predicting growth fell sharply on Q2 (from 31% to 24%), although this figure remains higher than was the position at the start of the year.

Regional analysis: Mixed picture around the UK

A regional analysis of small business growth predictions also presented a mixed picture. Whilst quarterly growth predictions show signs of stability and consistency in London, the South East and Wales, the latest Novuna data shows big swings elsewhere. For example, in Scotland, the North East and West Midlands there is a 12-month high for the percentage of small business owners predicting growth. In contrast, in the North West and East Midlands, small business growth predictions have hit a 12-month low point.

Jo Morris (pictured), Head of Insight at Novuna Business Finance comments: “At a time when the UK economy is in a relatively fragile position – impacted by inflation, the ongoing war in Ukraine and the pressure on living standards, our summer study shows a mixed position from the small business community, with enterprises in some regions and sectors struggling whilst, in others, growth forecasts are hitting 12 or 18 month peaks. Small businesses that rely on seasonal peak periods are leading the sector’s growth forecasts.

“Seasonality can be a blessing and a curse for small businesses, given these enterprises depend more heavily on shorter peak periods for trading. When market conditions favour them, things can go well but disruption from challenges like the pandemic, interest rate rises and extreme weather can hit them hard. It is pleasing to note from out latest study that seasonal small businesses out-strip the national average in predicting growth for the summer period. Some seasonal businesses – for example those in hospitality, agriculture, tourism or food production – have obvious summer peak periods but seasonality can apply to businesses in many other sectors, based on their customer profile and service offering.

“Among the UK Small business community, around 40% of enterprises class themselves as seasonal businesses, which is why we at Novuna Business Finance take the time to understand their specific needs and support them with tailored funding solutions.”