Small business growth forecasts in agricultural sector hit three-year high

French farmers may be blockading Paris with protests, but UK small business growth outlook in the agricultural sector has hit a three-year high – with 39% of business owners predicting significant or organic growth for the next three months, a sharp rise on 26% last quarter.

The new research from Novuna Business Finance forms part of its Business Barometer study, which has tracked small business growth forecasts every quarter for the last decade.

For the first time, the percentage of agricultural small businesses predicting growth is significantly higher than the national average for all UK small businesses, which remained largely unchanged on the previous three quarters at 32%. This contrasts to the years after Brexit and the pandemic, when small business growth predictions in the agricultural sector trailed far behind the national average.

Percentage of small business owners predicting growth each quarter: The agricultural sector compared to the UK national average

	Agricultural small businesses	UK national average for all small businesses
Q1 2024	39%	33%
Q4 2023	26%	32%
Q3 2023	31%	32%
Q2 2023	30%	32%
Q1 2023	34%	33%
Q4 2022	11%	31%
Q3 2022	22%	34%
Q2 2022	25%	37%
Q1 2022	23%	36%
Q4 2021	12%	35%
Q3 2021	15%	36%
Q2 2021	22%	35%
Q1 2021	23%	25%

Despite the national picture for small business growth forecasts remaining flat for nine months, the Novuna findings revealed some major highs and lows by industry sector.

Beyond agriculture, other sectors that saw a significant increase in the percentage of business owners predicting growth included manufacturing (44%), media (45%) and legal services (40%) – all sectors where confidence has now hit a 12-month high.

Quarterly growth predictions over the last 12-months:

	Q1 2024	Q4 2023	Q3 2023	Q2 2023
Manufacturing	44%	24%	32%	34%
Media	45%	28%	36%	38%
Legal Services	40%	31%	30%	35%

Conversely, the first quarter of 2024 also saw sharp falls in growth outlook among business leaders in the leisure/hospitality sector (down from 35% to 24% compared to last quarter) and the transport/distribution sector (growth forecasts down from 38% to 27%). In the troubled construction sector, the percentage of business owners predicting growth remained stagnant for the third consecutive quarter at 23% – the lowest level since summer 2022.

Signs of resurgent confidence in the agriculture sector coincided with an increase in the percentage of small business owners that said they were working on new initiatives to secure growth for 2024 (70% for Q1 2024 – up from 64% this time last year and 60% two years ago).

The most common new initiatives that agricultural small business owners said they were working on to invest in growth opportunities for the year ahead comprised of:

Keeping fixed costs down – 44% (up from 31% 12-months ago)
Investing in new equipment – 30% (up from 26% 12-months ago)
Improving cash flow – 25% (up from 20% 12-months ago).

Jo Morris (pictured), Head of Insight at Novuna Business Finance commented: “With a General Election looming, 2024 may well be a year when UK farmers are targeted for greater support. In recent weeks, the Government has set out its biggest upgrade to the UK’s farming schemes since leaving the European Union – and Labour too has promised British farmers a better deal with the EU and vowed to make sure more British produce is used for schools and hospitals.

“It is unlikely that the upturn of growth forecasts among agricultural small businesses is a reaction to policy announcements. Rather, it is more likely to be a statement of resilience among farmers despite the challenging economic context. The upturn in the percentage of farmers investing in new growth projects may well be the reason why they start 2024 will a more bullish outlook than previous years.”