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Hospitality Sector Bounces Back to Highest Growth Outlook in 12 Months

Almost two fifths of small businesses in the hospitality sector are predicting growth in the next three months (38%), more than twice the proportion compared with last quarter and on a par with the figure 12 months ago (40%), according to new findings from Novuna Business Finance’s Business Barometer. The positive news continues when looking at those businesses projecting contraction or closure which is at its lowest level since 2021 (14% vs 12% Q4’21).

This comes at a time when further interest rate increases from the Bank of England could dampen the recovery of small businesses, while firms are also under pressure from high costs of energy, raw materials and rising staff wage bills.

The recovery this quarter reverses a steady trend of decline over the past three quarters, with the proportion of businesses anticipating contraction last quarter exceeding those of growth (34% vs 24%).

Growth outlook among small businesses in hospitality and leisure

Nationally, the percentage of small businesses predicting growth remained consistent on last quarter at 32% – meaning hospitality exceeded the national average figures for growth.

The Novuna Business Finance study has been tracking small business growth predictions against prevailing market conditions every quarter since 2015. At the start of each quarter Novuna asks a representative sample of 1,200 small business owners about their growth predictions for the next three months. At a time of unprecedented economic strain and market uncertainty, the growth projections are a positive indication of recovery from the sector, with the pronounced dip in those businesses contracting only adding to this positive outlook.

Across the country, the picture by sector told a varied story. Hospitality was not the only sector to bounce back, with signs of much-needed recovery for small businesses in Agriculture and Retail – two sectors hit especially hard during the Covid era. In the Agricultural sector, the percentage of small business owners predicting growth has risen from 22% to 30% over the last 12 months, with positive growth forecasts in retail up from 25% to 31%.

Whilst the percentage of small businesses predicting growth in Manufacturing (34%) and Construction (31%) remains largely flat over the 12-month period, growth forecasts have fallen sharply in the Media sector (from 49% to 38%) and also in Transport and Distribution (35% to 25%). Further, with uncertainty over UK property prices, growth forecasts in the Real Estate and Property sector have fallen from 21% to 15% over the last 12-months.

Jo Morris Head of Insight at Novuna Business Finance comments: “Despite the clouds that have been gathering, with low consumer confidence, high costs and an uncertain economic outlook, the results give a sense that businesses in the hospitality sector can see light at the end of the tunnel. Nationally, the percentage of small businesses predicting growth has been remarkably steady at between 27%-30% for the last four quarters. Whilst this suggests resilience, the picture does vary considerably by industry sector – with our latest data also revealing that those small businesses who arguably had the hardest time over the past few years were also those more likely to be predicting growth as we move towards summer.

“In the current economic climate, many enterprises are focusing on financial strength as the platform from which to plan business growth. For many, this involves managing late payment and protecting cash flow and many enterprises also see 2023 as a time to invest – in new equipment and capabilities. For established businesses looking to drive growth in 2023, Novuna Business Finance is committed to helping them fulfil their true potential. We understand the growth cycles that small businesses go through and we have both the products and toolkits to support their growth ambitions.”