In addition, 18% of small businesses fear they will contract or struggle to survive over the next three months. These figures have gradually risen quarter-on-quarter through 2022 and the percentage of small businesses fearing for the future is now at its highest level since January 2021.

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 contraction of growth predictions is a cause of concern, although the scale of the dip in confidence this quarter is less pronounced than may have been expected.

Sector findings: A mixed picture of highs and lows. Across the country, the survey findings by industry sector present a far more mixed picture. In some sectors, small business confidence fell sharply since last quarter although, to some extent, this was offset in other sectors by a greater proportion of business leaders seeing uncertainty as an opportunity to secure growth.

Compared to last quarter, the percentage of small businesses predicting growth fell these sectors: Transport and distribution (falling from 30% to 24%), real estate (falling from 32% to 27%) and hospitality (31% to 26%). There was also a particularly sharp fall in the agricultural sector, where the percentage of enterprises predicting growth fell from 25% last quarter to a current figure of just 11%. In the manufacturing sector, the percentage of small businesses predicting growth held firm on last quarter (35%) - although this remained significantly down on 12-months ago (48%).

In contrast, there were three industry sectors where more small businesses predicted growth compared to last quarter. These included the construction sector (rising from 18% in Q3 to 27%) and the media sector (up from 36% to 48%). Further, the percentage of enterprises predicting growth also rose in the retail sector (up from 20% in Q3 to 28%), where many small business owners were probably banking on a trading uplift during the countdown to Christmas.

Regional findings: London and South East out-of-step with the country at large. Whilst London was resilient and the South East saw a quarterly rise (from 27% to 31%), elsewhere in the UK most regions saw a fall in the percentage of small businesses predicting growth for the next three months. Compared to last quarter, there were falls in the North West (from 33% in Q3 to 23%), Yorkshire (down from 39% to 26%), the West Midlands (falling from 35% to 30%), the South West (from 34% to 26%) and Wales (from 29% to 22%). Further, compared to a year ago, the relative falls in small business confidence in the North East, West Midlands, Yorkshire and the South West have been quite pronounced.

Sustainable businesses most likely to predict growth. Ahead of Cop27 next month, many have voiced concerns on the need to maintain commitments to the climate emergency despite the immediate economic challenges that everyone is facing. The latest Novuna findings suggest that sustainable small businesses are far more likely to be growing in troubled times. In fact, having an active plan to become a Net Zero business is the factor that correlates the most with growth: Nationally 53% of UK small businesses that are working on a plan to achieve Net Zero are predicting growth for the next three months. This suggests that rather than businesses choosing between sustainability plans and tackling an economic crisis - in truth, one could in fact help the other.

Technology savvy businesses prove to be more resilient. The research also suggests that small businesses that are investing more in technology to become more efficient enterprises are far more likely to be predicting growth (37%) compared to enterprises who acknowledge their use of technology lags behind their peers (10%).

Jo Morris, Head of Insight at Novuna Business Finance comments: "We are all very aware of the seismic economic challenges that everyone is facing as we head into autumn and winter months. We were not surprised to see a dip in the proportion of small businesses that are predicting growth in the run-up to Christmas, although the fall was less severe than may have been expected - given the scale of economic volatility and the impact of price rises and

inflation on running costs and the supply chain. Whilst in some regions and sectors there are grounds for concern, our findings also suggest there are strong levels of resilience from other businesses. We saw this during the lockdown era, a time many small businesses where quick to adapt their plans, some even re-purposed or re-engineered their businesses at a time of unforeseen change. For many enterprises, the same may be required this winter - and Novuna Business Finance will be there to support established enterprises that are working on plans to adapt, grow and fulfil their potential despite the enormously challenging context."