2024 Capify: predictions for the year ahead

SMEs faced plenty of challenges in 2023 – from high energy prices to labour shortages and supply chain disruption – and the outlook for 2024 is no less uncertain. However, there are signs that the coming year could be one of opportunity for those businesses that are willing to plan ahead and embrace change. Here are some key trends to look out for: Economic outlook The UK economy is expected to grow in 2024, but only modestly with KPMG expecting GDP growth of around half a percentage point. There’s a broad consensus among economists that progress will be slow given the potential challenges ahead such as geopolitical tensions and the dramatic reshaping of global supply chains.Inflation is expected to continue to fall in 2024, according to the The Bank of England, but at a lower rate than 2023 – with the target figure of 2% not likely to be reached until the end of 2025. But this does mean that interest rates could begin to soften slightly from mid-year onwards – potentially dropping down a full percentage point from the rate of 5.25% held at the end of 2023. But, as always, it’s a mixed picture for SMEs. If energy bills rise again, as many expect, overheads will likely increase and the cost-of-living crisis will continue to impact consumer confidence. On the flip side, audit, tax and consulting adviser RSM predicts wage growth to continue – and only dip to around 4.8% - meaning there could be a modest rise in consumer spending power. Indeed, employers are already planning for the upcoming minimum wage rise to £11.44 in April 2024, whilstGovernment attempts to stimulate purchasing power will also take effect in the new year. The main employee National Insurance rate is being cut from 12% to 10% in January, whilst the State Pension will rise by 8.5% and the standard personal allowance – the amount of tax-free income you can earn – will stay at £12,570. Standard Life has more information in this guide. Property and business rates The Autumn statement contained measures aimed at supporting small businesses and the high street, including freezing the small business multiplier at 49.9p. However, as PWC points out, the phasing out of Transitional Relief could see some SMEs have their rates bills rise by more than a quarter. In terms of commercial property values, CBRE expects the market to remain subdued – from retail through to industrial and logistics – in 2024. In the residential property market, affordability remains stretched according to Rightmove, who foresee a 1% drop in house prices in 2024 – one of the more positive assessments – whilst pointing out the wide differentials from region to region. Similarly UK Finance expects mortgage lending to fall – as higher interest rates and household costs hit affordability. Lending could be down as much as 8% (a drop of £10bn to £120bn) but the trade association is predicting the outlook to be brighter in 2025. This mortgage market turbulence will further shake the confidence of the UK’s banks, which may result in even tighter lending criteria to businesses seeking finance. Politics Following on from the business-related policies and tax changes announced in the 2023 Autumn Statement, the campaigning for 2024’s general election can now begin in earnest. Owners of SMEs will now be keeping an eye on relevant policy pledges hoping that whoever wins power will tackle the issues that mean most to them. However, satisfaction with democracy is low, according to an Ipsos survey, with only half (53%) of people in the UK saying they can influence things by voting. And even though the two major political parties will be keen to emphasise their differing approaches, any major spending pledges are likely to be constrained by the UK’s fiscal position. Technology The latest data from the International Business Report (IBR), Grant Thornton’s global survey of mid-market companies, shows that business leaders plan to increase investment in technology over the next 12 months. Indeed, the British Business Bank cites technology and AI as one of its five reasons to start up a business in 2024, pointing towards the ability to commission out research to tools such as ChatGPT and Google Bard and gain access to expertise. The technology is not perfect – in terms of results generated and potential privacy and copyright issues – but it can free up business owners to concentrate on other tasks. Analysts expect the ethical debate around the use, regulation and deployment of AI to continue for the foreseeable future. ESG agenda Technology has a key role to play as the implications of COP28 will continue to be felt across the corporate landscape. According to deVere Group, more than half of investors plan to increase their ESG-orientated investments in 2024. But ESG reporting is no longer limited to larger businesses: SMEs have a crucial role to play in terms of aspiring towards net zero and a circular economy. Whether it’s analysing and improving supply chain processes, choosing suppliers based on their ESG credentials or championing a demonstrable positive social impact, individual businesses can ensure their activities stand up to scrutiny. Fundamentally, a responsible and authentic company culture is likely to have a positive impact on the balance sheet. It opens up more varied commercial opportunities, recruitment becomes more efficient and talent is more easily retained. As Legal Futures highlights, many SMEs are not specifically bound by ESG legislation yet, but they will be impacted by the move towards greater transparency and reporting thanks to their commercial relationships with larger organisations. Hybrid working The hybrid working culture baked into the economy during the Covid-19 pandemic will continue to evolve – as will the arguments for and against. As a business owner, there’s a fine line to negotiate when developing and enforcing the policies that work best for you. In its wellbeing trends report, Westfield Health believes companies who can support work-life balance are also supporting a more diverse workforce to perform at their best.Indeed, the results of the world’s largest trial of a four-day week in February 2023 was hailed as a ‘major breakthrough’ by the campaign organiser. However, there’s no one size fits all approach. According to KPMG, the majority of CEOs of the world’s largest organisations are considering linking rewards, raises or promotions with office attendance.Nobody can be certain how the trends that look likely to shape 2024 will play out. Capify was launched in 2008 when many SMEs were struggling to navigate the global financial crisis. Since then, it has helped thousands of businesses to source the flexible finance solutions they require to approach the future with confidence.With loans between £5,000 to £500,000, Capify can help your business grow and capitalise on future opportunities. Check your eligibility here.

SUMMARY

2024 Capify: predictions for the year ahead

Economic outlook

Property and business rates

Politics

Technology

ESG agenda

Hybrid working

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