Falling consumer spending a top concern for Thames Valley businesses

A fall in consumer numbers and spending remains a top concern for Thames Valley businesses, as companies brace themselves for a challenging first quarter of 2024, according to accountancy and business advisory firm, BDO.

BDO LLP’s latest bi-monthly Economic Engine survey of 500 mid-market businesses, revealed that 44% of regional businesses rank dwindling customer numbers and a reduction in spending as one of the biggest challenges facing their business over the next six months.

This is at the same time as inflation and the high cost of living continue to hit customer pockets.

The regional trend is also mirrored in the retail sector, with more than a third (37%) of retailers placing this as their number one concern.

It follows the latest BDO High Street Tracker that showed total like-for-like retail sales were negative in the last three months of 2023, the so-called ‘Golden Quarter’, pulled down by poor fashion sales as customers held back on their discretionary spend.

The survey of mid-sized businesses also showed that supply chain pressure, exacerbated by geopolitical events and staff and skills shortages, is still proving to be a thorn in the side of Thames Valley businesses, with nearly three-quarters of regional companies (67%) admitting it will be their biggest challenge in the first half of 2024.

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More than a third (36%) ranked raising costs due to inflation, as one of their top concerns.

David Brookes, regional managing partner of BDO in the Thames Valley, said: “There are a number of enduring themes that continue to blight Thames Valley businesses, centring predominantly around reduced customer spending, supply chains, and the cost of doing business.

“While these will remain a cause for concern in the coming months, in the longer-term it is the crippling costs of borrowing that will significantly hamper growth.

“Unsurprisingly, high monthly loan repayments are proving to be a significant concern for Thames Valley businesses, with many calling on the Government for greater support.

“The Government should ensure it focuses on regulatory changes to tackle difficulty accessing capital, as well as providing greater financial incentives that are specifically targeted at mid-sized businesses, whose growth will play a key role in the overall economic recovery of the UK.”

Despite the ongoing pressures facing Thames Valley businesses, almost all (97%) of regional companies said they had achieved forecast growth in 2023.

When asked what steps they intended to take to help drive growth in 2024, a third (33%) of regional businesses said they plan to launch new products or services, with a further 33% intending to invest in environmental, social, or governance measures.

More than a quarter (28%) have set their sights on investing in new efficiencies.

Brookes added: “While the outlook is beginning to improve, with inflation heading in the right direction, there is still a huge amount of uncertainty on the horizon.

“The year ahead will throw up its own challenges in the form of potential political change and more economic volatility.

“As such, businesses in the region must clearly define their priorities in the coming months, while continuing to address ongoing challenges.”