The 2022 Plimsoll Mood Survey has shone a light on the extent to which confidence is flooding back into the UK economy. After the darkened mood of the past 18 months, business leaders, on the whole, seem primed for a prolonged recovery over the next few years.
While supply chain disruption, scarce human resources and the impact of Brexit are yet to impart their full impact, confidence remains high. Unprecedented levels of stimulus money are still flowing through the economy and along with pent up demand, sees most sectors expecting strong sales growth.
Pockets of concerns do persist, with 10% of respondents expecting their own company to sell less in the coming year despite a sustained recovery in the economy. Additionally, 14% think they will make less profit and 10% plan to reduce staff numbers.
The annual Plimsoll Mood Survey gauges how business leaders are feeling heading into the next trading year. Having surveyed thousands of business leaders across all sectors of the UK economy, the following is a breakdown of the key findings:
81% of companies expect higher sales next year
With 2021 GDP growth of 7.2% and 5.5% in 2022, the UK economy should return to pre-pandemic levels by Q1 next year. The Plimsoll Mood Survey reflects this growing confidence that the economic impact of the pandemic is past us.
81% of respondents said they expect sales to increase in 2022. Conversely, 9% suggested they expected no growth and a further 10% responded that they expected sales to fall.
There are many caveats to this optimism in the economy. A rampant return of the virus, continued shortages, soaring inflation and further disruption as more Brexit-driven changes become a reality could derail some expectations, but for now, positivity wins out:
71% of companies expect to make more profit next year
Despite increasing inflation and rising input cost pressure, two out of three respondents expect their rising sales to lead to bumper profit returns in 2022.
There are still clouds on the horizon as sharp rises in human resource, energy, distribution and other input costs are predicted to persist far beyond 2022. These cost pressures are bound to erode margins in some sectors, but expectations remain that profitability will bounce back strongly for most. How many of those profit forecasts will come to fruition over the next 12 months?
Not all share in the optimism, with 15% of companies worried their profit margins will fall in the coming year. The following highlights the overwhelmingly positive profit expectations in the UK economy right now:
Two third of firms are looking to employ more staff
Advertised vacancies in the UK economy hit a recent record high of 1.1m as companies struggle to hire staff post-pandemic and post-Brexit. Plimsoll’s latest survey shows the extent to which UK businesses need staff.
Having lost 1.3m, predominantly young, people from the UK’s potential employee pool as a result of Brexit, finding and retaining staff is one of the biggest threats to the optimism coursing through the economy. Hiring is likely to become more expensive with average wages up 7.2% compared to this time last year.
Regardless, most companies understand the need for people to execute their processes and deliver on amazing growth opportunities. This is reflected in Plimsoll’s latest survey with 63% of respondents looking to hire in the coming year:
A third of companies will look to reduce debt in the coming year
The monetary policy looks set for a cycle of tightening after years of near negative rates. Those carrying long-term debts should be insulated from the immediate pain of increased interest payments. However, those looking to refinance the debt or take on new debt could find the cost is much higher in 2022.
Many companies will look to use some of the excess cash that has built up on their balance sheet during the pandemic to clear some of their short terms, expensive debt. However, others could look to use external debt as a growth multiplier to fund their expansion plans. 17% of respondents said they were confident enough to take on more liabilities in the coming year:
A third of companies plan to buy another company in 2022
The ingredients for a prolonged wave of consolidation are in place for the coming year. There is pent up investment demand, excess liquidity, companies needing to recapitalise after the pandemic and recognition that having too narrow a marketplace can be a critical dependency. Those elements point to a marked increase in deals in 2022.
Plimsoll provides analysis to business leaders in thousands of UK markets and international industries. During the course of conversations with clients the number of companies that are looking to acquire another, often for the first time, has increased markedly. Whether it is buying a competitor to secure a market share or acquiring up the supply chain, the appetite for buying another business could be increased in 2022:
Over a third of companies will increase dividends in 2022
Contrary to popular belief, shareholders have shouldered a sizeable burden during the last 18 months. Many have financed their companies and their employees during the shutdown of the economy with no guarantee that normality will ever return.
Dividend payments across the global economy fell by more than US$220 billion in 2020 as companies battened down the hatches to protect their financial resources. However, as normality returns to the world, owners and shareholders are looking for a return on their patience and dedication.
Our latest Plimsoll Mood Survey shows the extent to which many companies are set to compensate their founders and owner beyond the pandemic:
Plimsoll has surveyed thousands of business leaders around the UK economy to add human insight to sit alongside our unique analysis, which covers the financial performance, outlook and value of the key players in more than 1600 individual industries in the UK and further afield.
2022 is unlikely to see the same level of disruption as 2020 and 2021 have suffered. However, the challenges of building and running a successful business will remain. Plimsoll can ensure you have the best possible analytical insight possible to make the best possible decisions in these fragmented and often bewildering times.
For more information about Plimsoll and our unique financial analysis, visit www.plimsoll.co.uk