Indeed, many of the responses could be best described as ‘mixed’, rather than either ‘positive’ or ‘negative’. Examples of this include cashflow, with almost one third seeing improvements and a similar amount experiencing a decline.

Investment in plant, machinery and training was flat, with equal proportions reporting increases and decreases. Two-thirds of LCR respondents said they had attempted to recruit during the quarter yet, of those, 59% faced difficulties, especially for professional, managerial and skilled technical roles.

The trouble seems to be that, where those green shoots are tempted to appear, they are discouraged by worries over whether the next storm is just over the horizon.

The most pressing concern continues to be around the impact of recent taxation policies and the threat of further fiscal attacks later this year. Inflation is another major worry, with the volatility of geopolitical issues exacerbated by seemingly muddled government policy.

Of course, underlying that inflation are upward cost pressures that have a direct, negative impact. Businesses are facing rising costs across wages, raw materials, utilities, and supplier pricing, which are often not recoverable through price hikes due to market sensitivity.

Add in the toll of business rates, increased competition from AI technology and the impact of seasonality for some firms, and it’s easy to see why even the most ambitious and positive business owners might be reluctant to reach too far over the parapet at the moment, while others are forced to scale back their investment plans and reduce staff numbers.

As one respondent succinctly put it:

“There’s too much uncertainty, which has been caused by increased Government intervention and taxation. Businesses cannot be expected or encouraged to grow within such a financially punitive business environment, there’s no respect for the people who are doing the heavy lifting and work.”

However, a new week and a relatively new month should always be a window for a little optimism, and there is certainly some to be found when sifting through both the qualitative and quantitative data from the QES.

When asked if they expect turnover to increase in the next 12 months, 55% of LCR businesses surveyed replied ‘yes’. Meanwhile, sales to UK markets increased for 41% of businesses, while 26% reported a decrease over the same period. Clearly, neither figure is as high as we would like it to be, but it perhaps also shows the picture is not all gloomy.

One local firm told us:

“Our industry hit the trough of the cycle in late 2024 and we are now in a slow recovery phase. Interest rates will keep a ceiling on demand, so any reduction in UK/EU/US would be favourable to our industry and business. We are cautiously hiring but we are also focussing on productivity improvements to increase profitability on growth.”

Another said:

“Our order book is growing and that will continue in the future. But we are very concerned about the Government’s proposals on employee’s ‘day one’ rights. In a highly skilled industry you need time to assess new employees’ ability to meet standards.”

A third remarked:

“We are taking a big gamble in expanding when many are contracting or consolidating. Increased investment in people, plant and additional facilities will absorb any additional profits from increased earnings for about 18 months. The government is the biggest variable in all of this, increasing pay scales and tax burdens on SMEs with no thought of how they will pay for it.”

I think these quotes capture perfectly the essence of the latest QES. It is a very tough trading environment, with a myriad of moving parts, and lots of businesses are struggling to make their way through it. Those who are experiencing some growth are aware that their plans could easily be derailed, or their profits quickly absorbed, by something beyond their control and they remain fearful of what lies ahead.

Firms will continue to hold back from making investment decisions until the outlook becomes clearer. The government could help to nurture the seeds of optimism through consistent, funded policies around skills and investment, and a clear promise that no more self-imposed stormclouds in the form of additional business taxes are looming on the long-term forecast.