As we approach the final quarter of 2024, the UK business landscape is facing a variety of challenges and opportunities. The latest insights highlight important trends that small and medium-sized enterprises (SMEs) and larger corporations should consider as they plan for the year ahead.

UK Economic Growth Picks Up

The UK economy is on a positive trajectory, having grown by 0.7% in Q1 2024 and with similar growth expected in Q2. This marks the strongest period of growth since the post-pandemic recovery and has boosted business confidence, especially in sectors like construction, which has seen its fastest rate of output growth since early 2022​

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. With inflation dropping back to the 2% target, businesses are optimistic about sustained consumer spending and improved economic conditions​

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SMEs Face Mixed Signals

SMEs are experiencing a more mixed outlook. The latest NatWest SME Business Activity Index shows a slight decline in SME output, falling to 49.3 in September 2024, signaling a marginal contraction in activity. This is particularly evident in the service sector, which has faced a slowdown in new business​

. However, the construction sector is bucking the trend, benefiting from increased demand following the general election and renewed client spending​

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Despite this, job creation within SMEs remains robust, with employment levels holding strong for the ninth consecutive month. Moreover, businesses remain optimistic about growth in the year ahead, driven by lower borrowing costs and hopes of a sustained economic improvement​

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Adoption of Artificial Intelligence (AI) on the Rise

An increasing number of businesses are adopting artificial intelligence (AI) technologies. As of September 2024, 15% of businesses reported using some form of AI, with larger firms leading the way at 30% adoption​

. AI is primarily being used to improve business operations, personalise services, and develop new products. This trend is expected to continue, with 10% of businesses planning to adopt AI within the next three months​

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Future Economic Outlook

Looking ahead, the Autumn Budget 2024, scheduled for 30 October, is expected to address the ongoing challenges of balancing public finances. The government is preparing to introduce a series of tax and spending measures to fill a £22bn fiscal gap. Businesses should stay tuned for these developments, which may include changes to corporate tax rates and further support for investment​