Business confidence remains negative despite slight improvement

© Hollandse Hoogte / Joris van Gennip
There has been a slight improvement in business confidence, which stood at -7.7 at the start of Q4 2024. Sentiment has improved in other services and in construction, in particular. Business owners cited a shortage of labour as their main operational obstacle, but reduced demand is also being mentioned more often. This is reported by Statistics Netherlands (CBS), the Dutch Chamber of Commerce (KvK), the Economic Institute for Construction and Housing (EIB), the Dutch Organisation for Small and Medium-Sized Enterprises (MKB-Nederland) and the Dutch Employers’ Organisation (VNO-NCW).

The data for this survey were collected in January.

Business confidence began to decline sharply at the end of 2021, and continued to fall until the end of 2022. There was a tentative recovery in 2023. The sentiment indicator rose slightly at the start of Q4 2024, but has been negative since the start of 2022. It is currently below the average (-4.0) for the series since 2012.

Business confidence
JaarMaandBusiness confidence
Source: CBS, EIB, KVK, MKB-Nederland, VNO-NCW

Negative business sentiment in most sectors

Business confidence is negative in nearly all sectors. Only in the information and communication sector and the business services sector are business owners slightly positive, on balance. In six out of the fourteen sectors, business confidence has improved, with the biggest rises in other services and construction. Confidence fell once again among businesses in car trade and repair and in transportation and storage. The mood in mining and quarrying deteriorated the most, and businesses in this sector are the most negative of all sectors.

Business confidence by sector
 January 2024October 2023
Total (excl. financial and utility companies)-7.7-10.1
Information and communication2.32.9
Business services1.6-2.3
Other services-1.5-14.7
Cultre, sports, recreation-2.40.1
Retail trade (excl. cars)-5.4-10.4
Real estate activities-8.1-7.1
Wholesale and commision trade-8.3-8.3
Accommodation and food services-13.5-13.1
Transportation and storage-13.7-8.4
Agriculture, forestry and fisheries-16.9-18.3
Car trade and repair-21.5-14.8
Mining and quarrying-28.9-2.4
Source: CBS, EIB, KVK, MKB-Nederland, VNO-NCW

The main obstacles faced by businesses

The proportion of business owners reporting reduced demand as the main obstacle increased for the seventh quarter in a row. Over 20 percent of entrepreneurs reported this. A shortage of labour remains the most frequently cited obstacle at just over 35 percent, but this percentage has been falling gradually in recent quarters.  A shortage of production resources has been reported less and less frequently as the main obstacle faced by businesses since mid-2022, and the number now reporting this stands at 7 percent.  Almost 34 percent of businesses say they are not facing any obstacles.

Businesses less negative about profitability

Around the same number of businesses reported improved profitability as reported a deterioration in profitability in the previous quarter. On balance, therefore, the mood was neutral. One year previously, just over 5 percent of businesses reported a deterioration in profitability. The mood regarding profitability improved the most in real estate activities, with  a rise from almost -15 percent to just over 7 percent. In construction and business services (now the most positive sector), the mood also changed from mainly negative to positive. In car trade and repair and transportation and storage, among others, sentiment actually deteriorated. The sector with the worst sentiment regarding profitability was agriculture, forestry and fisheries.

Changes in profitability in last three months
 January 2024 (% companies reporting increase or decrease (balance))January 2023 (% companies reporting increase or decrease (balance))
Total (excl. financial and utility companies)0.1-5.1
Business services11.2-1.5
Information and communication9.48.2
Real estate activities7.2-14.9
Other services6.3-7
Car trade and repair2.911.1
Wholesale and commission trade-10.6
Culture, sports and recration-1-8.8
Transportation and storage-4.52.4
Retail trade (excl. cars)-10.4-20.4
Accommodation and food services-15.5-25.6
Mining and quarrying-16.8-5.1
Agriculture, forestry and fisheries-26.2-21.2
Source: CBS, EIB, KVK, MKB-Nederland, VNO-NCW

Investment outlook for 2024 less positive

Businesses’ investment expectations for the current year are also close to neutral. One year ago, just over 3 percent more businesses expected to see an increase in investment rather than a decrease. Expectations regarding investment have declined the most in the information and communication sector and the car trade and repair sector. Business owners in these sectors expect to invest less than last year. The same applies to the accommodation and food services and wholesale trade sectors. Only in the retail sector have overall expectations turned positive, whereas one year ago they were negative. Businesses in real estate are the most positive regarding future investment. The most negative expectations are in agriculture, forestry and fisheries.

Expected changes in investments (current reporting year)
 January 2024 (% companies expecting increase or decrease (balance))January 2023 (% companies expecting increase or decrease (balance))
Total (excl. financial and utility companies)0.63.1
Real estate activities29.427.3
Culture, sports and recration13.514.8
Retail trade (excl. cars)8.9-5.8
Other services8.38.6
Business services6.64.5
Mining and quarrying3.812.5
Transportation and storage0.46.6
Wholesale and commission trade-1.56.0
Information and communication-4.211.7
Car trade and repair-5.26.1
Accommodation and food services-7.41.4
Agriculture, forestry and fisheries-15.0-18.9
Source: CBS, EIB, KVK, MKB-Nederland, VNO-NCW