Things can only get… worse Entrepreneurs are famously optimistic. Even in the face of spiralling inflation or geopolitical tensions, businesses get launched and founders look for opportunities to grow. Yet our survey suggests that this optimism is being put to the test

One of the most concerning things we found was that 39% of entrepreneurs believe they are contending with more risk today than they were a year ago and 33% say that they have been facing ‘about the same level of risk’ in the past year. But even more concerning is the fact that entrepreneurs expect the overall level of risk in the business environment to increase over the next year. Only 23% of founders said that there will be less risk a year from now, while 38% foresee no change, and a further 39% are actively braced for a riskier business environment.

A year prior to our survey being undertaken, things were bleak. The Bank of England had just raised its base interest rate from 1.25% to 1.75% – the biggest increase in 27 years.⁸ The ONS was reporting that the economy had shrunk by 0.6% in June.⁹ Public sector strikes were in full swing, inflation was rampant, and news outlets were splashing headlines like: “Food costs push price rises to new 40-year high.”¹⁰

Let’s be clear. We know what happened precisely a year ago because we can Google it. Entrepreneurs completing our survey didn’t have the luxury of hindsight before answering. But what’s revealing isn’t the extent to which the landscape is more risky today, it’s the extent that entrepreneurs feel it’s more or less risky, and what that tells us about the present.

The sentiment of growing risk isn’t equally distributed among entrepreneurs either, with some feeling it more strongly than others. For founders of firms with revenues under £1 million, the future looks much bleaker than it does to those of larger firms. Only 17% of the former expect the level of risk in the business environment to decrease in the coming year, and a staggering 82% expect the risks to either stay as they are or get worse. Founders of larger firms, on the other hand, tend to have more positive expectations for the year ahead, even if on net they still expect things to be riskier.

Back to the future. Humans are notoriously bad at predicting it. While it’s a national pastime to criticise weather forecasters, they’re oracles of Delphic proportions compared to experts on the economy, politics or technology. You can count on one hand the scholars of international affairs who predicted the fall of the Berlin Wall, and on the other the technology commentators who foresaw the impact of smartphones and the rise of social media.¹¹

While Philip Tetlock’s Good Judgment Project suggests that there are people who are better than others at predicting the future, and that business leaders more widely employ techniques like scenario planning to try to prepare for uncertainties, there is no reason to think that entrepreneurs are particularly prescient. As Steve Jobs once remarked: “You can’t connect the dots looking forward; you can only connect them looking backward.”¹²

Sentiment isn’t destiny.¹³ So while we shouldn’t take their economic predictions too seriously, we should take very seriously our finding that most expect things to get worse. Even if sentiments are grounded more in feelings than facts, they still tangibly influence decision making. Entrepreneurs who aren’t confident about the future might think twice about making that next hire, taking on that next project, or expanding their business in some other way.

Successful entrepreneurs are nothing if not tenacious. Just ask Sir Richard Branson, Brent Hoberman, Martha Lane Fox, Kristo Käärmann and Taavet Hinrikus, who all started businesses during recessions. Entrepreneurs tend to be more optimistic than the general population.¹⁴ So, seeing the rise of pessimism among entrepreneurs should be a warning sign.