12 month high creates optimism with small businesses
– Brexit warnings fail to dent bullish SME confidence
Two in five small business decision makers (42%) are optimistic about growth over the next three months – the highest level of optimism for a year – according to new research from Hitachi Capital Business Finance’s quarterly British Business Barometer.
At a time when the nation is engrossed in debate on the UK’s position in Europe – coupled with cautionary warnings on economic outlook in the wake of fluctuating oil prices and a Chinese slowdown – the new research suggests SME outlook is largely unaffected by macro-economic and political issues. Their confidence seems to be based more on the strength of their own plans and immediate supply chain relationships.
The findings from Hitachi Capital’s quarterly British Business Barometer, asked 1,139 small businesses in the UK, what best describes their outlook for business over the next three months. Findings were compared with previous research collected at quarterly intervals over the last 12 months. While the new data signals varying levels of confidence by industry sector, the overall position represents a 12-month high.
Key findings:
Outlook of business growth over the past 12 months (Q2 2016 – Q3 2015)
Q2 2016 Q1 2016 Q4 2015 Q3 2015
Modest growth and
significant expansion 42% 39% 40% 40%
Stay the same/
no change 44% 47% 46% 46%
Contract scale and
struggle to survive 11% 13% 12% 12%
Findings by sector:
Sowing seeds:
A positive outlook emerged for the agricultural sector, where 42% of SMEs are expecting significant expansion or some form of modest organic growth – and a further 45% expect no change over the next three months. Only 10% of respondents expect to scale down their agricultural business or struggle over the next three months.
Cemented foundations:
A less optimistic outlook was noted in construction, with growth dropping from 31% last quarter to 26% for the next three months. However, while SMEs in this sector are not expecting a dramatic improvement, the majority of small construction companies are not expecting significant change (64%) and only 3% think they will struggle to survive.
Weathering the storm:
Growth expectations have fallen dramatically in the UKs manufacturing sector from 47% to 30% last quarter. This doesn’t imply doom and gloom though, as the proportion expecting they will struggle is relatively small at 17%. The notable shift in this sector is a decline in those expecting to expand and an increase in the proportion expecting no change or flat growth (45%).
By Region:
North – Across the North, two in five SMEs (40%) expect to see significant or modest growth over the next three months, which is an increase of 7%, the highest it has been since the research started (36%, Q4 2014).
East – Commerce is looking positive for those in the East, more than half (53%) of those surveyed expect significant or modest growth over the following three months, which is the highest it has been since Q1 in 2015 (46%). Only 5% believe that they will scale down the business, with less than two in five (38%) experiencing no change at all, decreasing from 46% since Q2 2015.
London – Consistent with research from the previous quarters, the outlook for London over the next three months sees almost one in two SMEs (47%) expecting significant expansion with some form of modest growth (47% in Q1 2016, Q4 & Q3 2015).
Wales – Over a quarter of SMEs (27%) expect to see modest or significant growth over the next three months, this has fallen from 36% in Q1 2016. More than three in five expect to stay the same with no change (62%), an increase of 9% since last quarter. Out of all the regions, Wales is the most likely to expect no change over the next three months.
Gavin Wraith-Carter, general manager at Hitachi Capital Business Finance, said:
“Small businesses are the core of the UK economy, so it is encouraging to see that they are still standing tall at a time when many larger organisations are questioning the likely impact of Brexit and other broader economic trends. The last 12-months – with a General Election, a Scottish Referendum and now the Brexit vote – has been a period when any smaller enterprise has had every excuse to react to uncertainty by being cautious on venture planning. The welcome news is that SME confidence for the last year now shows signs of upward movement. With the Brexit vote weeks away the assumption we would draw from our research is that small business owners will react to the outcome with bullish pragmatism.”
