Clouds part in small business outlook as SME brokers bullish on economy

Three in four (73%) SME finance brokers feel optimistic about the future of small businesses, according to SME lender iwoca’s latest Q2 2024 SME Expert Index.

The survey of SME brokers reveals a tentatively bullish outlook for the UK’s 5.5m SMEs, as optimism among brokers is up 3pp compared to Q1 2024, and 6pp compared to Q4 2023.  Fewer than one in 12 (8%) brokers feel pessimistic about the business environment.

SMEs, by contrast, maintain a cautious eye on their financial prospects, with brokers indicating just over half (56%) feel positive about their own future business environment. This comes despite economic green shoots including the lowering of interest rates by the Bank of England earlier this month.

Economic instability concerns take a back seat

Small businesses’ concerns around a recession have reached a record low since the SME Expert Index began, according to their finance brokers. Just a third of brokers (34%) suggested their SME clients are worried about a potential recession, down 7pp since Q1 2024, and 37pp since Q2 last year.

Official statistics released in August show the UK’s economy grew by 0.6% in Q2 in a sign of continued recovery.

For the first time in iwoca’s SME Expert Index, 0% of brokers said ‘closing down the business’ as the primary concern for small business clients, down 3pp on Q1 2024, suggesting existential business anxieties have cleared in the last quarter owing to economic stability.

Labour Government still to prove support for SMEs

While economic circumstances improve, some political uncertainty persists. Over a third (35%) of brokers think the new Labour government will prove positive for SMEs, but a similar proportion felt there would be no change to small business outcomes (33%), or that the new Government would be a ‘negative’ for SMEs (32%).

This political waiting game is reflected in SME concerns––nearly a tenth (9%) of finance experts cite political uncertainty as SMEs top concern at the moment, up 6pp since last quarter, and the highest proportion yet.

Colin Goldstein, commerciagrowth director at iwoca, said: “Small businesses across the UK have endured a difficult two years, and our research with SME experts suggests there are signs of recovery and stability ahead. The fall in SME anxieties about the economy signals brighter months to come for small businesses, while the pinch of inflation and high interest rates eases.”