It’s business as usual as SMEs experience a lull in confidence
With the UK economy picking up speed and consumer confidence on the rise, the latest research from Hitachi Capital Business Finance’s quarterly British Business Barometer suggests this confidence may not be mirrored in the business world. In contrast to last quarter’s buoyant outlook, the research this quarter suggests SMEs are focused less on growth (40%) and more on stabilising their business (46%) in the next three months.
With SMEs providing the backbone to the British economy, the research suggests that more needs to be done to support businesses as they attempt to strive ahead and achieve growth. The lack of confidence is also echoed across different sectors, with pessimism high in manufacturing and construction in particular. Business optimism within the manufacturing sector is down 10% in the last three months (36% vs. 47% Q2 2015) whereas, over one in two (52%) small businesses in the construction sector are looking to stay the same rather than grow in the next three months.
The research from Hitachi Capital Business Finance asked 1,000 small businesses across the UK what their outlook is for the next three months.
Quarterly outlook:
– Steadying the ship: With 40% of small businesses intending to grow their business over the next three months, the number of SMEs saying they plan to significantly expand the business has risen steadily over the last three months (6% Q3 vs. 3% Q1 2015). Interestingly, the number of businesses saying they will contract or scale down has also remained at a steady level for the last four quarters (6% Q3 vs. 6% in Q1 and Q2).
– Weaving in and out: While optimism was at a high in the manufacturing sector in Q2, for the first time in six months, growth optimism in this sector has now fallen significantly by 10% (36% vs. 47% Q2). Growth in the sector appears to have stagnated, with over one in two (53%) SMEs looking to just keep the business ticking over, and a further 8% are looking to contract or scale down, a 5% increase on Q4 2014.
– Building blocks: Despite the need for affordable homes and the appetite for growth, SMEs in the construction sector have a less optimistic growth outlook for the next three months than in previous quarters. The number of businesses stating they will be looking to grow their business in the next three months has dropped 4% from the 36% recorded in Q2, to 32% this quarter. Furthermore, over one in two (52%) businesses in the sector said they just aspire to stay the same, an increase of 6% on Q4 2014.
– Ploughing on: The agricultural sector, compared with others is much less optimistic for growth this quarter. Only 13% of SMEs in the sector are looking towards any type of growth in the coming months. This is a decrease of 8% on the figures in Q2 2015 (21%), and a 12% decrease on the Q1 2015 figures (25%). Interestingly, the percentage of SMEs in the sector focusing on maintaining a business as usual approach and stay the same has increased quarter on quarter (71% Q3 vs. 58% Q2, 61% Q1 2015).
Gavin Wraith-Carter general manager at Hitachi Capital Business Finance said: “With all indicators pointing towards the growth of the economy, focus has been too concerned with consumer confidence. Continuing to support SMEs means we can keep the balance right. We can see from the research that the growth outlook varies significantly by quarter and currently many businesses will be focusing on keeping the business steady – not looking towards ambitious growth, although this doesn’t mean that businesses shouldn’t be investing in assets which refresh or replace existing items.”
