Barclays SME Barometer data reveals an increase in the number of small and medium sized businesses (SMEs) feeling positive about their future, following a difficult second half of 2022.

Over two fifths (41%) report feeling optimistic about their own business prospects, the highest level in 9 months, since Q2-22 (43%), whilst only 15% report feeling pessimistic. More than half (55 per cent) of SMEs expect their business to grow this quarter, compared to the same period last year.

The research found that this growth is due to lead to further employment, as a third (33%) of SMEs are investing in recruiting more staff in the next twelve months. On average, businesses intend to make seven new hires each in the next quarter. That’s an additional one, new hire when compared to the same period last year.

This comes as data from Barclaycard Payments, which processes nearly £1 in every £3 on credit and debit cards in the UK shows card payments to SMEs grew 3.5% year-on year, as businesses enjoy a full first quarter free of any pandemic restrictions.

Macro-economic pressures

Despite the business optimism, wider economic concerns, such as high energy prices, continue to put pressure on SMEs. In fact, almost three-quarters (73%) report feeling worried about their energy bills. In response, more than half (54%) are now looking for ways to reduce the amount of energy they use to combat rising costs.

Overall, the issues small business leaders highlight as the greatest challenges over the next twelve months are the strength of the domestic economy (15%), inflation (12%) and increased utility bills (9%). Yet, despite these concerns, only one in five (21%) felt pessimistic about prospects of the sector they operate in.

Planning for growth

As businesses continue to remain positive about their own prospects, on average SMEs expect their businesses to increase revenue by 11% by the end of year compared to Q4-22. With growth expected to be in the double digits year-on-year, leaders are keen to invest money back into their businesses.

A third (33%) plan on recruiting new staff and 29% plan on purchasing new equipment or technology to support business growth. Furthermore, 29% will invest further in marketing to promote their business, and just under a quarter (23%) will be reskilling or upskilling their current workforce.

Colin O’Flaherty, head of SME at Barclaycard Payments, said: “The last few years have seen huge shifts for SMEs and they have had to become increasingly agile, adapting their businesses to support growth. Therefore, it’s encouraging to see more businesses reporting optimism about their prospects going forward and investing to future proof their revenue streams.

“Whilst SMEs remain optimistic, the impact of the wider economic climate means support for our local SMEs is key to navigating any further challenges that may come their way.”