UK SMEs plan investment push in the next 12 months

UK SMEs feel more buoyant about their future prospects, less concerned about the overall health of the economy, and intend to increase capital expenditure (capex) and employment in the next 12 months, according to GE Capital’s latest European SME Capex Barometer.

The findings, based on Q1 research amongst over 2,250 SME business leaders across seven European markets* show that UK SMEs intend to increase capex investment by 12% in the next 12 months to a total estimated £58.6bn – on average £58.2k per SME. In addition, they plan to create more than 660,000 jobs in the next twelve months, 26% more than planned in Q1 2013.

Overall confidence is stronger amongst SMEs in the UK than in any other European market. Almost two thirds of SMEs are feeling positive about the future (63% vs. 9% negative) compared to just over half in 2013 (52% vs 19% negative). Notably, less than a quarter of businesses surveyed in the UK reported economic uncertainty as an obstacle to investment, significantly less than at the same time last year (23% vs. 40%).

Ilaria del Beato, chief executive of GE Capital UK, said: “UK SMEs appear to have reached a crucial tipping point in their willingness to invest for growth and hire new staff. This is a true measure of economic recovery and points to promising future growth potential as greater investment should help boost productivity.”

Enhanced productivity remains the top reason for upgrading equipment (54%) but a renewed faith in the domestic economy appears to be spurring some UK businesses into action, with 7% more SMEs planning to invest primarily for expansion at home than at the same point last year (16% vs. 9%). Roughly one in ten (9%) companies are looking to fund planned expansion into new export markets, up from 3% in Q1 2013.

Other key findings include:

· A significant number of businesses – more than a quarter – are saying they don’t face any restrictions on their plans and can invest as they wish

· Commercial vehicles and manufacturing equipment are the main focus of SME capex investment in the UK (£35.8bn)

· Investment in IT assets is expected to increase to £17.8bn (up 56% on Q1 2013)

· The most preferred method for financing capital investment is using existing company capital (50%) followed by leasing or structured finance (17%)

· Across Europe, German SMEs still plan to spend much more than any other market – an estimated average £95.6k per SME (€115.2k).

Ilaria added: “Last year, planned increases in investment were somewhat tempered by a ‘wait and see’ attitude, with many businesses ultimately putting off investment until absolutely necessary. The big difference this year is the greater emphasis on taking advantage of opportunities to expand, rather than just the necessity of replacing deteriorating equipment.”