SME growth expectations bounce back in Q1

Almost half of SMEs expect sales to increase in the months ahead

UK SMEs have signalled a more bullish outlook in the first quarter of 2016, according to Bibby Financial Services’ (BFS) latest SME Confidence Tracker. The research shows that growth expectations rose by twelve percentage points in Q1 2016 when compared to Q4 2015, while the number of small businesses expecting sales to decline fell by over half from 17 per cent in Q4 2015 to 8 per cent in Q1.

Almost half (48%) of businesses surveyed expect to see increasing sales over Q1 and Q2, compared to around two-fifths (36%) in Q4 2015, signifying an uptick in optimism.

David Postings, Global Chief Executive of Bibby Financial Services, said: “Despite the uncertainties of the upcoming EU referendum and a muted outlook for the UK economy, small business owners started the year in an unexpectedly bullish manner displaying more confidence than in the second half of 2015.”

SMEs were bullish about their investments from Q4 2015 to Q1 2016, with three-quarters investing in the building blocks of business, such as office equipment, IT and machinery. Looking ahead to Q2, SMEs have signalled that investment will focus on recruitment and technology. Businesses intend to invest an average of £43,700 in Q2.

Despite this positive outlook, concerns over the UK’s economic environment remain. A quarter (26%) of businesses say this is the main reason holding back investment, while SMEs cite increased competition, red tape, regulation and rising costs as top challenges.

Mr Postings continued: “Having made business-critical capex decisions and invested in the building blocks of business in 2015, SMEs are looking to position themselves for growth in 2016. However we aren’t out of the woods yet as SMEs still don’t believe in the UK growth story and optimism remains far below 2014 levels.

“We have had three hugely impactful political debates in as many years with the Scottish Referendum, General Election and forthcoming EU Referendum.

“Add to this changes such as the National Living Wage and pension auto-enrolment, it’s clear that SMEs crave stability and would benefit from a more simplified operating environment.

“The Budget nibbled at the edges of SME’s challenges but much more can be done to get businesses moving in 2016. This should include rebalancing the North-South divide by offering tax breaks to redevelop brownfield sites rather than building on greenbelt farmland.”

Posted on 4 April 2016

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