SMEs more bullish in the first quarter of 2016
The growth expectations of SMEs in the UK have bounced back in the first quarter of 2016, according to a new report.
The latest SME Confidence Tracker by Bibby Financial Services found that almost half (48%) of small and medium-sized businesses surveyed said they expect to see increasing sales over the first two quarters of 2016. This compares to less than two-fifths (36%) in Q4 2015, representing a significant rise in optimism.
This rise in confidence comes despite a challenging business landscape. The impending referendum on EU membership continues to sow uncertainty and other developments including pensions auto-enrolment and the introduction of the National Living Wage last month could also present potential issues.
Many businesses may fall by the wayside, facing insolvency or liquidation as they simply do not have, or cannot source, the necessary alternative finance options to cover their operations in the face of difficulties. The most recent figures released by the ONS revealed that there were 246,000 business deaths in 2014, representing nearly one in 10 (9.6%) of all businesses that were active that year.
According to the SME Confidence Tracker however, pessimism amongst SMEs fell in the first three months of this year, with just 8% of SMEs predicting declining sales. This was just less than half of the 17% who predicted falling sales in Q4 of 2015.
The confidence shown in the survey was reflected by the fact that three quarters made investments into key areas such as staff recruitment and development, office equipment, IT and machinery towards the end of last year.
SMEs also indicated they were looking to spend an average of £43,700 on their businesses over the next three months, suggesting many are gearing up for a year of growth by ensuring the basic building blocks are in place.
The top reason given by businesses that were not looking to invest over the next quarter was an uncertain economic environment in the UK, cited by just over a quarter (26%) of respondents.
Other reasons given were that they were building up cash reserves (24%), a general lack of confidence in the business (21%), declining sales (21%) and an unreliable cashflow (20%).
By Phil Smith