SMEs should invest or risk being left behind, warns HSBC

In its latest Ambitious Businesses report, HSBC suggests that despite the economic upturn, SMEs need to invest for the future before it's too late

SMEs should invest or risk being left behind

One of the toughest decisions in the game Blackjack is knowing what to do if you draw cards totalling in the mid-teens. Do you stick and hope the dealer goes bust, or take another card and hope it’s low enough that you don’t exceed 21?

Luckily for SMEs they operate in a world where the house doesn’t always win, meaning their investments can be based on sound business principles and not a game of probability. As the economy becomes healthier with each passing quarter the SME landscape has been revitalised, according to HSBC’s latest Ambitious Businesses study. The report – which entailed a survey of 750 UK SMEs and HSBC clients in the UK – concludes that while economic conditions are improving, firms cannot afford to hold back with their growth investment.

The study revealed that 76% of UK SMEs are actively planning for growth over the next year, with small firms reporting a revenue boost of around £80,000 and medium-sized businesses coming out at £440,000. There is still a significant split in confidence regarding investment however, with 66% of business leaders having confidence in the current economy – an increase of 24% on last year’s figures – but 36% still believing it is too risky to make significant investment.

With the West Midlands and Northern Ireland being the most confident regions, they are joined by those in the technology and energy sectors who also have the most faith in the current economy. This is mirrored by HSBC which – after making £6bn available for SME lending in April – states this is the time for businesses to invest and not rest on their laurels.

“In April, we reported on the positive consensus view for 2014 from the country’s leading economists, and called on ambitious businesses to take advantage of a window of opportunity to invest for growth,” said Amanda Murphy, head of business banking for HSBC. “I’m delighted to now report that the economists’ optimism has translated into business confidence and action, with the majority of SMEs pressing ahead for growth.

“However, there is still a sizeable minority of businesses that are understandably cautious about the recovery and reluctant to make significant investments now. These firms risk falling behind their more ambitious peers.”

HSBC’s report went on to reveal 49% of businesses saying that competition has strengthened along with the economy, with a further 47% expressing their concern that if they didn’t continue, or start, to invest, then they could be left trailing their rivals. Companies who did take the early initiative focused their investment on staff training, marketing, upgrading IT and purchasing new equipment in order to give them a competitive edge.

Investment decisions are undoubtedly tough for any SME – more so given the fact that there are no card tricks or quick fixes in the world of business. Whilst we may think the time is ripe for putting your hand in your pocket, it’s probably best not to rely solely on our word before parting with the cash. 

James Dyble
James Dyble

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