Under two-fifths of SMEs expect to grow this quarter

The latest SME Confidence Tracker from Bibby Financial Services reveals that 35% of British SMEs have no plans to invest in their business in Q1 2016, with almost a third blaming the uncertain economic environment in the UK

Under two-fifths of SMEs expect to grow this quarter

While the majority of us have now shaken off any lasting thoughts of Christmas and begrudgingly settled back into the nine-to-five, one would hope the mood of SMEs would be somewhat more positive than your average Joe. However, new research suggests that small businesses are feeling just as blue about the new year as the rest of us.  

According to the latest SME Confidence Tracker from Bibby Financial Services, the business funding provider, only 36% of British SMEs expect to grow in the first quarter of 2016, representing a 10% decline in growth expectations from the previous quarter. And it’s a significantly different story to two years ago, when 64% of SMEs were expecting growth. The survey also reveals that 17% of SMEs expect sales to decrease in the first three months of the year.

Unsurprisingly, this drop in confidence has had a marked impact on businesses’ investment plans: 35% of the SMEs surveyed said they have no intention of investing over the next three months. The uncertain economic environment was cited by 29% of respondents as a reason for holding off, up from 21% the previous quarter. Of those businesses that are planning to invest over the next quarter, their reasons for investment are focused on maintaining “business as usual” activities. However, while investment in existing and new staff topped the list of planned investments, only one in ten SMEs said that “ensuring the business attracts and retains the best talent” was a primary reason to invest.

“Concerns over the uncertain UK economic environment are strengthening, suggesting that SMEs believe the recovery is losing steam,” said David Postings, global chief executive of Bibby Financial Services. “While in Q3, small business owners were sensing dark clouds on the horizon, they now appear to be preparing for the storm. Government and policymakers would be wise to heed the reality of SME experiences and hold off on any major changes to monetary policy. Small businesses need certainty in the UK economy and as much forward guidance as possible if they are to lift themselves out of this downward spiral.” 

Here’s to better news come April. 

Adam Pescod
Adam Pescod

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