Confidence amongst Britain’s SMEs is steadily declining, with many returning to the cautious outlook they had 12 months ago, according to latest research from Hitachi Capital’s British Business Barometer. The research suggests that businesses are reforecasting their growth ambitions, with almost one in two (47%) SMEs expecting no change to their current business in the next three months.
At a time when it is widely reported that business confidence is falling globally, and worries around the slowdown in China and the Eurozone continue, the research suggests that SMEs are cautious and are focusing on business as usual, with only 39% of businesses looking towards some type of growth, a significant decrease on the peak recorded six months ago in Q3 2015 (43%).
Interestingly, business outlook amongst key UK industry sectors is very diverse. Businesses in the agriculture (64%) and construction sectors (55%) are behaving cautiously and focusing on business as usual, despite market sentiment, whereas SMEs in the manufacturing sector are focusing on trying to achieve some type of modest growth (41%).
Findings from Hitachi Capital’s quarterly British Business Barometer, asked 1,021 small businesses in the UK, what their business outlook is for next three months. These figures were compared with the same period 12 months ago (Q1 2015 vs. Q1 2016).
- Agriculture: Growth ambitions within the sector are at an all time low, with the number of companies saying that they will strive for growth has dropped by 12%, compared with the same period last year (13% vs. 25% in Q1 2015). Furthermore, the number of businesses in the sector saying they will contract or struggle to survive has increased substantially in a year (14% Q1 2015 vs. 22% Q1 2016).
- Construction: For SMEs in the sector, the priority this quarter will be on keeping the business in line with realistic expectations, so the focus will be on business as usual. Interestingly, it was the opposite a year ago (55% Q1 2016 vs. 42% Q1 2015). However, there is positive news from the sector, the number of companies who said they would contract or scale down has fallen significantly from 24% in Q1 2015 to 13% this quarter, a decrease of 11%.
- Manufacturing: Despite widespread reports that SMEs in the sector have lagged recovery compared to other sectors, this quarter, the research suggests that manufacturing companies are revising their outlook and are striving for some growth (47% compared with 43% in Q1 2015).
- Businesses based in the Midlands and London seem to be ‘swimming against the tide’ of the national trend, where outlook for growth is on the increase, compared with 12 months ago. The Midlands are focussing less on keeping the business afloat with no change (43% down 10% on Q1 2015 53%) and almost one in two (45%) businesses are looking for some type of growth for the next three months, compared with 36% in Q1 2015 (a 9% increase). Businesses in London are also striving to do more than just stay the same (35% vs. 43% in Q1 2015.
Gavin Wraith-Carter, general manager at Hitachi Capital Business Finance has said: “Small businesses have reigned in their plans again this quarter, where they are only dipping their toes in regarding expansion and growth. The market has been choppy with potential issues that would have will have dented confidence, particularly the current concerns surrounding the manufacturing sector coupled with the knock on effect of the events in China.
“It is in these more challenging times that businesses should look at all the options available to them – and when it comes to finances, it is important to be aware that alternative financing options are available to ensure plain sailing. Funders such as Hitachi Capital work closely with our intermediaries to provide the right financial solution to help small enterprises reach their ambitions.”