UK SMEs expect accelerating revenue growth in the New Year

Q4 report finds that small and medium-sized enterprises (SMEs) predict revenue and hiring will accelerate in 2017, with three in four saying it is business as usual since the Brexit vote.

The fourth quarter SME Growth Tracker finds that SMEs have increased their revenue growth expectations for the coming 12 months, despite losing some confidence in their business prospects and the broader UK economy.

The report is based on a YouGov survey of more than 1,000 SMEs across the UK. SMEs project revenue and jobs growth despite concerns over business conditions in 2017 SMEs forecast revenue growth of +1.8 per cent and employment growth of+0.8 per cent over the coming year, compared with a prediction of +1.5 per cent for revenue growth and +0.7 per cent in employment growth in the Q3 tracker.

Confidence falls despite growth

SMEs around the country also predict their profits will rise by +1.1 per cent over the coming year compared with 0.2 per cent over the last 12 months. In particular, SMEs in the East of England, South East, and West Midlands, and those in the financial sector, professional services, and IT & Telecoms sector, are forecasting the highest revenue growth. This is amidst the confidence of SMEs dimming as they head into 2017.

The SME Confidence Index score has fallen from +5 in Q3 to -4 in Q4 for their own companies, -2 to -9 for their respective industries, and -13 in Q3 to -15 for the wider UK economy. SMEs in London, the North West and the South West expect business conditions to deteriorate the most for their business in the coming year, with the SME Confidence Index scores for their business of -10, -10 and -11 respectively in Q4.

Emma Jones, MBE, founder of Enterprise Nation and HM Government’s Crown Representative for Small Business, says, ‘Britain’s small businesses play a crucial role in driving our economy, and are the most driven, adaptable, and resilient you will ever meet. With the right support, like lower rates, easy access to finance, and digital opportunities which boost exports and productivity, you’ll continue to see them grow year-on-year.’

Limited Brexit impact, but SMEs think it could hurt growth over the next 12 monthsAlmost three quarters (74 per cent) of SMEs have not delayed any business decisions as a result of Brexit, showing only a marginal change since SMEs were polled in the Q3 tracker (77 per cent). A quarter (26 per cent) of SMEs say they had delayed business decisions as a result of Brexit, up slightly from 23 per cent in theQ3 tracker.

Mark Pragnell, chief project economist, Capital Economics, comments, ‘Although a majority of SMEs see the consequences of Brexit as a risk over the next twelve months, Brexit isn’t everything. A bigger number ofSMEs see euro-zone instability, a fall in domestic demand, higher price inflation and a global recession as greater risks to their business.’

E-commerce users more confident and expecting stronger revenue growth SMEs that use e-commerce have an SME Confidence Index score for their own business of -2 compared to non-e-commerce users who have a score of -7. They expect overall revenue to increase by +2.1 per cent, compared to SMEs who do not use e-commerce who predict lower revenue growth of+1.2 per cent in 2017.

One in four SMEs also believe e-commerce will boost their sales at Christmas, whilst one in five also believe it will allow their employees to spend more time with their families during the holidays.

‘What we’re hearing is that SMEs see a lot of opportunity in the year ahead, but equally some hurdles as they navigate potential changes in the economic landscape,’ concludes Doug Gurr, UK country manager, Amazon.

‘Investment in proven growth drivers like e-commerce and exports and a focus on boosting productivity, help best position SMEs for the future, and at Amazon, we’ll be working hard to support and champion their success.’

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