SME optimism is falling amid rising political uncertainty

SMEs are less optimistic than a year ago and cite finding skilled staff, red tape and political uncertainty as their biggest barriers to growth, according to research from Albion Capital, the independent investment manager.

The findings, from the Albion Growth Report, reveal 59 per cent of SMEs believe they will grow in the next two years. However, this compares to 63 per cent of SMEs that expected to grow over the same timeframe in the previous Growth Report, which in turn was lower than the previous year.

Stagnating productivity is likely to be a significant factor contributing to reduced optimism. Albion’s research found less than half (44 per cent) of SMEs expect their productivity to increase in the next two years, as opposed to 57 per cent who predicted an increase when the survey was conducted a year earlier.

Political uncertainty has risen from fourth to the third highest barrier to growth for SMEs, following a tumultuous 12 months which included an unexpected General Election and ongoing Brexit negotiations. Meanwhile, lack of access to finance is a falling concern and now ranks 14 out of 16 factors assessed by the Report.

The research also uncovers the following growth trends:

  • 35 per cent of SMEs expect to increase headcount in the next two years, a fall from 50 per cent who expected to increase headcount in the previous Growth Report
  • Manufacturing (71 per cent), finance and accounting (71 per cent) and media and marketing (63 per cent) SMEs are most likely to expect to grow in the next two years
  • Education (15 per cent), hospitality and leisure (15 per cent) and retail (12 per cent) SMEs are most likely to expect to downsize or close their business in the next two years
  • SMEs in London (64 per cent), the North West (64 per cent) and Yorkshire (59 per cent) are most likely to expect to grow within the next two years
  • SMEs expect technology (30 per cent), skill levels (28 per cent) and market changes (27 per cent) to be the top drivers of their productivity growth

Patrick Reeve, managing partner, Albion Capital, says, ‘Political uncertainty has unsettled SMEs across a range of sectors over the last year, with the election and inconclusive Brexit talks making it challenging for businesses to determine strategy.

‘We expect this uncertainty to dissipate over the course of the next 18 months as we gain more clarity around the UK’s future relationship with the EU, providing SMEs with a clearer base from which to assess their requirements. It is encouraging to see that access to finance continues to fall as a barrier to growth and that the support is there for SMEs with ambitious growth plans.’

Further reading on business optimism

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