Confidence strong among UK SMEs, studies suggest

Two recent studies have suggested that confidence among the UK’s small- and medium-sized enterprises (SMEs) is strong, despite the impact of COVID-19 and uncertain economic times ahead.

According to research by Starling Bank and the Great British Entrepreneur Awards (GBEA), 80 per cent of UK SMEs are confident that they can recover from the impact of the coronavirus pandemic and its associated lockdown.

The report also notes that 75 per cent of SME owners feel more optimistic about the future than they did one month ago, while 68 per cent think their businesses will return to pre-pandemic levels or better by 2021.

Meanwhile, the Barclaycard Payments’ SME Barometer, which measures business optimism among SMEs, has jumped from 79 out of 200 at the start of the second quarter of 2020 to 95 out of 200 at the start of the third quarter.

This resurgent sentiment among SMEs follows a stronger-than-expected second quarter, combined with the increasing optimism that has accompanied the easing of lockdown and the phased reopening of the economy. According to the SME Barometer, SMEs were predicting a 28 per cent decline in revenue in Q2 compared to Q1. However, the actual decline proved to be just 14 per cent.

The latest barometer sees an uptick in business outlook, with 36 per cent of SMEs forecasting a positive Q3, compared to 21 per cent at the start of Q2. Across all sectors, the Barclaycard Payments report shows that SMEs forecast a 5 per cent revenue increase in Q3 compared to Q2 and a 14 per cent increase over the coming 12 months.

Looking to the future, 60 per cent see COVID-19 impacting business until at least the end of September, however, looking ahead to August 2021, this falls to 13 per cent. 80 per cent of SMEs say they plan to invest in their business over the next year.

Barclays Payments CEO Rob Cameron said: “Despite uncertainty and business disruption, SMEs are outperforming their own revenue expectations and beginning to look to the future by returning to work and thinking about investment.

“We welcome these signs of growth and optimism – and hope that SMEs continue to take advantage of the support available, whether from finance partners or the Government, to continue this recovery.”

The reports do, however, still reflect some of the inevitable negative effects of COVID-19. While, according to the SME Barometer, the percentage of SMEs saying they had been negatively impacted by COVID-19 dropped from 82 per cent in Q2, the figure still remained high at 74 per cent. 26 per cent said they had reduced staff numbers as a result of the pandemic.

According to the Starling and GBEA study, 20 per cent of SME owners had considered closing due to the impact of COVID-19, with 63 per cent reporting a decline in revenue and 19 per cent saying they had made no profit whatsoever during the coronavirus lockdown.

30 per cent said they had used their own money to survive the lockdown and 33 per cent furloughed staff. 21 per cent said they were uncertain about whether they could pay their bills each month. These business struggles took a toll on mental health, with 66 per cent saying their mental health had suffered due to COVID-19’s impact on their business.

However, despite this, the overall picture depicted by the two studies is one of improved sentiment among SME owners compared to the uncertainty that was rife at the outset of the pandemic. As recently as the end of May we reported on a survey that found that 41 per cent of SME owners felt they were at risk of permanent closure.

The new findings seem to suggest growing optimism compared to earlier in the Summer, but the Starling and GBEA study was accompanied by calls for more support to ensure SMEs survive the difficult upcoming months.

GBEA founder Francesca James commented: “In the face of the disruption caused by COVID-19 and the emergence of a radically altered landscape, I’ve been inspired by the innovation, spirit and tenacity of the entrepreneurs we work with in coping with this unprecedented situation.”

“However, it’s been a deeply troubling time for so many SMEs and they need support now more than ever to create the wealth and jobs that are needed over the next few months.”

Starling Bank founder and CEO Anne Boden, meanwhile, said: “Small businesses are essential to the nation's efforts to build back the economy as we emerge from the coronavirus crisis. Despite the challenging conditions they face, it's heartening to see that many are proving so adaptable and resilient.”


For more on the impact of COVID-19 on UK SMEs, take a look at this recent insight:

Report claims fast-growing UK SMEs face £15 billion funding shortfall.

If your business is struggling during these challenging times, we can help.

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