UK SMEs suggest the future’s looking brighter

AXA Business Insurance’s annual “Optimism Index” shows that 37 per cent of UK SMEs are more optimistic about their business than a year ago. Eight out of ten (81 per cent) are currently upbeat about the general state of their business and the majority are expecting growth over the coming year.

24 June 2013

Posted in Product

by Daniel O’Byrne (see media contact)

The index, compiled by AXA, one of the largest business insurers in the UK, reveals that this time last year 35per cent of SMEs were optimistic about the growth of their business over the following six months. This year this figure has risen to 63per cent.

This optimism is reflected in their planned investment in staff and other resources:

  • 38 per cent of SMEs are planning to take on new employees in 2013 - a rise of over 300 per cent on last year's figure of 9 per cent (although in reality 34 per cent ended up recruiting)
  • 53 per cent are planning to invest in new equipment or other resources (not people) this year - a doubling of last year's figure of 25 per cent

Alongside this, 38 per cent of SMEs believe they will make more profit this year than they did last year and a further 38 per cent believe profit levels will be similar. The number who would bet their house on their company making a profit this year has risen by about a third - from 13 per cent to 17 per cent.

And there has been a rise of around 25 per cent of those who think their personal earnings from the business will go up year on year.

Over half (58 per cent) of UK SMEs believe 2014 will be an even better year than 2013.

While the overall picture is much improved from this time last year, Government spending cuts were cited as a key reason for those with a less optimistic outlook followed by the economic situation in the Eurozone.

Optimism by sector[1]

The index looked in more detail at four broad sectors within the SME marketplace and, while the picture was again largely optimistic compared with last year, there are some marked differences between sectors. The retail and distribution sector showed the highest levels and biggest rise in optimism about growth year on year. While building trades and industrial, while still more optimistic year on year, fell behind the other sectors in general levels of optimism around growth.

Numbers of SMEs who are either very or quite optimistic about growth in the next six months

 

2012 %

2013%

Retail & distribution

35

71

Building trades & industrial

34

48

Business & professional services

34

67

Personal services

41

67

 

Numbers of SMEs planning a growth in number of employees

 

2012 %

2013 %

Retail & distribution

7

47

Building trades & industrial

19

32

Business & professional services

8

34

Personal services

7

43

 

Numbers of SMEs planning investment in equipment/other resource (not employees)

2012 %

2013 %

Retail & distribution

19

54

Building trades & industrial

32

55

Business & professional services

24

49

Personal services

35

56

Looking forward to 2014, SMEs in retail & distribution were the most optimistic about the outlook (68 per cent believed it would be a better year) while those in building trades & industrial were the most cautiously optimistic with 52 per cent predicting a better year.

Regional optimism

The index also looked at a breakdown by UK countries revealing SMEs in Scotland to be the most optimistic with 88 per cent (nearly 10 per cent above average figures) stating they are generally optimistic about the state of their business. Statistics from BIS[2] also suggest that thenumber of SMEs in Scotland is growing more rapidly than elsewhere.

Interestingly, while SMEs in Wales are less optimistic generally, they are significantly more likely to be planning on taking on new employees in the next year.

Regional breakdown of SMEs' levels of optimism and plans for investment this year

England %

Scotland %

Wales %

N Ireland %

Optimistic about state of their business

81

88

76

75

Optimistic that 2014 will be better than 2013

59

50

47

N/A

Planning to take on employees this year

38%

40%

47%

N/A

Planning investment in equipment/other resource (not people) this year

52%

62%

47%

N/A

Darrell Sansom, Managing Director at AXA Business Insurance says; "We all know that the number of SMEs in the UK is rising rapidly and they continue to form the core of British business. We also know that many small businesses have really struggled in the recent economic downturn so it is extremely encouraging to see that the level of optimism among SMEs is rising.

"As an insurer we aim to protect all of these businesses against the unforeseen while they focus on turning that optimism into business success