SMEs buoyant but feeling less optimistic about future growth and recruitment

Each year, AXA Business Insurance, one of the UK’s largest business insurers, conducts a nationwide survey of SMEs looking at how they feel about the current state of their business, the potential for growth and other factors affecting their business. This year’s Index shows that, while the overall levels of optimism remain healthy at more than 80 per cent, nearly one in ten fewer SMEs expect growth than a year ago.

27 May 2014

Posted in Product

  • Overall levels of optimism remained steady at just over 80 per cent
  • Nine per cent drop in number of SMEs optimistic about growth this year compared to 2013
  • 40 per cent drop in SMEs planning to take on new employees in 2014
  • Potential interest rate rises are a concern - nearly a third citing this as a reason for reduced optimism
  •  The UK’s most optimistic business is likely to be Scottish, run by a female under 35 and in the personal services (eg cleaning, hairdressing, dog walking) sector

Optimism by sector

Overall optimism stayed steady at 82 per cent (81 per cent in 2013), but was slightly lower among retail and distribution businesses (79 per cent) and highest among businesses offering personal services (89 per cent). Retail businesses also showed a big drop in growth expectations – while 71 per cent said they were optimistic of growth last year, that’s now just 58 per cent. Only construction/industrial companies were looking more confident about growth this year, possibly a reflection of the fastest growth in house building that the UK’s seen since 2003.

Sector Overall optimism about state of business (per cent)
Retail and distribution 79  
Building trades and industrial sector 82  
Professional services (eg accountancy, IT, marketing) 83  
Personal services (eg cleaning, hairdressing, dog walking) 89  


Small businesses optimism about growth by sector (per cent)
2012  2013 2014
Retail and distribution 35 71 58  
Building trades and industrial sector 34 48 57  
Professional services (eg accountancy, IT, marketing) 34 67 59
Personal services (eg cleaning, hairdressing, dog walking) 41 67 63

  SMEs’ appetite for recruitment has also suffered this year with a 40 per cent drop in businesses planning to hire. Small retail businesses have taken the biggest hit – only 15 per cent are planning to take on staff this year, compared to almost 50 per cent this time last year.

Small businesses planning to hire new employees this year by sector (per cent)
2013 2014
Retail and distribution 47 15  
Building trades and industrial sector 32 26  
Professional services (eg accountancy, IT, marketing) 34 27  
Personal services (eg cleaning, hairdressing, dog-walking) 43 25  

Optimism by region As last year, Scottish businesses emerged as the most optimistic overall, as well as showing greater enthusiasm for hiring and growth.

England (per cent) Scotland (per cent) Wales (per cent)
Overall optimism about state of business 82 91 79
Optimistic about growth 58 63 47
Planning on taking on new staff in the coming year 22 37 18

Dents in SME optimism in 2014

When asked about things that affected their overall optimism, a third of SMEs said the prospect of rising interest rates made them less optimistic. It was a particular concern for construction/industrial businesses with 41 per cent citing it as a reason for diminished confidence.

Meanwhile, the economic situation in the Eurozone seems to be less of an issue than a year ago when over a third of SMEs considered this a dampener to their optimism, a figure that has dropped to just under a quarter this year.

Headshot of Darrell Sansom, managing director of AXA Business Insurance

It’s good to see that, overall, optimism remains high; but we can’t ignore the drop in growth expectations.

It could simply be that there was a dramatic surge of optimism last year as the economy started to pick up and that this has now settled to more realistic levels.

But we also know from working closely with SMEs that things like difficulties in securing funding and invoicing terms from clients are holding many back from more ambitious plans for the future.

Whatever the reasons, we want to see the UK’s SMEs – who are such powerful drivers of our economic recovery – make the most of our improving economic climate. Ensuring they have the protection they need to keep going through the good times and the bad is just a little thing that we can do to help.

Darrell Sansom, Managing Director at AXA Business Insurance

Source: Markit/CIPS UK Construction PMI