Small-to-medium business confidence increases but challenges remain

By Rich Wilcock

17th Apr 2023 | Economy

Business confidence amongst SME's increased by just under 60% (Image - Unsplash)
Business confidence amongst SME's increased by just under 60% (Image - Unsplash)

Confidence in the economy amongst businesses has increased sharply according to new research.

For big businesses, a Deloitte survey has shown that several concerns including energy prices and Brexit issues were easing and inflation seemingly peaking.

Nearly 95% of businesses which call Cheshire East home are small-to-medium enterprises (SME's) and the survey released shows that this confidence is mirrored in SME's as well, with Altrincham-based online lender Capify revealing in their most recent SME confidence survey that most SME's across the country are expecting growth in turnover for the year ahead.

Just under 60% of SME owners are expecting turnover to grow over the coming year and a slightly smaller percentage expecting an increase in profits over the same period.

Capify has revised its current SME confidence score to 0.12, which is a 7pp improvement on Q4 of 2022. The score measures confidence between -10 and +20.

John Rozenbroek, chief financial officer, and chief commercial officer at Capify said: "Although still some way below the historic average confidence score, these latest results give some cause for optimism."

"UK SMEs have faced a raft of challenges and deteriorating trading performances over the past three years, but it seems that, for many, some of the key business metrics are stabilising."

This optimism however is facing challenges, with cash flow still an issue for some businesses.

One in five businesses said that cash flow was one of the reasons preventing them from expanding whilst 39% of respondents said that their company had reduced spend on advertising and marketing.

The 'cash crisis' has also affected working capital reserves for many SMEs, with 36% requiring external funding to support day-to-day operations.

"We have witnessed a growing 'cash crisis' amongst UK SMEs for the past year", says Rozenbroek.

"We can see the impact that the economic conditions have placed on cash flow and cash balances and helping UK SMEs weather the storm is imperative."

Nationally, not since the COVID-19 vaccine was rolled out in 2020, has confidence in the economy amongst the UK's biggest companies been as high, however, Deloitte, who conducted the survey also said challenges remained.

Ian Stewart, chief economist at Deloitte said: "Despite a brighter outlook, CFOs are alive to the continued risks facing the economy. Corporates remain in defensive mode and CFO risk appetite is subdued."

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