Confidence among Britain’s small and medium-sized businesses (SMEs) is steadily declining, with many returning to the cautious outlook they had 12 months ago, according to a study.
Research from Hitachi Capital's British Business Barometer suggests that businesses are reforecasting their growth ambitions, with almost one in two (47 per cent) SMEs expecting no change to their current business in the next three months.
At a time when it is widely reported that business confidence is falling globally, and worries around the slowdown in China and the Eurozone continue, the research suggests that SMEs are cautious and are focusing on business as usual, with only 39 per cent of businesses looking towards some type of growth, a significant decrease on the peak recorded six months ago in Q3 2015 (43 per cent).
Business outlook among key UK industry sectors is very diverse, according to the study of more than 1,000 respondents.
Companies in the agriculture (64 per cent) and construction sectors (55 per cent) are behaving cautiously and focusing on business as usual, despite market sentiment.
Growth ambitions within the agriculture sector are at an all-time low, with the number of companies saying that they will strive for growth has dropped by 12 per cent, compared with the same period last year (13 per cent vs. 25 per cent in Q1 2015).
Furthermore, the number of businesses in the sector saying they will contract or struggle to survive has increased substantially in a year (14 per cent Q1 2015 vs 22 per cent Q1 2016).
For SMEs in the construction sector, the priority this quarter will be on keeping the business in line with realistic expectations, so the focus will be on business as usual.
It was the opposite a year ago (55 per cent Q1 2016 vs 42 per cent Q1 2015). However, there is positive news from the sector; the number of companies that said they would contract or scale down has fallen significantly from 24 per cent in Q1 2015 to 13 per cent this quarter, a decrease of 11 per cent.
However, SMEs in the manufacturing sector are focusing on trying to achieve some type of modest growth (41 per cent).
Despite widespread reports that SMEs in the sector have lagged recovery compared to other sectors, this quarter, the research suggests that manufacturing companies are revising their outlook and are striving for some growth (47 per cent compared with 43 per cent in Q1 2015).
Gavin Wraith-Carter, general manager at Hitachi Capital Business Finance says that small businesses have reined in their plans again this quarter, where they are only dipping their toes in regarding expansion and growth.
'The market has been choppy with potential issues that would have will have dented confidence, particularly the current concerns surrounding the manufacturing sector coupled with the knock on effect of the events in China,' he adds.
Further reading on growth
See also: Double digit growth for SMEs