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SME growth mindset still strong but could be on the wane
Some sectors have seen different fortunes than others

Britain’s SMEs are confident of ending the year in a growth phase, although certainty is beginning to wane from the peak recorded in Q2 this year, research suggests.

The number of small and medium-sized enterprises (SMEs) looking to grow their business has increased from last year (40 per cent compared with 36 per cent in Q4 2014).

However, this is a 3 per cent decrease on the 43 per cent of businesses that said they would aspire to grow in Q2 this year, according to a study by Hitachi Capital.

By sector, some industries have been hit harder than others, with the research indicating sectors such as construction, manufacturing and agriculture lacking in confidence this quarter and are cautious. 

The research from Hitachi Capital’s quarterly British Business Barometer asked 1,021 small businesses in the UK what their business outlook was for the next three months and how these compared with 12 months ago in Q4 2014.

The number of businesses looking to significantly expand in the next three months remains low again this quarter, although there is a slight increase on 12 months ago (4 per cent Q4 2014 vs 6 per cent Q4 2015).

The number of SMEs saying overall growth is on the agenda (whether through significant and/or modest organic growth) has improved since 12 months ago (35 per cent in Q4 2014 vs. 40 per cent in Q4 2015).

There has been a drop in the number of SMEs content with just staying the same – 46 per cent compared to 48 per cent in Q4 2014.

Concerns among the agricultural sector prevail for another quarter, with this sector the least optimistic for growth than any other sector.

Outlook within the construction sector is less optimistic this quarter, with the number of businesses saying they will grow down 5 per cent from 12 months ago (33 per cent Q4 2015 vs 38 per cent in Q4 2014).

Those looking to just stay the same has also increased significantly from 12 months ago, suggesting turmoil within the sector is changing their outlook from broadly positive to playing it safe and keeping the business steady (46 per cent in Q4 2015 vs 52 per cent in Q4 2014).

Despite continuing pressure on the manufacturing sector and a weak month for the industry in September, optimism among the sector is still stronger than it was 12 months ago, with a 5 per cent increase in growth compared with 12 months ago (28 per cent in Q4 2014 vs 33 per cent Q4 2015).

Significant expansion is not high on the agenda and has dropped considerably by 4 per cent in Q4 2015 compared with 7 per cent in Q4 2014. 

Gavin Wraith-Carter, general manager at Hitachi Capital Business Finance says that, whatever the economy holds for us all in the next three to five years, one thing is evident; there is confidence in the SME market.

'Although confidence is not on a par with Q2 this year, problems in the EU, the steel industry and agricultural sector in particular, will have changed the economic landscape for a significant number of Britain’s small businesses.

This quarter’s more cautious attitude to growth may be a sign businesses are taking a ‘wait and see’ approach and are striving to achieve steady rather than ambitious growth.'

Further reading on business outlook 

See also: Crunch slowing SME growth

Related topics: Entrepreneurs

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