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April 17, 2019

Over half of SMEs predict UK recession this year

Concerns including Brexit are causing more than half of SMEs to predict a UK recession by the end of the calendar year.

By Christopher Marchant

Concerns including Brexit are causing more than half of SMEs to predict the UK will enter a recession by the end of the calendar year.

The data comes from the 1000 UK business surveyed in Bibby Financial Services’ SME Confidence Tracker.

According to Bibby, confidence among SMEs has declined by 5.6% year-on-year, with UK businesses experiencing their least confident start to a new year since 2014.

This has a knock-on effect on investment decisions, with the average amount of capital SMEs plan to invest in their business falling for the fourth consecutive quarter – from £103,648 in Q1 2018 to £64,600 Q1 2019.

This drop comes as an increasing proportion of businesses say they are holding back investment due to the uncertain economic environment within the UK, increasing from a quarter (26%) in Q4 2018 to a third (33%) in Q1 2019, the highest level since 2015. A similar proportion (30%) cite that uncertainty arising from the UK’s exit from the EU is thier reasoning for holding back investment.

Edward Winterton, UK chief executive officer for Bibby Financial Services, said: “If SMEs are the warning lights of our economy, this quarter signals to us that they see trouble ahead. We typically observe a seasonal bounce in SME confidence at the start of a year, as businesses begin with renewed optimism. This year, the bounce was lower than ever before, highlighting how Brexit uncertainty is taking its toll on UK SMEs.

“Political uncertainty is acting as a brake on the economy. It needs to end. Regardless of whether you supported leave or remain, Brexit has been an agonisingly slow process resulting in our SMEs pulling back on investment when our economy needs stimulus to grow.”

This month Brexit was been identified by German print firms as their primary current business concern, according to research conducted on behalf of Close Brothers Asset Finance by Censuswide.

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