In Paragon Bank’s recent survey of over 500 UK SMEs conducted in 2022, the FTSE250 bank, and asset finance provider, reported confidence among half of the businesses surveyed, with 57% confident about the financial prospects of their respective sectors. Meanwhile close to a fifth (18%) of SMEs surveyed reported scepticism about the year ahead.
Conversely, in a similar survey of UK SMEs, GlobalData found over three-quarters (78.4%) of businesses were concerned (to some extent) about the cost-of-living crisis, with micro-businesses reporting the highest levels of concern (82.7%). Some 66.3% of UK SMEs reported concerns about generating enough revenue to remain in business.
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Paragon Bank’s report, with research carried out by Opinium, found that 24% of firms anticipate growth of over 5% in Q1 of 2023 compared to the same period last year, with 62% of SMEs expecting an overall higher turnover.
SMEs surveyed also anticipate improved cash flow. Half of SMEs (49%) expect cash flow to increase during Q2 2023.
Is SME confidence well-founded?
SMEs provide the foundations of a thriving economy, creating half of the world’s jobs and generating up to 40% of GDP. The pandemic disproportionally hurt SMEs, making it harder to access finance and slowing global recovery. Yet the pandemic increased the numbers of SMEs, fuelled by a shift in working patterns and the ‘side hustle’ economy in which the pressures from the cost-of-living crisis contribute to more people requiring a second source of income.
The IMF reports that the UK is the only major economy forecasted for negative economic growth in 2023 (-0.6%). As UK house prices fell for a fifth consecutive month in January 2023, the Bank of England is anticipating the incoming recession to last just over a year, rather than two as previously thought. As the economy remains fragile, job losses and business closures are expected in the coming months.
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By GlobalDataParagon Bank’s survey reports that SMEs remain confident despite challenges presented by high inflation. As well as energy costs, companies said they experienced increased costs across fuel (86%), raw materials (83%), salaries (80%), asset prices (78%) and premises (64%).
John Phillipou, managing director of SME lending at Paragon and board director of the FLA, commented on the research findings: “With expectations for growth and plans to invest in their businesses, SMEs are ready to help the economy recover from the challenges of recent years. It is clear from the research data that UK SMEs are optimistic and resilient – and it is, therefore, vital that they can continue to access the financing required to support their growth plans.”
CBI urges government to continue energy cost support to protect UK economy from recession
