More than a quarter (27%) of SMEs view economic uncertainty as their primary concern, with their overall confidence having fallen to a four-year low. This is according to Lloyds Bank’s latest Business in Britain report; so why are companies bracing themselves for the worst?
Economic uncertainty: the biggest worry
The banking giant’s confidence index suggests that small firms have become more worried about the economic climate in the wake of Brexit. A net 12% felt positive over negative, which represents a 26-point decline since January when the previous survey was completed.
Tim Hinton, Lloyds’ Managing Director of Mid Markets and SME Banking, said that falling confidence “should be viewed in the context of the recent economic and political shocks”. “The EU referendum vote has introduced a level of uncertainty for companies as the UK decides on the best model for its future relationship with the EU”, Mr Hinton explained, “and this is likely to continue for the foreseeable future.”
While business confidence has declined, Mr Hinton added, levels aren’t as low as they were at the time of the economic crisis of 2008/09.
Other SME concerns
Economic uncertainty aside, the Business in Britain report – which had more than 1,500 respondents, with the majority from the SME sector –revealed that small firms are also concerned about weaker domestic demand and falling levels of investment. This may affect how many people SMEs employ, with -1% of respondents saying they expect to increase staff numbers over the next few months. This is down by 14 points since January.
G-10 Economist at Lloyds Hann-Ju Ho believes the figures suggest economic growth will be “slow” over the following six months despite “a relatively robust performance” at the beginning of 2016. “Even though inflation is expected to pick up as a result of the weaker pound”, Mr Ho said, “this may be offset by the survey findings of a fall in capacity pressures within firms and a fall in recruitment difficulties.”
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