Confidence is growing for UK SMEs

UK economic growth may have slowed in the last three months, but SMEs are more confident than ever that they can grow their businesses to turn the economic tide.

A shift in focus

Hitachi Capital's quarterly British Business Barometer found that 43% of small companies in the UK intend to grow their business over the next three months.

Gavin Wraith-Carter, general manager of Hitachi Capital Finance, says SMEs are less concerned with how the dust settles after the election, and more intent to take advantage of a stabilising economic landscape, arguing that “eventually, the focus will shift more towards business investment as a means of achieving long-term growth.”

What's behind the boost?

If Office for National Statistics (ONS) data is showing that growth has slowed, does that make SME optimism unfounded? Not quite.

A quarterly report from the British Chambers of Commerce and DHL Express reports that manufacturers saw increased export orders and sales in Q1 2015, which shows that some sectors are already experiencing growth, but the broader confidence boost may have more to do with the fact that high street banks are loosening the purse strings.

According to further ONS data, banks lent an extra £635m to SMEs through the Bank of England’s Funding for Lending Scheme in Q1 2015. More significant still is that net lending was actually down £800m in the previous quarter, meaning there’s been a significant swing in sentiment at the banks too.

Home and away

There’s certainly headroom for UK SMEs to grow into too, particularly when it comes to foreign exports. Research from payment processors Worldpay suggests that non-UK registered credit and debit cards account for just 11% of online sales for the average UK SME. Aspiring to growth in international markets is no bad thing, especially if the domestic market is subdued.

Nonetheless, with lingering uncertainty over the stability of the international economic recovery, SMEs must proceed with caution. Easier access to credit means additional debt burdens as well as opportunities, and it’s vital that a healthy cash flow and sufficient liquidity is maintained during periods of growth to avoid undermining the long-term future of the business.

If you need advice or help in maintaining a healthy cash flow or recouping unpaid debts, contact a Dukes Bailiffs advisor today.