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Confidence in SMEs Surges in Q1 as Almost Half Expect an Increase in Sales

48% of small and medium sized businesses predict a rise in sales in Q2

Data from the latest SME Confidence Tracker shows that SMEs have climbed four percent in the Confidence Index, now at 61.3%. With almost half of SMEs (48%) expecting higher sales in Q2, it appears that small and medium sized enterprises are concentrating on getting back to business in a bullish fashion. The Tracker reports the highest level of sales optimism since the EU referendum took place in June last year.

It’s not only confidence that’s on the up. There has also been an uptick of business investment in Q1 following the low of Q4 2016, which experienced an average planned investment decrease of over 50% from the previous quarter. Average planned investment in SMEs rose 14% to £56,040 in Q1 from the past quarter, with 20% of SMEs that had invested citing the reason for planned capital expenditure was to replace deteriorated technology or equipment. According to our findings, SME investment is being driven by rising levels of domestic and overseas competition and furthermore, it’s unsurprisingly evident that businesses are looking to increase levels of efficiency also.

Unlike the statistics before, not all increases are trending in the right direction. Although confidence is back on the up and sales outlook is buoyant, the amount of bad debt that SMEs are subject to has increased quarterly. In Q1, small and medium sized businesses wrote off £16,795 on average in the past 12 months, an increase of 8% on Q4. Since Q2 2016, bad debt has risen by 42% and almost a third (30%) of SMEs have had to write off debt in the last 12 months.

Coupled with bad debt, late payments continue to prove problematic for SMEs. On average, it takes 37 days to receive payment. The crippling nature of late payments continues resonates with businesses across the UK. There are also regional ‘hotspots’ of late payment and bad debt according to our findings, with West Midlands SMEs bearing the brunt of both of these factors. On average, these businesses wait 41 days for payments, four days above the national average. Trends can also be traced to industry also, with the transport sector waiting the least time on average (34 days) for payment and wholesalers the most (39 days).

SMEs have generally welcomed political change and have taken it in their stride, especially as there has been two referendums and a general election within the last three years alone. On June 8th, businesses will be tested once again with the snap election that Theresa May announced on April 18th, and it’ll be interesting to see if SMEs will continue their rise in confidence and momentum in our research next quarter. Small business has found its feet again in Q1, although we’ll have to look closely at the SME community after the election results to see if these positive statistics can continue throughout the remainder of this year.  

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