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Peer2Peer Finance News | August 23, 2019

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UK SMEs bullish on growth despite political woes

UK SMEs bullish on growth despite political woes
Suzie Neuwirth

THE VAST majority of small businesses in the UK have shrugged off the current political uncertainty and are optimistic about their growth over the next year, despite feeling a lack of support from the government.

Accountancy firm Smith & Williamson surveyed more than 200 small business owners and entrepreneurs for its quarterly enterprise index. The results revealed that 85 per cent of respondents are planning for growth and 80 per cent are optimistic about their own prospects over the next 12 months.

However, this was the fourth consecutive quarter where small- and medium-sized enterprises’ (SME) perception of support offered by the government has declined, with just 45 per cent expressing positive opinions about government policy.

Read more: SMEs funding appetite surges after Spring Budget

“It’s possible that, by triggering Article 50, entrepreneurs at least feel some progress is being made,” said Guy Rigby, head of entrepreneurial services at Smith & Williamson.

“In addition, the high-profile climb-down on self-employed National Insurance Contributions (NICs) appears to be evidence of a government that is listening.

Read more: £45bn late payment burden hangs over UK SMEs

“Notwithstanding this, there has been a growing mistrust in the government due to a credibility gap between what the government is saying and what it is actually doing. 

“Within the past few months they have delivered an industrial strategy green paper, a scale-up champion and a scale-up taskforce but this has yet to deliver meaningful change.  However, at the same time, the government has slashed the tax-free dividend allowance by 60 per cent, causing problems for many.”

Read more: SMEs show cautious optimism despite Brexit

The enterprise index found that 54 per cent of respondents believe that uncertainty associated with the triggering of Article 50 has negatively affected their business. However, this does not appear to have dampened their plans for growth, with 65 per cent planning to increase headcount over the next three months.

“The negotiation of a Brexit deal will have many layers, with the ramifications from any individual part having potentially widespread consequences,” said Rigby. “While the current mood is buoyant, SMEs need to be aware that changes to our relationship with the EU could affect them on a day-to-day basis. Recent growth decelerators, such as stagnating real wage growth and lower consumer spending, could be a portent of things to come.

“Confidence is important, but it is vital that SMEs keep a close eye on the changing landscape and guard against any irrational exuberance.”

Read more: SMEs feel the pinch as inflation soars