Studies by business organisations suggest that SME confidence is rising but many firms still plan to make redundancies.
There are encouraging signs of a bounce back as the proportion of UK small businesses predicting growth has almost doubled in just three months - from 14% to 27% - according to the latest quarterly tracking study by Hitachi Capital Business Finance.
It means that one in ten firms now fear failure compared to close to a third of small businesses three months ago. The findings show that:
- 23% predict moderate expansion (up from 10% in the previous quarter);
- 43% expect no change (up from 26%);
- 19% expect a contraction (down from 31%);
- 11% fear business collapse (down from 29%).
By sector, the IT/telecoms sector has the highest proportion of small businesses that are predicting growth for the three months to the end of September (44%). The biggest rises in confidence since lockdown have been seen in transport and distribution (up from 8% to 34%) and manufacturing (9% to 30%).
There have been significant rises in sectors hardest hit by lockdown: In retail, the percentage of small firms predicting growth has risen from 21% to 27%; in hospitality, growth forecasts rose from 11% to 16% in the three months since April.
The research suggests that smaller, more agile enterprises will be the fastest to adapt to the UK's emergence from lockdown. Small businesses that have been trading for less than five years (35%) and those that employ 10-49 employees (37%) are most likely to predict business growth for the next three months.
Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, described the findings as "remarkable for both the scale and the speed of the revival in small business confidence". He said: "Our new research … shows what an immediate and positive impact the easing of lockdown has had on the small business community. Whilst bigger businesses are having to adjust and adapt at a slower pace, small business confidence across the UK has bounced back."
However, results from the new Quarterly Recruitment Outlook published by the British Chambers of Commerce (BCC) indicate that almost a third of firms (29%) will reduce the size of their workforces in next three months.
The research, conducted in partnership with Total Jobs, has found that 59% will keep their headcount the same while just 12% are looking to expand their workforce.
The survey found that over the next three months:
- 18% of micro firms (with fewer than 10 employees) expect their workforce to decrease;
- 41% of small and medium firms (with 10 to 249 employees) expect their workforce to decrease;
- 41% of large firms (with over 250 employees) expect their workforce to decrease.
However, as lockdown lifts, Totaljobs has seen a 30% month-on-month increase in the number of jobs being advertised on its website for June. There have been significant month-on-month increases in sectors benefiting from lockdown easing including retail (+51%), travel (+47%) and hospitality (+23%).
The British Chambers of Commerce and Total Jobs are calling on the government to reduce the overall cost of employment through a temporary cut in employer National Insurance contributions.
BCC co-executive director Hannah Essex said: "Many businesses are suffering from a historic cash crunch and reduced demand, meaning firms will still face tough decisions despite welcome interventions made in the Summer Statement. The government should consider additional support for employers before the Autumn Budget to reduce the overall cost of employment and prevent substantial redundancies."
Written by Rachel Miller.