Small and medium-sized enterprises (SMEs) account for 99% of the private sector in the UK and around 52% of employment – in other words, a crucial part of the economy. So we’ve collaborated with Cebr to produce the SME Health Check Index. This new report combines a range of statistics to take the temperature on what the current macro-economic environment is like for SMEs.
The report establishes that there are many challenges facing UK SMEs in the first quarter of 2017. However, it also shows that there is light ahead and, despite political and economic uncertainty, businesses have plenty of reason for optimism.
Two of the eight categories measured by the index have improved since the last quarter of 2016 – those are SME business confidence and employment levels.
While just two categories might not seem too positive, these are key categories which show that right now might actually be a great time to be an SME in the UK.
One positive note in the report is that SME business confidence is at its highest level in over a year. It sits at 67 points in the index – up 17 points from the last quarter of 2016. Considering how turbulent 2016 was, we think that’s quite a result.
This measurement, made using data from the Federation of Small Businesses, relates to how confident SMEs are about their short-term prospects over the next three months.
That significant improvement in SME business confidence adds to the hope that UK economic slowdown in the first quarter was a temporary blip rather than the start of a prolonged period of subdued growth.
So where is this confidence coming from?
Things have been complicated and, while Brexit negotiations may add to that, the UK economy has proven its resilience. There seems to be a confidence among many SMEs that they are strong enough to overcome almost any difficult economic circumstances that develop.
Another major positive in the report is the increase in employment levels – the index score is up to 75, a rise of 13 points from last quarter. This reflects the wider trend for employment figures in general.
The UK job market is going from strength to strength and the jobless rate was at its lowest level for over four decades in March – the number of people in employment rose by 121,000 in the first quarter of 2017.
These rising employment levels chime with the increase in short-term confidence shown by SMEs. There is great faith in the amount of business to be done in the short-term future and they are willing to make the investment in personnel to cope with demand.
Such confidence only adds to the hope that the economic environment for SMEs will improve in the next quarter, and that the first quarter slowdown in GDP growth is only a temporary blip rather than the start of a prolonged issue.
While the overall index score for the UK is down, there are pockets of improvement spread throughout the country. And for some regions the picture is looking especially positive.
Yorkshire & The Humber is on the up, placed second in the regional ranking with a 0.6 improvement from last quarter. The region scored especially high on business confidence, with only the North East and East Midlands recording a better score in that area.
North West England improved overall with a 3.9 point increase from last quarter and East of England improved 2 points overall – it was also one of the few regions where lending increased in the last quarter.
Wales was the biggest winner though – topping the rankings with a 3.1 index score rise from the last quarter. Improved business confidence and employment were some of the factors positively contributing to the improving business and economic health of SMEs in Wales.
As we can see, now might actually be a very exciting time to be an SME. Access the full report to find out more.
POSTED IN: 2017