Small businesses stand firm in face of economic uncertainty

Small businesses stand firm in face of economic uncertainty

One in three small business decision makers (33%) say their top concern this quarter is market uncertainty – but this relates more to immediate sector specific issues than broader macro-economic factors – according to new research from Hitachi Capital’s quarterly British Business Barometer.

At a time when the UK market has experienced fluctuations in recent months, specifically in the retail and manufacturing sectors (BHS, Austin Reed & TATA), small businesses are focusing on the issues on their doorstep, such as cashflow, labour and red tape.

The findings from Hitachi Capital’s quarterly British Business Barometer, asked 1,139 SMEs across the UK which factors they perceived to be holding business growth back. This was compared with the research collected over 12 months ago.

Key findings: 

Quarterly comparison (from Q2 2014 to Q2 2016)

 Top seven business concernsQ2 2016Q4 2015Q2 2015Q4 2014
1.Market uncertainty33%32%32%34%
2.Red tape19%22%22%25%
3.Late payment from clients17%22%22%21%
4.Volatile cash flow16%22%19%15%
5.Uncertainty as to the future of the business15%17%17%19%
6.Cost of skilled labour13%14%14%11%
7.An unwillingness within the business to take risks11%10%10%8%


By sector:

Agriculture Ploughing ahead: Dramatic rise in worries with extreme weather for 44% of small and medium size enterprises in the agricultural sector over the next three months, compared to 31% in Q4 2015. Market uncertainty was of lower concern for a third of SMEs (33%) this quarter (42%, Q4 2015).

Construction Digging Deep: In the wake of the tax cuts in the Budget, less than one in four small and medium sized construction companies (24%) recognised red tape and regulations as restricting expansion. This has fallen 4% since Q4 2014. Additionally fewer SMEs (9%) thought banks being restrictive with lending would hold them back, a reduction from 13% last quarter.

Manufacturing Nailed Down: Market uncertainty is a greater worry for SMEs in manufacturing. More than two in five SMEs (42%) believe this will restrict growth, compared to 35% in Q4 2015 & Q2 2015. With recent unease about overspending and investments it may not be surprising that 15% believe that volatile cash flow will restrict growth, rising from 9%, since Q4 2015 and Q2 2015.

By region:

Looking northward: Market uncertainty has lifted by 8% compared to six months ago for small and medium organisations in the North (23% Q2 2016 Vs. 31% Q4 2015). Another positive uplift within the region, 18% thought that red tape and excessive bureaucracy would restrict growth compared to 22% six months ago.

In the Midlands: Feeling more positive, a fourth of SMEs (25%) thought that market uncertainty would restrict businesses over the next three months across the Midlands, falling 7% in six months (32%). Furthermore, 15% believe that red tape and regulation will restrict growth - this has decreased from 20% in Q4 & Q2 2015.

In the Capital: There is an improving trend with fewer small companies (21%) in London seeing market uncertainty as restrictive to expansion over the next three months, this is down 10% from Q4 2015 (31%) and Q4 2014 (37%). A positive client outlook – this quarter only 17% believe late payments from clients would restrict growth compared with 26% in Q4 & Q2 2015.

Across Scotland: Another positive for red tape and regulation as only 7% of SMEs in Scotland saw this as holding back growth over the next three months, compared to one in five (20%) in Q4 & Q2 2015, and 33% in Q4 2014. One in four (25%) believe that market uncertainty will hold back growth in the next three months compared to 36%, six and 12 months ago.

South: The market outlook in the South is positive this quarter with 22% saying that market uncertainty would hold back business growth compared to 32% in Q4 2015. However, late payments from clients would also affect the South, as with other regions, 11% of SMEs believe that clients not paying on time would hold them back over the next three months.

Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, said: “SMEs face challenges daily when securing growth. Red tape, volatile cash flow and late payment from clients are daily issues for many, but despite the general market uncertainty, SMEs remain confident and are tackling challenges, which is positive. Aside from market and economic issues, every quarter we also see a steady proportion of respondents that feel their bank is holding them back. At Hitachi Capital Business Finance we are backing British business through the stages of the economic cycle and offer SMEs a valuable alternative to mainstream lending, allowing businesses to get the financial support they need to reach their full potential.”