Confidence of UK SME businesses slips in third quarter

02 December 2015

UK SME confidence has dipped slightly in the last quarter, although it still remains high compared to a year ago. The government can help improve business confidence however, with among others clearer information regarding export and green-efficiency incentives.

A new survey by Smith & Williamson, which involved 151 participants from UK SMEs, finds that almost a third of SMEs are feeling pressure from external factors, leading them to delay their investment plans. Business confidence has fallen five points from the Q2 2015 measurement of 119.4. Relative to the baseline however, set in Q2 2014, confidence remains relatively firm at 114.4. One consequence of the loss of confidence is that belief in the Government’s promise to support private enterprise fell 10%, to 70%.

The biggest issues faced by SMEs is the continued instability and fallout from European politics, mainly the situation in Greece but also the prospect of the potential of the UK’s 2016 referendum on EU relations. Further issues cited by businesses as lowering their confidence are the planned ‘National Living Wage’ laws, less-friendly dividend tax rules, and a less generous annual investment allowance.

Confidence of UK SMEs

Global macro-economic conditions too remain dicey, with the prospect of interest rate hikes in the US (and the UK), the recent turmoil on the Chinese stock exchange, as well macro-slowdown in general impacting sentiment, says Guy Rigby, Head of Entrepreneurial Services at Smith & Williamson.

The research further highlights that the vast majority (87%) of SMEs respond that the government is not doing enough to support export activity. One central issue is the lack of transparent access to information and government services. While websites are well regarded and trusted, the export page is said to be “difficult to navigate, untidy and complicated.” The improvement of the website into a reliable information portal is a simple step the government could make, according to the report.

Another issue stressed by the respondents is that many are unaware of research and development (R&D) credits and/or subsidies that could help them export. Improvements to working together should be helpful to further boost businesses to trade internationally.

Export factors

Going Green
The survey also finds that SME’s are not taking full advantage of their 100% capital allowances available to them for certain energy-efficient equipment. The whole notion of going green is not being taken seriously by more than half of SMEs. Only 8% believe strongly in investing in more energy efficient business practice, even while the world’s eyes have been turned to the issue at COP21. The Bank of England Governor Mark Carney also warned companies recently that climate change may already be too big to tackle, with the “current generation” having “little incentive” to do so.

The HMRC is seeking to create more tax efficient incentives to help companies invest in energy efficient equipment, while redressing how companies are informed about the potential tax benefits of such investments – including the 100% capital allowances available to them for certain energy-efficient equipment.

Crowd funding consideration

Crowd funding
The business advisors also consider the changes affecting the financing side of SME development, finding that the alternative finance market, with crowd funding becoming increasingly important, is being considered by over 90% of participants. The possibilities of the market have been quick to percolate through to SMEs. Rigby adds that a “recent Government consultation surrounding the use of crowdfunded investments in ISAs highlights that this is being considered as an increasingly important way of raising funds.”


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