UK SMEs Express Cautious Optimism

The confidence of the UK’s small and medium-sized enterprises (SMEs) showed signs of improvement at the end of 2012 after near-record lows, according to data from Western Union Business Solutions’
‘International Trade Monitor’
(ITM) report, produced by research firm TNS.

In the period October to December 2012 (Q412), 52% of SME business leaders expressed confidence in the current UK economic climate, an increase from 46% in Q3, while 53% were confident that international trade conditions will improve over the next 12 months, an improvement of 10% since Q3. The findings suggest that fears of a ‘triple dip’ recession in the UK could have been overstated, or businesses at least believe that a swift rebound is possible.

With eurozone instability diminishing towards the end of last year, 31% of SMEs felt there would be an export-led recovery within the next 12 months, while 54% were confident that the international trade aspect of their business would not be adversely affected by the stagnant UK economy.

The ITM report also revealed that importers and exporters grew their international activity in Q412. UK small businesses are increasingly diversifying their import and export destinations, with almost every global region showing signs of increased trade activity, particularly through exports.

UK trading partners

Australasia showed the greatest export increase from the previous quarter, up 16 points to 27% of SMEs having customers based there. SMEs continue to favour North America as the UK’s biggest non-European trading partner, up 12% to 39%. One in five SMEs surveyed are now trading with African countries, more than double that from Q312.

Capitalising on emerging market opportunities (81%) and growth in the formation of new SMEs running international operations (80%) are the top reasons for optimism among the SMEs that have confidence in an export-led recovery. Nearly three quarters of those that foresee an export-led recovery also believe that the stabilisation of the eurozone will be a significant factor in driving a return to sustained growth.

“‘Cautiously optimistic’ is the best way to describe SME sentiment at the moment.” said Gareth Heald, UK finance director, at Western Union Business Solutions. “However, by expanding their portfolio of export locations, it is clear that they are diversifying their businesses to try and insulate against a potentially frosty economic winter.  Whilst eurozone concerns have eased for now, the wider global outlook is still front of mind for Britain’s small businesses as they widen their reach.

“Confidence has improved compared to a dismal third quarter but we are not out of the woods yet, particularly when considering that there has been a 53% increase in the number of SMEs who have had to reduce staff numbers as a result of being impacted by the eurozone crisis.”

The ITM report also showed that number of SMEs negatively impacted by currency movements has dropped over Q412, from 27% to 20%. Currency volatility is a decreasing concern for business owners, having dropped to 49%, compared with 61% a year earlier. SMEs are continuing to utilise currency risk solutions, with 40% of SMEs using spot payments, a jump from 33% in Q312. 

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