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UK SMEs performing well recently but remain cautious about Q3 prospects

Written by  Aug 21, 2020

Small and medium sized-businesses (SMEs) in the UK remain “cautiously optimistic” about third-quarter revenue increases after stronger-than-expected performances in the second quarter.

Nearly a third planning to resume technology investment, according to latest Barclaycard Payments SME Barometer.

In May 2020, the barometer, which is used by Barclaycard and YouGov to measure SME sentiment, found UK-based SMEs predicted second-quarter revenues would fall by 28%.

However, according the latest SME responses published on 20 August, the revenue decline was half as severe as originally expected, with SMEs reporting an average decline of 14% instead, in turn leading to a small jump in overall optimism about the future.

SMEs across all sectors are now predicting 5% revenue increases for the third quarter, which grows to 14% over the next 12 months, while 80% plan to invest again during that period, with new equipment and technology (32%) and marketing (28%) being the greatest focus areas.

This optimism boost is reflected in the barometer’s confidence-measuring index score, which jumped 16 points from 79 out of a possible 200 at the start of the second quarter to 95 at the start of the third quarter. Despite the bump in optimism, however, Barclaycard classes any scores under 100 as a negative outlook.

Barclaycard also found the percentage of SMEs reporting that coronavirus had negatively affected their business also dropped this quarter, falling from 82% to 74%.

“SMEs are once again proving their resilience and reaffirming their role at the heart of the UK economy, especially in the face of the challenges posed by coronavirus. Despite uncertainty and business disruption, SMEs are outperforming their own revenue expectations and beginning to look to the future by returning to work and thinking about investment,” said Rob Cameron, CEO of Barclays Payments.

“We welcome these signs of growth and optimism – and hope that SMEs continue to take advantage of the support available, whether from finance partners or the Government, to continue this recovery.”

“SMEs are once again proving their resilience and reaffirming their role at the heart of the UK economy, especially in the face of the challenges posed by coronavirus”
Rob Cameron, Barclays Payments

Responding to the barometer’s results, chair of entrepreneurial network Tech Nation Stephen Kelly said while the impact on SMEs had been less severe than expected, some actors were clearly suffering more than others.

This is particularly true of sectors that rely on consumer card payments, such as hospitality or leisure, which were hit much harder as they could not reopen until the start of the third quarter.

According to Barclaycard SME transaction data, despite consistent week-on-week growth in the first half of the third quarter, card transactions remain behind 13% behind the same point last year, suggesting card-taking enterprises are a way off matching their pre-pandemic performance.

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“Scaling SMEs are vital to the UK’s economic recovery and therefore must remain an absolute priority, the government must ensure there is continued access to capital for SMEs during this downturn,” said Kelly.

He added while the Coronavirus Business Interruption Loan Scheme (CBILS) was “one of the great strategic investments in to UK SMEs”, the inevitability of paying back these loans had created “a daunting future”.

“To give SMEs the confidence they need going into the recession, it could actually be in our national interest if the government becomes a long-term partner and shareholder in these businesses by offering SMEs the chance to convert unpaid loans in to shares in their business,” he said.

“Clearly these are extraordinary times, and as such, call for some quite unprecedented measures, but by doing this, founders won’t feel under pressure to pay back these loans in an arbitrary timeframe. If they are, they risk making business decisions for the short term, not the long, and that will stunt the growth they could achieve.”

“It could actually be in our national interest if the government becomes a long-term partner and shareholder in these businesses by offering SMEs the chance to convert unpaid loans in to shares in their business”
Stephen Kelly, Tech Nation

The government has already started to go down the shareholder path by setting up the Future Fund, which was set up on 20 April and provides loans to UK-based startups ranging from £125,000 to £5m, subject to at least equal match funding from private investors.

Investment through the scheme comes in the form of a convertible loan note, giving the UK government equity shares in the enterprise when the funding converts.


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Karen Turner

A very experienced freelance IT journalist who now prefers to work from home and has such a broad range of knowledge accrued over the years, we would not cope without her influence and ideas.

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