The numbers behind SMEs’ growing confidence of a bright future

It’s clear that SME leaders have a renewed belief in their own businesses and in the economy as a whole, which is very encouraging to see. But risks still lie ahead and business owners should continue to be cautious, especially as they seek to grow and build their empires.

Our SME Risk Index survey reflects the opportunism by SME owners. Not only is the Index at its lowest level since records began in 2012, nearly half (44 per cent) of SMEs surveyed say they feel confident about the economy, and a further 57 per cent confident the economy will improve within the next year.

This rise in confidence could be connected to reports from earlier this year, in which more banks took advantage of the Funding for Lending Scheme and increased lending to small businesses, following criticism for not doing enough to finance the sector in previous years.

This change in stance from some of the country’s biggest lenders seems to have manifested itself in some of our data with nearly three-quarters (71 per cent) of SME leaders saying they are not concerned about bank lending with 24 per cent now worried about financing their business. This, again, is a drop on the findings from our first quarter Risk Index.

Our data suggests that this is having a positive impact on the economic outlook for small businesses across the country. When you consider that two years ago 39 per cent of businesses were worried about securing a basic bank loan, it’s extremely encouraging to see that only 24 per cent of SMEs see themselves in the same situation today.

This is just one factor of many contributing to a decrease in the number of SMEs worried about the economic climate. According to our latest data, over half (53 per cent) of small and medium businesses are now worried about the economic climate – a three per cent drop on the first quarter of 2015 and a staggering 31 per cent fall from the 84 per cent we recorded at the beginning of the Risk Index back in October 2012.

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It is worth bearing in mind that small and medium businesses are not out of the deep yet, with many businesses still fighting hard to stay profitable in a rapidly changing economic landscape. Our data shows that almost half (47 per cent) of SMEs are now expanding activity in order to reach new customers and over a quarter (28 per cent) are diversifying product lines and services to meet business needs.

Business owners seeking to make the most of the more robust business environment shouldn’t overlook risk planning. Businesses should ensure they know where problems could arise in order to mitigate these.

With almost one in ten (eight per cent) SMEs suggesting there is a danger of shutting shop in the next 12 months, businesses need to take time to fully understand the risks faced, and ensure each make the most of these turbulent times and secure a firm future.

Ultimately, the data shows that while a majority of SMEs are feeling increasingly confident about the state of the economy, the hard work isn’t yet over for many and the risks that many companies face show no signs of abating.

Our hope is that this new found confidence will give small and medium businesses the freedom to operate boldly in the market and continue to open up opportunities for growth, allowing companies to prosper in the long-term.

SMEs will need to understand the continued risks that businesses, particularly small and medium, face in a continually changing economic environment. Whilst it’s great to see confidence at its highest level in three years, there are still many obstacles that businesses will need to overcome.

In understanding these risks, we hope that SME confidence remains and businesses continue to provide a vital contribution to the UK economy in years to come.

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