SMEs report revenue growth but brace themselves for turbulent times ahead

• UK small and medium sized businesses (SMEs) report revenues increased by 11.4 per cent on average in Q2 this year against the same period in 2021 with more than half (54 per cent) expecting turnovers to increase further by the end of Q3
  
• To support this growth, a third (34 per cent) of SMEs increased their number of full-time employees in Q2, recruiting an average of seven new employees each.
• While over three quarters (77 per cent) fear the impact of recession, 83 per cent of SMEs are neutral (45 per cent) or optimistic (38 per cent) about their own business’ prospects
• The quarterly Barclays SME Barometer combines billions of merchant transactions, processed by Barclaycard Payments, with research data to provide an in-depth look at the UK SME economy

More than half (55 per cent) of small and medium-sized enterprises (SMEs) saw revenue increases in the second quarter of this year against 2021, reveals the latest quarterly Barclays SME Barometer¹. And a similar number (54 per cent) of small businesses also expect further gains this quarter despite concerns about a looming recession.

Data from Barclaycard Payments, which processes one in three debit and credit card payments in the UK, shows an annual rise of 7.3 per cent² in the value and 18.1 per cent in the volume of payments made to SMEs between April and June this year.

The research found that to support this growth, a third (34 per cent) of SMEs increased their number of full-time employees in Q2, recruiting an average of seven new employees each.

This trend is also expected to continue in quarter three, as on average small businesses predict a further 10 per cent increase in their turnover for July to September, against the same period a year ago.

Macro-economic concern

This reported revenue growth comes, however, at a time when more than half (53 per cent) of small business leaders are pessimistic about the prospects of the UK economy, with 77 per cent concerned over rising cost of bills and inflation, 77 per cent fearing recession and 74 per cent worried about the soaring cost of energy.

Last quarter, 51 per cent of businesses were concerned that increased living costs would impact consumer spending, and 28 per cent feared it would make them less competitive as they would need to increase prices.

This has increased in Q3, with nearly three in five (59 per cent) businesses worried about consumer spending decreasing and 41 per cent now worried that rising costs will impact their competitiveness.

Self-confidence and business investment

Despite the backdrop of uncertainty, 83 per cent of SMEs are neutral (45 per cent) or optimistic (38 per cent) about their own business’ prospects, with half (50 per cent) describing their current cashflow as strong.

More than three in five (68 per cent) SMEs say they plan to invest in their business over the next 12 months, turning to recruitment, marketing and technology to shore up their operations. On average over the next 12 months, more than a third (38 per cent) of SMEs say they intend to invest an average of £13,855 on recruitment; 30 per cent an average of £9,948 on marketing; and 25 per cent an average of £11,082 on new tech and £10,696 upgrading existing technology respectively.

August Bank Holiday provides boost to sales

Among those businesses that were trading across the August Bank Holiday weekend, more than a third (33per cent) said they wouldn’t have usually been open, but extended their working hours to generate more cash. The long weekend came with high expectations, with half (49 per cent) of SMEs that were open expecting it to be their biggest weekend of sales for the year so far this year, beating out Easter and the Jubilee four-day weekend.

Colin O’Flaherty, Head of SME at Barclaycard Payments, said: “The current operating landscape brings a host of challenges for businesses, but as we saw throughout the pandemic, SMEs are resilient and our research shows they are proving this again this in the face of rising costs and inflation.

“We are confident they will prove adaptable and innovative to meet the challenge, but now more than ever, the nation must pull together to continue its support for local SMEs and provide them with the support they need.”

Earlier this year, to help SMEs recover and grow, Barclays launched its Business Health Pledge, a package of support aimed at boosting small businesses. The bank is hosting 50 masterclasses a month this year, with focuses on managing cash flow, business growth and support for wellbeing as well as national, sector specific. Find out more at https://labs.barclays/business-health-hub

ENDS

Notes to editors

¹Barclaycard Payments commissions YouGov to conduct its quarterly SME Barometer research. This quarter’s study was conducted among 577 small and medium-sized business leaders, with a nationally representative regional and industry sample, between 27th July 2022 and 16th August 2022.

²Barclaycard Payments transaction data processed between 1 July 2022 and 14th August 2022 by SMEs in the UK compared to the same period in 2021.

To measure SME sentiment, Barclaycard and YouGov have aggregated SMEs’ viewpoints on 10 key topics to create an overall index score out of 100, with anything over 50 indicating a positive outlook, while anything under 50 is negative. The breakdown of key topics is below, including the change in sentiment score for each category compared to previous Barometers.

NOTE: Micro businesses are defined as any business with a turnover of under £2m. Small businesses are those between £2m – £10m. Medium-sized businesses are £10m – £25m.