Half of small and medium-sized firms have high hopes for increased sales in the next few months, new analysis has unveiled.
According to the Bibby Financial Services SME Confidence Tracker, 48 per cent of SMEs polled expected sales to rise through Q1 and Q2, compared with 36 per cent in the last quarter of 2015.
By comparison, the number of small firms that predicted a decline in sales fell from 17 per cent in Q4 2015 to just 8 per cent in the first three months of this year.
Investment on the rise
In addition, boosted optimism was marked in Q1 by greater investment, with three quarters of SMEs funding new office equipment, IT and machinery.
Through Q2, the analysis found, SMEs plan to invest more in recruitment and technology, with average spend expected to hit more than £43,000.
David Postings, global chief executive of Bibby Financial Services, commented that SMEs had started this year in “an unexpectedly bullish manner, displaying more confidence than in the second half of 2015”.
But concerns over the UK’s economic environment remain, with a quarter (26 per cent) of businesses surveyed reporting that this is the main factor holding back investment. Increased competition, red tape, regulation and rising costs were cited as the key challenges for SMEs.
SMEs ‘not out of the woods’
Postings said: “Having made business-critical capex decisions and invested in the building blocks of business in 2015, SMEs are looking to position themselves for growth in 2016.
“However we aren’t out of the woods yet as SMEs still don’t believe in the UK growth story and optimism remains far below 2014 levels.
“We have had three hugely impactful political debates in as many years with the Scottish Referendum, General Election and forthcoming EU Referendum. Add to this changes such as the National Living Wage and pension auto-enrolment, it’s clear that SMEs crave stability and would benefit from a more simplified operating environment.
“The Budget nibbled at the edges of SMEs’ challenges but much more can be done to get businesses moving in 2016. This should include rebalancing the north-south divide by offering tax breaks to redevelop brownfield sites rather than building on greenbelt farmland.”