Despite recent news that smaller businesses are beginning to regan confidence followjgnt he shock of the Brexit vote in June, there are still some concerning indications from the SME sector. The latest comes from the latest Bibby Financial Services’ Q4 SME Confidence Tracker, which shows investment intentions among small businesses are still cautious.
The biggest driver of this caution is rising costs, the tracker shows, with 22% of SMEs saying they are concerned with their cost base and the upward trend. Indeed, that figure has in fact doubled since the same time last year, reflecting widespread impact of the pound’s weakening since Brexit was confirmed. As well as rising costs, increasing competition (18%) and late payments (11%) were other key challenges that SMEs highlighted as impacting their businesses.
So what is the impact? The tracker shows that “investment intentions have taken a dive as businesses adopt a more cautious approach”. In practice that means that over the next three months SMEs plan to invest an average of £49,237; less than half the level of intended investment in Q2 2016 (£101,919)
Rising costs an increasing concern
David Postings, Global Chief Executive of Bibby Financial Services said: “Smaller businesses are becoming increasingly concerned about rising costs. We’re seeing more SMEs looking towards efficiency, rather than investment for growth at the start of 2017.”
“Rising costs fuelled by inflation and the drop in the value of the pound is a double edged sword for many businesses. The manufacturing industry has recently grown at the fastest rate for 25 years, fuelled by an uplift in exports due to the pound’s depreciation, but manufacturers that are reliant on importing goods and selling solely in the UK will see margins being significantly eroded.”