Enterprise Index H2 2018: Is the tide turning for small businesses?

The Smith & Williamson Enterprise Index has been charting confidence and intentions among business leaders for over five years. This year’s figures show continuing robust confidence among the small business sector, a reflection of the strength they are seeing in their individual businesses and trading partners.

On the economy, the index showed 81% of businesses believe it will improve in the next 12 months, compared to 57% six months earlier. Of those, 37% think it will improve “significantly”, compared to 23% six months ago. This is a more positive message than the one reflected in UK GDP data and suggests that certain parts of the economy are in good health. It is interesting to note that 93% of firms have seen financial health of trading partners improve, compared to 40% six months ago. This is in spite of mounting fears of a slow-down in the global economy.

Entrepreneurs are increasingly optimistic on their own business prospects - 82% of businesses expect their prospects to improve in the next 12 months, compared to 59% six months ago. 39% expect their prospects to improve significantly, compared to 26% six months ago. In spite of Brexit, 82% expect turnover from overseas growth to increase in the next 12 months. This is almost double the level of six months ago.

At the same time, the index continues to show real ambition among smaller businesses. Around a third are contemplating a merger or acquisition, while 84% expect to increase headcount in the next year. This compares to just over half six months ago. Far from a skills shortage, 87% of companies have access to the talent they need, compared to 76% six months ago.

These growth plans have been facilitated by better access to funding. 72% think access to funding has improved in the last 12 months. The index also shows entrepreneurs increasingly willing to put risk capital to work to growth - 73% of firms have a greater appetite for borrowing than they did 12 months ago, double the previous level.

At the time of the survey, 70% of firms think Government policy is supportive of private enterprise, compared to 58% six months ago. This has been reinforced by a budget favourable to entrepreneurs, with the UK Chancellor holding off any major reform of entrepreneurs’ relief, extending the funding of the Start-Up Loans Programme and cutting business rates.

With Brexit looming, there has been some gloom among the general business population. Scale- ups continue to be notably more optimistic than other types of businesses, which is part of the reason these results look so different to other business surveys. It is possible that sentiment may worsen should the potential for a no-deal Brexit become a reality, but with many seeing improving trading conditions and building ambitious expansion plans, there is little sign of the tide turning for entrepreneurs so far.

DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.