UK SMEs join chorus of gloom

There has been a sharp fall in optimism among small and medium-sized business according to the latest Bowmark Entrepreneurs’ Index, underlining the uncertainty of the next six months.

The mood of small and medium-sized businesses in the UK has become distinctly grim in the past six months, according to a survey by mid-market firm Bowmark Capital. 

The Optimism Index, which tracks how positive respondents are about their own businesses, has dropped nearly 10 points to 66.7 since the first survey was published in January.  Optimism about UK entrepreneurial businesses generally has tumbled 13 points to 49.7.

Bowmark Capital’s managing partner, Charles Ind, said: “The outlook for the economy in the next six months is more uncertain than at any time in recent history.  Entrepreneurial company directors, normally more positive than most, have become increasingly apprehensive and cautious in their approach.”

The survey also found companies have become more concerned about the impact of government intervention and legislation on their businesses. 70 percent cited these as obstacles to growth, up from 56 percent in January, while nearly two-thirds see tax as a major obstacle.

Profit and revenue growth have slowed and rising energy prices have had a negative impact on a third of companies surveyed. The credit crunch is also starting to bite – around a quarter of companies said that the availability and terms of bank debt have worsened since the previous survey.

Growth in turnover and profits has slowed since the last survey.  In January, more than 60 percent of respondents reported profits up 10 percent or more in the previous 12 months.  This time, fewer than half saw that level of increase and a quarter had stagnant or falling profits.  The percentage reporting a more than 10 percent growth in revenue fell from 65 percent in January to 57 percent in this survey.

Companies have also reined in their expectations for future growth.  Just over half of those surveyed expect growth of more than 10 percent in revenue in the next 12 months, down from two-thirds in January’s report. Similarly only half are anticipating a rise of more than 10 percent in profits, down from 70 percent last time.

Only a third of respondents are planning acquisitions in the year ahead, compared to 43 percent in January, while two-thirds are now planning to launch a new product or service.  “With merger and acquisition activity likely to be muted in the year ahead, entrepreneurial companies will be focusing on organic growth,” Ind said.