The latest SME Sentiment Tracker from business market research firm Fifth Quadrant in partnership with Ovation reveals a slight weakening in year-on-year revenue, with 34 per cent of SMEs reporting a decline compared to 29 per cent in February.
The report notes that expectations concerning economic conditions continue to weaken both domestically and internationally amid persistent inflationary pressures that delayed any immediate relief in interest rates. Consequently, growth expectations continue to trend slightly lower, with 35 per cent concentrating on growth over the next 12 months compared to 44 per cent reported in February.
Expectations regarding employee growth have also declined, with only 10 per cent anticipating an increase in staff over the next three months. Consequently, the downward trend in recruitment activity persists, with only 17 per cent of SMEs actively seeking to fill positions in April compared to 30 per cent in December 2023.
Despite the decline brought about by interest rate concerns, 59 per cent of SMEs reported a profit which is notably higher than in the last month, in line with the data reported in April 2023. This stronger profitability data has been achieved by 74 per cent of SMEs successfully passing on higher input costs to customers in April.
While expectations regarding capital investment and marketing spend have also slightly declined, purchasing intentions for passenger, light, and heavy vehicles remain buoyant and therefore demand for additional finance has rebounded as the financial year draws to a close. SMEs with 20-99 employees are driving the highest demand for additional finance with 18 per cent of SMEs requiring additional funds over the next three months
“Sentiment remains highly correlated with stubborn inflation and the potential for further rate hikes,” Fifth Quadrant Managing Director, James Organ, commented. “Despite, heightened profitability, caution remains highly prevalent and hence many SMEs are in a holding pattern in relation to staff numbers, capital investment and marketing spend. However, the demand for finance has rebounded in line with growing demand for vehicles and equipment before the end of the financial year.”
