SME revenue on the rise but business owners see dark clouds on the horizon

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The SME sector recorded a strong rebound in revenue in June, with 23 per cent of SMEs reporting a higher turnover than pre-COVID times, according to latest The SME Sentiment Tracker conducted by business market research firm ACA Research in partnership with Ovation.

That trend is predicted to continue, with 29 per cent of SMEs expecting to record a higher revenue in July. The research also points to an improvement in the number of SMEs now making a profit, with only 15 per cent of them reporting a loss compared to 31 per cent in March.

SME growth expectations remain steady at 40 per cent, with only seven per cent forecasting that they will have to downsize or close down in the next 12 months.

SMEs job growth is also on an upward curve, with the number of SMEs employing more staff than before the pandemic rising from 10 per cent in April to 20 per cent in June. And SME job vacancies have increased from 23 per cent in January, to 31 per cent in June – although this suggests SMEs are still struggling to find the right talent .only 29 per cent of them say it is “very difficult” to recruit new staff now compared to 44 per cent expressing that sentiment in March.

Despite these strong financial and employment indicators, however, more SMEs are pessimistic about the economic outlook, with 55 per cent predicting weaker conditions in the next quarter in June in comparison with just 29 per cent saying that in April.

The biggest concerns driving this fear are fuel costs (86 per cent), rising inflation and interest rates (79 per cent) and ongoing supply chain issues (78 per cent). These issues have pushed SMEs into tightening their belts, with 25 per cent intending to reduce capital investment and 21 per cent planning to cut their marketing spend in the next quarter. SMEs evidently believe the tough times will continue, too, with only 30 per cent of them expressing confidence in the new Labour Government to will deliver effective policies to support their needs during these challenging economic times.

“In summary, SMEs continue to perform strongly, but expect difficult economic conditions to impact over the next three months,” ACA Research Managing Director James Organ said. “Rising fuel prices, inflationary pressures and ongoing supply chain issues will be significant and hence SMEs will look to the new Government to implement policies that will reduce rising costs and support growth.”