Small businesses express cautious optimism despite war concerns

perceptions, confidence

Sentiment among SMEs is cautiously positive with a rebound in confidence in February regarding Australian and global economic conditions.

The latest edition of the COVID-19 SME Tracker created by business market research firm ACA Research in partnership with Ovation, reveals that 35 per cent of SMEs believe economic conditions will improve over the next three months, but with the backdrop of the Russian invasion of Ukraine, the report noted that confidence is likely to decline once more in the short term.

Revenues were slightly improved in February, but profit margins continue to be under pressure as rising operating costs persist. Only 39 per cent of SMEs achieved a profit last month, compared to 53 per cent recorded in December.

Despite ongoing challenges, the proportion of SMEs with job vacancies has again spiked to 29 per cent compared to 23 per cent in January. The report indicated that staff retention is becoming more difficult, with the proportion of SMEs replacing employees in existing roles continuing to rise. On the other hand, the proportion of SMEs finding it very difficult to recruit has decreased to 33 per cent in February compared to 45 per cent in December. However, as competition for staff remains high, 22 per cent of SMEs expect wages to increase over the next three months.

Meanwhile, support for the Federal Government continues to be weak with 41 per cent of SMEs now dissatisfied compared to 44 per cent last month. And with fuel prices increasing, the demand for electric vehicles among SMEs also rose, with 15 per cent saying they are now consider buying them compared to eight per cent in January.

“Sentiment is more positive than reported in January, but SMEs remain cautious as operating costs and wages continue to impact profit margins,” ACA Research, Managing Director, James Organ, said. “It is positive to report the rise in confidence, although it’s likely that sentiment will decline if the Russian invasion of Ukraine is prolonged.”