- Overall levels of optimism remained steady at just over 80 per cent
- 9% drop in number of SMEs optimistic about growth this year compared to 2013
- 40% drop in SMEs planning to take on new employees in 2014
- Potential interest rate rises are a concern - nearly a third citing this as a reason for reduced optimism
- The UK’s most optimistic business is likely to be Scottish, run by a female under 35 and in the personal services (e.g. cleaning, hairdressing, dog walking) sector
Optimism by sector
Overall optimism stayed steady at 82% (81% in 2013), but was slightly lower among retail and distribution businesses (79%) and highest among businesses offering personal services (89%). Retail businesses also showed a big drop in growth expectations – while 71% said they were optimistic of growth last year, that’s now just 58%. Only construction/industrial companies were looking more confident about growth this year, possibly a reflection of the fastest growth in house building that the UK’s seen since 2003.
| Sector | Overall optimism about state of business (%) |
|---|---|
| Retail and distribution | 79 |
| Building trades and industrial sector | 82 |
| Professional services (eg accountancy, IT, marketing) | 83 |
| Personal services (eg cleaning, hairdressing, dog walking) | 89 |
| Small businesses optimism about growth by sector (%) | 2012 | 2013 | 2014 |
|---|---|---|---|
| Retail and distribution | 35 | 71 | 58 |
| Building trades and industrial sector | 34 | 48 | 57 |
| Professional services (e.g. accountancy, IT, marketing) | 34 | 67 | 59 |
| Personal services (e.g. cleaning, hairdressing, dog walking) | 41 | 67 | 63 |
| Total (All sectors) | 35 | 63 | 58 |
SMEs’ appetite for recruitment has also suffered this year with a 40% drop in businesses planning to hire. Small retail businesses have taken the biggest hit – only 15% are planning to take on staff this year, compared to almost 50% this time last year.
| Small businesses planning to hire new employees this year by sector (%) | 2013 | 2014 |
|---|---|---|
| Retail and distribution | 47 | 15 |
| Building trades and industrial sector | 32 | 26 |
| Professional services (eg accountancy, IT, marketing) | 34 | 27 |
| Personal services (eg cleaning, hairdressing, dog-walking) | 43 | 25 |
| Total (All Sectors) | 38 | 23 |
Optimism by region
As last year, Scottish businesses emerged as the most optimistic overall, as well as showing greater enthusiasm for hiring and growth.
| Country | England (%) | Scotland (%) | Wales (%) |
|---|---|---|---|
| Overall optimism about state of business | 82 | 91 | 79 |
| Optimistic about growth | 58 | 63 | 47 |
| Planning on taking on new staff in the coming year | 22 | 37 | 18 |
Dents in SME optimism in 2014
When asked about things that affected their overall optimism, a third of SMEs said the prospect of rising interest rates made them less optimistic. It was a particular concern for construction/industrial businesses with 41% citing it as a reason for diminished confidence.
Meanwhile, the economic situation in the Eurozone seems to be less of an issue than a year ago when over a third of SMEs considered this a dampener to their optimism, a figure that has dropped to just under a quarter this year.
It’s good to see that, overall, optimism remains high; but we can’t ignore the drop in growth expectations.
It could simply be that there was a dramatic surge of optimism last year as the economy started to pick up and that this has now settled to more realistic levels.
But we also know from working closely with SMEs that things like difficulties in securing funding and invoicing terms from clients are holding many back from more ambitious plans for the future.
Whatever the reasons, we want to see the UK’s SMEs – who are such powerful drivers of our economic recovery – make the most of our improving economic climate. Ensuring they have the protection they need to keep going through the good times and the bad is just a little thing that we can do to help.
Notes to editors
Source: Markit/CIPS UK Construction PMI