Q2 2022
Capify ConfidenceBusinessSurvey
1
Our survey has found cash reserves to be a real and growing concern for SMEs, as many find their bank balances depleting as the costs of doing business increase.
Once again I am indebted to all our respondents who took part in the research. Overall we received 320 responses to our most recent question set, from a wide range of regions and sectors. These responses prove invaluable in helping us to better understand the challenges and opportunities facing SME business owners.
SMEs are the lifeblood of any economy and here in the UK we are lucky to have some of the most innovative, dynamic and resilient businesses on the global stage.
These characteristics will be vital for businesses over the coming months as owners face some of the toughest trading conditions in recent times.
Whilst many firms have already changed their pricing to protect margins, it can take some time for new prices to work their way through the customer base. Accordingly, we’re seeing the beginnings of a potentially crippling cash crunch for many SMEs.
am pleased to present the findings from our latest quarterly Business Confidence Survey.
2
John Rozenbroek CFO/CCO
We’re seeing the beginnings of a potentially crippling cash crunch for many SMEs.”
INTRODUCTION
To ease this cash crunch, access to finance will play a critical role over the coming months. It is likely that things will get worse before they get better for the UK SME community, but at Capify we will continue to help small business owners in any way we can.
Understanding how these conditions impact businesses, enables us to better serve the SME community. We use these insights to help us tell the SME story; to raise awareness of what help is required from legislators, advisory professionals and finance providers. Furthermore, the responses from this survey help us adapt our own offering to allow us to deliver the best service we can to meet the specific requirements for SMEs and support them on their business journey.
I
3 RESPONDENTPROFILE We received over Average turnover of respondents: £2,139,690 Average number of employees: Average cash in bank position: £95,726 Nearly 60% of businesses have been trading for over 15 years Most represented sectors: Business and Professional Services and IT Services16.6fromsurvey320responsesarangeofsmallbusinessacrosstheUK.
PERFORMANCEBUSINESS
Despite the conditions proving incredibly challenging for business, our survey found many performing with resilience. The majority of firms have recorded turnover growth in the past 12 months, perhaps a response to the fact that 56% of firms have raised their prices in response to the impacts of inflation.
40% have seen profits increase, whilst about the same level (39%) have seen profits decrease in the past 12 months.
IN TERMS OF TURNOVER, HOW HAS YOUR BUSINESS PERFORMED OVER THE PAST 12 MONTHS?
IN TERMS OF PROFIT, HOW HAS YOUR BUSINESS PERFORMED OVER THE PAST 12 MONTHS?
48.78% of respondents have grown turnover over the past 12 months.
4
41% of firms, however, report that they are behind targets for the quarter ending June 2022.
5
The majority of firms (54%) have kept headcount levels consistent over the past 12 months.
IN THE LAST 12 MONTHS, HAS YOUR NUMBER OF EMPLOYEES?
HOW HAS YOUR BUSINESS PERFORMED IN THE LAST QUARTER? (APRIL - JUNE 2022)
Following a period of rising costs, the majority (55%) are concerned about levels of cash in the bank.
6
BUSINESS OUTLOOK
In response to inflation and rising cost crisis, 80% of respondents have seen an impact on the cash reserves and working capital position
HOW IS INFLATION IMPACTING YOUR BUSINESS?
Based on this cash position, the average length of time a firm could continue without any income is 25 weeks.
Unsurprisingly the survey found many SMEs shaken by turbulence in the economy, continued supply-chain issues and a challenging labour market. Despite this, our research suggests that there is an sense of longer-term cautious optimism for many firms.
The resilience many businesses have developed over the past few years will be severely tested over the next six months. This agility and adaptability - which has become a characteristic of UK smaller business - will help many weather the storm and rebound when the inevitable recovery arrives.
Of those who aren't expecting expansion, 29% cite economic uncertainty and 19% cashflow and working capital as a barrier to growth.
40% of businesses expect to add headcount to their operations over the next 12 months.
And, despite increasing pressure on margins, only 21% of respondents expect profit performance to drop over the same period.
7
63% of businesses expect turnover to grow in the next 12 months.
WHAT ARE YOUR AMBITIONS FOR THE BUSINESS OVER THE NEXT 12 MONTHS?
WHAT ARE YOUR EXPECTATIONS FOR THE NEXT 12 MONTHS IN TERMS OF TURNOVER?
The majority of firms remain bullish in the face of challenging prevailing conditions. 51% of firms are targeting expansion over the next 12 months.
The Survey uses business owners’ responses on business performance, confidence, and investment intentions, to produce an overall confidence score between -10 (very unconfident) and +15 (very confident).
Q3 2021 Q4 2021 Q1 2022 Q2 2022
CONFIDENCE SCORE
This iteration of the Survey found SME outlook in a very fragile state. Confidence is at the lowest point since the research programme began, with the Q2 SME Confidence score now sitting at -2.70, a significant downgrade on the 7.68 we saw in Q1 of this year.
DO YOU EXPECT TO BE INVESTING IN ANY OF THE FOLLOWING AREAS IN THE NEXT 12 MONTHS?
8
This is reinforced when looking at SME investment intentions over the coming 12 months, with just under 40% of businesses indicating an intention to invest in the new and existing people.
9
Our research shows that confidence among SMEs has slumped since the start of the year as inflation and economic weakness begin to bite. The survey also reveals a need for governmental and third-party support – both to address urgent crises like rocketing energy bills and also to put the UK economy on a sounder long-term footing.
HELP AND SUPPORT
63% want to see the new Prime Minister implement a reduction in corporation tax, whilst 45% want to see a cut in VAT on energy bills.
WHAT GOVERNMENT SUPPORT WOULD YOU LIKE TO SEE FOR SMALL BUSINESS?
IF YOUR BUSINESS WERE TO NEED FINANCE, WHAT WOULD IT BE DRIVEN BY?
FINDING FUNDING
10
as the most likely way of finding funding partner with 30% of the respondents, with a similar level expecting financeprovision to come via an intermediary.
The issues of SME access to finance continues to prevail. 60% of firms are now not confident of being able to secure external finance from their banking partners – a 9pp increase from our Q1 Recommendations/referralssurvey.areseen
Ease of application is the most important characteristic in choosing a finance partner, and working capital and cash flow needs would be the main driver for 32% of those expecting to need external finance.
11 CapifySurveyConfidenceContact: Ian Wood, Marketing iwood@capify.co.ukDirector01613939536 For more details about Capify, visit: capify.co.uk