UK SMEs More Upbeat About Their 2023 Prospects, Despite Uncertain Economic Outlook, Barclays SME Barometer Reveals

• More than two-fifths (41 per cent) of UK small and medium-sized businesses (SMEs) feel optimistic about the prospects of their own business, the highest level in 9 months
• Yet more than half (55 per cent) are expecting revenue growth this quarter compared to the same period last year, with a third (33 per cent) planning on recruiting new staff in 2023
• The quarterly Barclays SME Barometer combines billions of merchant transactions, processed by Barclaycard Payments, with research data to provide an in-depth look at the UK SME economy

Barclays SME Barometer data¹ reveals an increase in the number of small and medium sized businesses (SMEs) feeling positive about their future, following a difficult second half of 2022.

Over two fifths (41 per cent) report feeling optimistic about their own business prospects, the highest level in 9 months, since Q2-22 (43 per cent)², whilst only 15 per cent report feeling pessimistic. More than half (55 per cent) of SMEs expect their business to grow this quarter, compared to the same period last year.

The research found that this growth is due to lead to further employment, as a third (33 per cent) of SMEs are investing in recruiting more staff in the next twelve months. On average, businesses intend to make seven new hires each in the next quarter. That’s an additional one, new hire when compared to the same period last year.

This comes as data from Barclaycard Payments, which processes nearly £1 in every £3 on credit and debit cards in the UK shows card payments to SMEs grew 3.5 per cent year-on year³, as businesses enjoy a full first quarter free of any pandemic restrictions⁴.

Macro-economic pressures

Despite the business optimism, wider economic concerns, such as high energy prices, continue to put pressure on SMEs. In fact, almost three-quarters (73 per cent) report feeling worried about their energy bills. In response, more than half (54 per cent) are now looking for ways to reduce the amount of energy they use to combat rising costs.

Overall, the issues small business leaders highlight as the greatest challenges over the next twelve months are the strength of the domestic economy (15 per cent), inflation (12 per cent) and increased utility bills (9 per cent). Yet, despite these concerns, only one in five (21 per cent) felt pessimistic about prospects of the sector they operate in.

Planning for growth

As businesses continue to remain positive about their own prospects, on average SMEs expect their businesses to increase revenue by 11 per cent by the end of year compared to Q4-22. With growth expected to be in the double digits year-on-year, leaders are keen to invest money back into their businesses.

A third (33 per cent) plan on recruiting new staff and 29 per cent plan on purchasing new equipment or technology to support business growth. Furthermore, 29 per cent will invest further in marketing to promote their business, and just under a quarter (23 per cent) will be reskilling or upskilling their current workforce.

Colin O’Flaherty, Head of SME at Barclaycard Payments, said: “The last few years have seen huge shifts for SMEs and they have had to become increasingly agile, adapting their businesses to support growth. Therefore, it’s encouraging to see more businesses reporting optimism about their prospects going forward and investing to future proof their revenue streams.

“Whilst SMEs remain optimistic, the impact of the wider economic climate means support for our local SMEs is key to navigating any further challenges that may come their way.”

Notes to editors

¹ Barclays commissions YouGov to conduct its quarterly SME Barometer research. This quarter’s study was conducted among 603 small and medium-sized business leaders, with a nationally representative regional and industry sample, between 20th January 2023 and 1st February 2023

² Comparison to Q2-2022 Barclays SME Barometer. Surveyed 574 small and medium-sized business leaders, with a nationally representative regional and industry sample, between 21st April 2022 and 9th May 2022

³ Barclaycard Payments transaction value data processed in January 2023 by SMEs in the UK is compared to the same period in 2022

⁴ Growth rates were also increased by the Omicron Plan B restrictions in January 2022, which caused a drop in non-essential spending at the time thereby inflating this year’s figures

NOTE: Micro businesses are defined as any business with a turnover of under £2m. Small businesses are those between £2m – £10m. Medium-sized businesses are £10m – £25m.

Source – Barclays