SMBs see revenue growth but brace for turmoil ahead

  • UK small and medium-sized enterprises (SMEs) say their revenues grew by 11.4% on average in the second quarter of this year compared to the same period in 2021, with more than half (54%) expecting this that turnover increases further by the end of the third quarter
  • To support this growth, a third (34%) of SMEs increased their number of full-time employees in the second quarter, hiring an average of seven new employees each.
  • While more than three-quarters (77%) fear the impact of the recession, 83% of SMEs are neutral (45%) or optimistic (38%) about the prospects for their own business.
  • The Barclays Quarterly SME Barometer combines billions of merchant transactions, processed by Barclaycard Payments, with research data to provide in-depth insight into the UK SME economy.

More than half (55%) of small and medium-sized enterprises (SMEs) saw their revenues increase in the second quarter of this year compared to 2021, the latest Barclays Quarterly SME Barometer reveals1. And a similar number (54%) of small businesses also expect further gains this quarter despite worries about a looming recession.

Data from Barclaycard Payments, which processes one in three debit and credit card payments in the UK, shows an annual increase of 7.3%2 in value and 18.1% in volume of payments made to SMEs between April and June of this year.

The research found that to support this growth, a third (34%) of SMEs increased their number of full-time employees in the second quarter, hiring an average of seven new employees each.

This trend is also expected to continue in the third quarter, with small businesses on average expecting a further 10% increase in revenue from July to September, compared to the same period a year ago.

Macroeconomic concern

This reported revenue growth, however, comes at a time when more than half (53%) of small business owners are pessimistic about the outlook for the UK economy, with 77% concerned about rising bill costs and inflation. , 77% fearing a recession and 74% worried about soaring energy prices.

Last quarter, 51% of businesses worried that the rising cost of living would impact consumer spending, and 28% worried that it would make them less competitive as they would need to raise prices.

This increased in the third quarter, with nearly three in five companies (59%) worrying about falling consumer spending and 41% now worried that rising costs will affect their competitiveness.

Self-confidence and business investment

Despite the backdrop of uncertainty, 83% of SMEs are neutral (45%) or optimistic (38%) about the prospects for their own business, with half (50%) describing their current cash flow as solid.

More than three in five SMEs (68%) plan to invest in their business over the next 12 months, looking to recruitment, marketing and technology to shore up their businesses. On average over the next 12 months, more than a third (38%) of SMEs say they intend to invest an average of £13,855 in recruitment; 30% on average of £9,948 on marketing; and 25% on average of £11,082 on new technology and £10,696 on upgrading existing technology, respectively.

August bank holiday boosts sales

Of businesses that traded over the August bank holiday weekend, more than a third (33%) said they would not usually have been open, but extended their working hours to generate more cash. The long weekend came with high expectations, with half (49%) of open SMBs expecting this to be their biggest sales weekend of the year so far this year, beating Easter and the four-day Jubilee weekend.

Colin O’Flaherty, Head of SMEs at Barclaycard Payments, said: “The current operating landscape poses a host of challenges for businesses, but as we have seen throughout the pandemic, SMBs are resilient and our research shows they are proving it again in the face of rising costs and inflation.

“We are confident that they will be able to adapt and innovate to meet the challenge, but now more than ever, the nation must come together to continue supporting local SMEs and providing them with the support they need.”

Earlier this year, to help SMEs recover and grow, Barclays launched its Business Health Pledge, a set of support measures aimed at boosting small businesses. The bank is running 50 masterclasses a month this year, focusing on cash flow management, business growth and wellness support, as well as country and industry specifics. Learn more about https://labs.barclays/business-health-hub

ENDS

Notes to Editors

1Barclaycard Payments commissions YouGov to conduct its quarterly SME Barometer survey. This quarter’s study was conducted among 577 small and medium-sized business leaders, with a nationally representative regional and industry sample, between July 27, 2022 and August 16, 2022.

2Barclaycard Payments transaction data processed between July 1, 2022 and August 14, 2022 by SMEs in the UK compared to the same period in 2021.

To measure SME sentiment, Barclaycard and YouGov aggregated SME views on 10 key topics to create an overall index out of 100, with anything above 50 indicating a positive outlook, while anything below 50 is negative. The breakdown of key topics is below, including the sentiment score evolution for each category compared to previous barometers.

Measure

Score

Q3 2022

Score

Q2 2022

Score

Q1 2022

Score

Q1 2021

Score

Q4 2021

Score

Q4 2020

Commercial sales channeling

60

60

60

53

65

58

Planned investment

51

52

53

46

62

55

Supply Chain

61

60

61

60

60

54

Impact of legislation

45

44

44

55

56

59

Cash flow strength

63

64

63

58

56

48

Raise funds

53

53

55

51

56

51

UK Economic Outlook

34

38

46

40

50

44

Sector outlook

50

53

57

100

50

34

Business prospects

57

59

61

110

55

44

Business stability

37

41

44

71

35

32

NATIONAL AVERAGE

51

52

55

49

49

48

NOTE: Micro enterprises are defined as any enterprise with a turnover of less than 2 million euros. Small businesses are those between £2 and £10 million. Medium-sized businesses cost between £10m and £25m.