SME confidence remains robust with turnover growth and investment plans

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Confidence amongst UK SMEs remains robust, with nearly two-thirds forecasting growth and increased levels of investment, Paragon Bank research has found.

The survey of over 500 SMEs, commissioned by FTSE250 specialist bank Paragon, found that half of businesses were confident in the prospects for their company over the next 12 months, with 57% also confident about the broader sector in which they operate. Conversely, less than one in five (18%) were not confident in the year ahead for their business, with 16% less confident from a sector perspective.  

The research, carried out by Opinium, found that 62% of SMEs expect higher turnover in Q1 of 2023 compared with the same period last year – with 24% of firms anticipating growth of over 5%.

The research also found that expectations for turnover growth continued throughout 2023, with 63% of firms predicting year-on-year turnover increases in Q2, followed by 65% in both Q3 and Q4.

SMEs also expect cashflow to improve across the next 12 months. Half of SMEs (49%) anticipate improved cashflow during Q2, rising to 52% in Q4 – a further 35% of businesses expect cashflow to remain steady during Q2, falling to 28% in Q4.

Only a minority of firms anticipate weaker cashflow across the same periods, with 14% anticipating a reduction in Q2 and 16% in Q4.

The optimism of SMEs is matched by planned investment in their operations. Amongst the areas SMEs plan to invest include:

  • Machinery/equipment investment (24%)
  • IT/technology investment (23%)
  • Staff recruitment (21%)
  • Staff development (18%)
  • Commercial vehicles investment (17%)
  • Existing premises (15%)
  • Fleet or director vehicles (14%)
  • Marketing and PR (12%)
  • R&D (12%)

Businesses remain confident despite the challenges presented by the high inflationary environment of 2022. As well as energy costs, companies said they experienced increased costs across fuel (86%), raw materials (83%), salaries (80%), asset prices (78%) and premises (64%).

The research also identified modest concerns regarding the quality of service provided to SMES by suppliers over the last 12 months:

  • Supply of goods and services: Worsened (35%)/Improved (33%)
  • Cost of good and services: Worsened (41%)/Improved (36%)
  • Reliability of suppliers: Worsened (31%)/Improved (30%)
  • Ability of suppliers to meet our needs: Worsened (33%)/Improved (32%)
  • Improvements were though found to key services:
  • Supplier hitting service level agreements: Worsened (30%)/Improved (22%)
  • The environmental, social, and governance practices of suppliers: Worsened (35%)/Improved (13%)
  • Payment term offered: Worsened (32%)/Improved (18%)

Commenting on the research findings John Phillipou, Paragon’s Managing Director of SME Lending, said: “With expectations for growth and plans to invest in their businesses, SMEs are ready to help the economy recover from the challenges of recent years. It is clear from the research data that UK SMEs are optimistic and resilient – and it is therefore vital that they can continue to access the financing required to support their growth plans.” 

He continued: “As SME lending specialists, Paragon understands that each business is unique and requires bespoke financing solutions. By working closely with clients to learn about their circumstances, we look forward to delivering financing packages that will benefit SMEs throughout 2023 and beyond.”

 

For further information contact:

Tom Frew
Media Relations Manager
Paragon
E: [email protected]
www.paragonbank.co.uk 


 

Notes to editors: 

Paragon Bank PLC a subsidiary of the Paragon Banking Group PLC which is a FTSE 250 company based in Solihull in the West Midlands. Established in 1985, Paragon Banking Group PLC has over £14 billion of assets under management, helping more than 340,000 customers to achieve their ambitions.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551