Business News Round Up (03/03/2023)
Cash concerns grow for UK SMEs
Capify’s latest quarterly survey finds a dramatic drop in SME confidence as a result of declining cash balances and concerns over cash flow. The outlook from the UK’s SME community has fallen to a record low level, according to Capify’s most recent quarterly survey. Reflecting on the last quarter of 2022, the Business Confidence Survey revealed that SME confidence had fallen in response to ongoing economic uncertainty, rising prices and the impact of industrial action. Only 40% of respondents revealed turnover growth in the past 12 months, a 17pp drop year-on-year. At the same time, 40% of businesses reported a reduction of profitability last year, compared to 32% in Q4 2021. As a result, the cash position for Britain’s SME has deteriorated significantly in the past year. The average level of cash held in the bank has more than halved from £188,474 to £90,320. Correspondingly, over 50% are now significantly worried about the level of cash the business holds. The survey, which canvasses the insights of hundreds of SME business owners from across the UK on areas of business performance, outlook, and investment intentions, uses the data to produce an overall confidence score between -10 (very unconfident) and +20 (very confident). The confidence score now sits at -6.89, a 16-point decrease on the Q4 2021 score of 8.93.
Scottish firms remain resilient, but investment needed for future growth
A new report has suggested that business investment in Scotland has lagged for the majority of the past decade, warning of the detrimental impact this could have on productivity and longer-term economic growth. The Scottish business survey, compiled by the Fraser of Allander Institute and produced in partnership with Addleshaw Goddard, has marked 100 of these monitors by publishing analysis of the past 25 years of business in Scotland, highlighting how Scottish firms have coped with significant changes in the economic landscape. The latest findings show that business sentiment fell to a 25-year low at the start of the pandemic in 2020, significantly lower than that felt during the 2007/08 global financial crisis. While exporting levels have recovered since the lowest rate recorded by the monitor in 2020, the net balance of firms reporting an increase in current and expected export activity remains well below zero as of the fourth quarter of 2022. Additionally, the share of firms reporting increased costs reached their highest levels on record towards the end of 2021 and throughout 2022. In the institute’s most recent quarterly monitor, published in January, 90% of firms surveyed had seen their costs increase on the year, with just under half reporting that they expected to reduce operations in 2023 due to higher energy bills. However, the latest quarterly results found that businesses are increasingly taking steps to tackle the current energy crisis, with more than 60% of firms reporting that the energy crisis has encouraged them to speed up making energy-efficient improvements.
https://www.insider.co.uk/news/scottish-firms-remain-resilient-investment-29354928
UK businesses most optimistic in Europe
British business leaders are pessimistic about the country’s economy, but most still believe their own firm has a bright future. A majority of firms said they were optimistic about the performance of their firm over the coming year, while one-fifth said they were ‘very optimistic’. Business leaders’ outlooks on the broader economy and their own firm’s prospects have regularly converged in recent times. Multiple studies throughout the protracted Brexit process, and uncertainty of the Covid-19 pandemic, showed that while bosses often feared the worst when it came to the economic health of the UK, they did not seem to believe the same headwinds applied to them. Now, a new survey from Eden McCallum has shed further light on this widening disconnect, suggesting that the UK has Europe’s widest gap between personal and general expectations. While such a contrast was evident across all markets, the UK’s businesses stood apart from the rest – with 56% of respondents “somewhat pessimistic about the global economy” and 79% either “very pessimistic” or “somewhat pessimistic” about the domestic picture, standing in stark contrast to the 68% majority that were “somewhat” or “very” optimistic on their business’ outlook.
https://www.consultancy.uk/news/33669/uk-businesses-most-optimistic-in-europe
Northern deals decline as investors get cautious
Private Equity activity in the North of England has declined, according to new figures released today. KPMG analysed mid-market private investment in the region and found that investor caution has impacted on deals – however, there is some optimism. Nationally mid-market private equity deals were worth £46bn, down 12%. While in the North, there were 149 mid-market private equity deals in 2022, with a total value of £9.3bn. These numbers fell 19.9% and 7.9% respectively. When compared to pre-pandemic levels, both the number of deals and their value has increased nationally and regionally. The North of England accounted for 22% of all transactions in the UK market, with the majority in the North West. “Considering all the factors at play in the economy, the decline in volumes and values we saw across the North wasn’t quite as dramatic as many expected,” said Rick Stark, Head of Private Equity at KPMG in the North. Furthermore, it is encouraging that the Northern market has retained a healthy share of activity that reflects the continued strength of the investment community here and the quality stable of ambitious, investable, and attractive businesses that call the North home. With deal volumes and values comparing well in the North West and Yorkshire against pre-pandemic performance, there is a hint of optimism emerging that 2023 may be more stable and see some growth.”