Barclaycard’s inaugural SME Barometer, in partnership with YouGov, has revealed that UK SMEs performed well last quarter – and are positive about the year ahead.
SMEs saw a strong end to 2019, with Barclaycard processing 5.1% more merchant transactions in the fourth quarter (Q4), compared to the same quarter the previous year.
Barclaycard, which processes almost £1 in every £3 spent in the UK, also reveals that the total value of merchant transactions is up 4.4% in the first half of Q1, compared to the first half of Q4 2019. This puts SMEs well on track to meet their quarterly revenue growth target of 3.3%.
Less than a month after leaving the EU, longer-term expectations are even more positive, with SMEs expecting to grow by an average of 6.3% over the next 12 months.
Small businesses in construction and real estate have the highest predicted quarterly growth at 6.3%, while professional services SMEs are most confident about the year ahead, expecting an annual boost of 9.8%.
Businesses in the North East, Yorkshire & The Humber were the most optimistic in both the short and long term – forecasting quarterly revenue growth of 5.3%, and an annual uplift of 7.9%.
SMEs in Scotland reported the highest performance year-on-year, with a revenue increase of 6.6%, and they have even stronger expectations for 2020, predicting annual growth of 7.7%.
Barometer sentiment score
To measure SME sentiment, Barclaycard and YouGov have aggregated SMEs’ viewpoints on ten key topics to create an overall index score out of 200, with anything over 100 indicating a positive outlook, while anything under 100 is negative.
The figures indicate that SMEs are generally feeling confident, with a combined sentiment index score of 110. One of the areas small businesses are most positive about is the strength of their cash flow (122), which could be explained by the growth in the range of solutions available for cash flow management, such as business credit cards, unsecured/secured loans, and invoice financing.
Challenges and opportunities
Interestingly, SMEs report the strength of the domestic economy as both the largest opportunity (19%) and biggest challenge (19%) they face this year. They reported the next top opportunity as technology (11%), while the top three challenges are rounded out by competition (14%) and the availability of skills (13%).
Wider economic outlook
Asked about prospects for the UK economy, on average businesses were positive, with one third of SMEs (33%) saying they were optimistic. The same percentage of SMEs (33%) also said that they felt positive about prospects for their sector.
Expectations jumped when it came to their own businesses, with 42% of SMEs feeling positive, indicating a determination to succeed despite the more balanced outlook for their sector and the broader UK economy.
In another sign of economic growth,17% of businesses reported that they had started to trade internationally in the past 12 months, with a further 10% intending to start doing so this year.
Finally, almost three in ten (28%) SMEs say it is taking clients longer to pay them than it did a year ago, with manufacturing suffering the most, with nearly half of businesses (49%) reporting this as a trend they’re seeing.
Rob Cameron, CEO, Barclaycard Payments, says: “Small and medium businesses are the engine of the UK economy and a vital indicator of economic wellbeing. It is crucial that we understand both their performance and their overall confidence, so that we can target support at the areas where it will have the most impact, driving further economic growth.”
Cameron concludes: “It’s very encouraging to see that SMEs expect to increase revenue in both the near and longer-term. As they grow and start to trade internationally, SMEs should look for a payments provider who can scale alongside them, helping them to meet the needs of their customers, both today and in the future.”
Emma Jones, Founder of Enterprise Nation,adds: “Being an entrepreneur has its peaks and troughs. With the economy stabilising, resilient self-starters and business owners are being realistic about the next 12 months. They are embracing opportunities like the potential for new partners and availability of support, and they are alive to the advantages that affordable technology can bring. In an environment with changing business conditions, a widening skills gap and inevitable competition, in the true spirit of entrepreneurship, the UK’s small businesses are getting on with the job with enthusiasm and determination.”