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SMilE – things are looking up for UK SMEs

In welcome news for UK business, the Office for National Statistics has reported industrial output growth significantly higher than expectations. 

In the latest 2014 figures, industrial production rose 0.9% whilst manufacturing grew 1% registering a year on year increase of 3.8%.

George Buckley, UK economist at Deutsche Bank, held a very punchy view of the latest figures saying:

“Q1 [2014] looks set to be another stellar quarter of growth for the UK”

Depsite this good news, fuelling belief in a broader based recovery, output still sits below pre-recession peak levels. Interestingly the only business sector that registered a year on year contraction was electricity and gas, mostly as a consequence of the mild, wet winter weather.

The good news on growth comes at a time that companies are confident enough to be planning an increase in capital expenditure and recruitment. That is the view of 80% of businesses surveyed in Deloitte’s quarterly survey of finance directors.

Deloitte estimated the UK’s biggest businesses were preparing to invest up to £200bn in the next two years.

However it isn’t just major corporations that are feeling a bounce in confidence. According to GE Capital, in a separate survey, SMEs are planning a spending surge to £58bn over the next 12 months, an increase of 12%.

Amongst this are plans to create an additional 600,000 jobs, an increase of 26% since the survey was last run in 2013.

Ilaria del Beato, chief executive of GE Capital UK, said:

“[UK SMEs] appear to have reached a crucial tipping point in their willingness to invest for growth and hire new staff”

Indeed GE Capital believe that the confidence of UK SMEs is higher than in any of the other European nations surveyed.

The British Chambers of Commerce took a more cautious view in their quarterly poll of 8,000 businesses however, warning that a more balanced recovery was essential for the long-term benefit of the UK economy.

BCC director general John Longworth said:

“More support is needed if we are to place the recovery on a sustainable, broader footing in the medium-term. Given that over the next year or so we face political change at home and abroad, long-term policies that support our businesses as they look to grow and invest are crucial.”

David Kern, chief economist at the BCC, added:

“The results of our survey suggest that growth is strengthening in the short term, and support our recent forecasts that the economic recovery is moving at a solid pace. But challenges persist and despite this progress, the recovery is not yet secure.

“UK growth is still reliant on consumer spending, driven by a resurgent housing market and a declining savings ratio. Given that UK personal debt levels are too high and need to fall, it will be hard to maintain growth levels in the medium term without significant structural changes to our economy.

“Our current account deficit is the largest in the G7 and will pose long-term risks unless it is tackled. Investment and exports must play a larger contribution to our economic future, or else there is a risk that our recovery could stall.”

How is your business feeling about the recovery, as punchy as Deutsche or more wary like British Chambers. Let us know.

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