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Election and growing competition mutes business confidence in Q2

Our latest SME Confidence Tracker shows muted business confidence for Q2, with SME owners and decision-makers reporting their lowest expectations for sales since the first quarter of 2014.

Findings come at a time of uncertainty for the European economy as businesses delay making investment decisions. It appears that the General Election – and a surprise majority Conservative Government – led SMEs to adopt a ‘wait and see’ approach to investment.

Findings of our research reveal that a third (32%) of firms are not planning to invest in the three months leading to October, with this trend most apparent in the construction industry where 38% of respondents are adopting a cautionary approach to investment over the months ahead.

This notable caution, inspired by Election uncertainty, was compounded by increasing competition and this remains the number one challenge for many businesses. This is reflected in the sales outlook of the SMEs we surveyed as less than half (48%) predict sales growth over the next three months, compared to a bullish 57% in the second quarter of 2014.

Investment opportunities

Notwithstanding this evidently subdued confidence, results of our survey are not all bad, and perhaps more cautionary than indicative of longer-term concerns.

In fact, half of respondents saw an increase in the number of new customers, suggesting that a resurgence in confidence could be on the cards in Q3, once new customers have bedded-in.

Findings for Q2 show SMEs investing in existing employees through staff training and development. More than a third (34%) plan to invest in existing staff over the next three months, compared to only 23% in the same period the year before. Of these, two in five are investing in new technology or equipment and this highlights the need for SMEs to future-plan for the next investment decision on the horizon.

The Tracker shows that only 6% of firms plan to invest in overseas trade over the coming months and it is perhaps time for more SMEs to consider export as a viable means of growth.

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