SMEs in Scotland report revenue growth but brace themselves for turbulent times ahead

25/08/2022
  • Scottish small and medium-sized businesses (SMEs) report revenues increased by 11.4 per cent on average in Q2 this year against the same period in 2021 with more than half (54 per cent) expecting turnovers to increase further by the end of Q3
  • While over three quarters (77 per cent) fear the impact of recession, 78 per cent of Scottish SMEs are neutral (45 per cent) or optimistic (33 per cent) about their own business’ prospects
  • Over half (57 per cent) of SMEs in Scotland say they plan to invest in their business over the next 12 months, turning to recruitment (34 per cent), marketing (30 per cent) and purchasing new equipment or technology (21 per cent) to shore up their operations.
  • The quarterly Barclays SME Barometer combines billions of merchant transactions, processed by Barclaycard Payments, with research data to provide an in-depth look at the UK SME economy

MORE than two-thirds (63 per cent) of Scottish small and medium-sized enterprises (SMEs) saw revenue increases in the second quarter of this year against 2021, compared to 55 per cent UK wide, reveals the latest quarterly Barclays SME Barometer1. And a similar number (65 per cent) of small businesses also expect further gains this quarter despite concerns about a looming recession.

Data from Barclaycard Payments, which processes one in three debit and credit card payments in the UK, shows an annual rise of 19.4 per cent2 in the value and 21.5 per cent in the volume of payments made to SMEs in Scotland between April and June this year.

The research found that to support this growth, nearly two fifths (34 per cent) of SMEs in Scotland responded that they increased their number of full-time employees in Q2.

This trend is also expected to continue in quarter three, as on average small businesses predict a further 16.7 per cent increase in their turnover for July to September, against the same period a year ago.

Macro-economic concern

This reported revenue growth comes, however, at a time when more than half (54 per cent) of Scottish small business leaders are pessimistic about the prospects of the UK economy, with 87 per cent concerned over rising cost of bills and inflation, 77 per cent worried about the UK going into a recession and 83 per cent worried about the soaring cost of energy.

Last quarter, 56 per cent of Scottish businesses were concerned that increased living costs would impact consumer spending, and 30 per cent feared it would make them less competitive as they would need to increase prices.

These concerns have dropped slightly in Q3, with over half (51 per cent) businesses worried about consumer spending levels and 52 per cent now worried that rising costs will impact their competitiveness.

Self-confidence and business investment

Despite the backdrop of uncertainty, 78 per cent of Scottish SMEs are neutral (45 per cent) or optimistic (33 per cent) about their own business’ prospects, with half (50 per cent) describing their current cashflow as strong.

Over half (57 per cent) of SMEs say they plan to invest in their business over the next 12 months, turning to recruitment (34 per cent), marketing (30 per cent) and purchasing new equipment or technology (21 per cent) to shore up their operations.

Colin O’Flaherty, Head of SME at Barclaycard Payments, said: “The current trading environment brings a host of challenges for businesses, but as we saw throughout the pandemic, SMEs are resilient and our research shows they are proving this again this in the face of rising costs and inflation.

“We are confident they will prove adaptable and innovative to meet the challenge, but now more than ever, the nation must pull together to continue its support for local SMEs and provide them with the support they need.”

Earlier this year, to help SMEs recover and grow, Barclays launched its Business Health Pledge, a package of support aimed at boosting small businesses. The bank is hosting 50 masterclasses a month this year, with focuses on managing cash flow, business growth and support for wellbeing as well as national, sector specific. Find out more at https://labs.barclays/business-health-hub

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