PwC: SMEs are looking to the future

Friday 28 February 2014

Small and medium-sized enterprises (SMEs) - including limited companies - are confident about their prospects ahead of Budget 2014.

Research from PwC revealed smaller companies are showing signs of recovery and 52 per cent agree that the positive economic news coming out of the UK at the moment reflects their own experiences.

Indeed, three in ten SMEs claim they are in better financial health now than before the financial crisis.

Stephanie Hyde, partner and leader of PwC regions, said: "On balance, the UK’s private business leaders are positive about prospects for the year ahead. After years of cost cutting and efficiency, we’re seeing companies turn their minds to new products and services, and the future."

Businesses in London appear to be the most positive, with 53 per cent claiming they are now better off.

However, collectively, those companies established for between 11 and 15 years were able to weather the financial crisis in the best health.

"There are patches of good growth across the UK, despite many businesses still dealing with tough trading conditions and the demands of adaptation," Mr Hyde said.

Over the coming year, 38 per cent of companies claim they intend to hire new staff, with 67 per cent declaring redundancies are unlikely.

Pay rises for staff are also back on the cards for 31 per cent of businesses. Just 12 per cent of SMEs are considering pay cuts - an eventuality that is most likely in London.

This could suggest concern over the contents of Budget 2014 are minimal. Yet SMEs aren't without worry, and uncertainty about the  future economic environment is still the biggest factor preventing investment.

Costs and access to capital also continue to concern smaller companies and many will be hoping the government manages to step up to the plate in this regard.

Suzi Woolfson, partner and leader of PwC’s private business practice, said: "Companies are focusing on cash and looking for sources of finance to secure their business models for the long term. Today, this includes looking at the growing choice of alternative financiers such as peer to peer lenders."

When it comes to costs, 28 per cent of private businesses claim most worry about taxes and other business charges. Labour costs are a concern for 22 per cent, while 15 per cent fear supplier costs. Energy prices worry 14 per cent.

This comes after research from the Forum of Private Business showed time, money and expertise are the biggest challenges for firms that have downsized since the financial crisis.

Thirty-six per cent of small companies claim time will continue to affect how they run their business over the next 12 months, while 26 per cent cite cash as an issue. Thirteen per cent admit they lack the relevant skills they need to grow their business.

Alexander Jackman, head of policy at the FPB, claims that this "sends a clear message to government" that more needs to be done.

This may including further deregulation measures and efforts to minimise the impact of changes to employment law. Stabilising regulation was also considered to be key by Mr Jackman.

By Victoria McDonnell

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