Optimism in the SME business sector has recovered since the shock of the Brexit vote, but business owners doubt whether Theresa May’s government can really help them seize the opportunities, according to the latest quarterly survey carried out by accountancy, investment management and tax group Smith & Williamson, which has offices in Bristol and Cheltenham.
The latest Smith & Williamson Enterprise Index found that 73% of business owners, including those based in Bristol, Cheltenham and other parts of the West, were confident about their own prospects for the next 12 months, a surge of 20 points on the previous quarter. While economic confidence has recovered, SMEs’ faith in the government’s commitment to supporting private enterprise fell five points to 54 per cent, the lowest since 2014.
Mike Lea, managing partner at the 200-strong Bristol office of Smith & Williamson, said: “We expected an uplift following our last survey as business leaders accepted the vote and started to look for the opportunities. There is also a realisation that, for the time being, nothing has changed from a practical point of view and that, despite the rhetoric, there is a detailed and balanced negotiation to be had.
“However, the drop in confidence in the government highlights that SMEs have viewed the change in political leaders with suspicion. As we move into the Autumn Statement, it would be good to see the Conservative government show strong support for the entrepreneurial community, not least of all because of the fresh wave of uncertainty hitting many businesses following Donald Trump’s election as U.S. President.”
The Smith & Williamson Enterprise Index, which measures the views and confidence of close to 250 owner-managers and entrepreneurs in the UK, moved almost 10 points higher from 97.7 to 107.4 [its baseline being 100].
Mike explained: “Almost 1 in 2 respondents now expect the economy to improve over the next 12 months, a 16 per cent increase over the previous quarter. Given the deep economic inter-dependency between the UK and the EU, there is a sense that we can make Brexit work.”
SME businesses are the engine of UK growth
There have been a number of Enterprise Index records set in this third quarter of 2016; 69% of those exporting expect their turnover to increase over the next 12 months, 59% of respondents expect to increase headcount over the next three months and over 75% of businesses are planning for growth or acquisition in the next 12 months, a 16% rise on the previous quarter.
“For many, the Great British Bulldog, with its famous ‘can do’ attitude, is back and the recent growth statistics are hugely encouraging. Only time will tell, but it’s worth remembering that the recession inspired huge growth in the number of small businesses, alongside a surge in individual capitalism. These businesses are the engine of UK growth and will not be easily defeated.”
“It’s not a one way street and business owners are beginning to see commercial potential in Brexit. The depreciation of sterling has assisted our exporters and put the spotlight on our opportunities with the rest of the world. At the end of the day, with inter-dependencies and strong commercial ties, it is not unreasonable to suggest that national sovereignty might be consistent with friendly nations and free trade.”
However, Mike Lea warns that politicians must do more. “While some confidence has returned, it has not recovered its pre-Referendum level. The forthcoming Autumn Statement must therefore be pro-business, to maintain this positive momentum. One thing the UK’s growth engine does not need is more red tape and the plan for quarterly tax reporting to become mandatory in stages from 2018 has been much derided due to the administrative and cost burden that may be imposed upon them.”
Respondents almost universally agreed that the upcoming Autumn Statement needs to focus on supporting smaller and scale-up businesses with only 14 per cent believing otherwise. Finally, only 16 respondents absolutely disagreed with the statement ‘the plan for quarterly online tax reporting will have a negative effect on my business.’
He added: “It is vital that a modern Britain has a modern tax system to support itself. However, the introduction of this new system heralds a sea change in the way business records must be maintained and increased tax compliance reporting obligations but does not allow the necessary time for businesses to adapt and develop appropriate systems to be able to provide this information.”