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Despite negative short-term outlook, UK SMEs begin road to recovery

Mon May 25 19:01:00 EDT 2020

  • UK SME revenue predicted to fall by 28 per cent in Q2, with almost three quarters of SMEs expecting coronavirus to have a significant impact for the next three months
  • However, this drops to 19 per cent who expect significant impact after 12 months, and to just 8 per cent after two years
  • In early signs of growth, Barclaycard Payments data reveals that the number of SME clients actively taking payments has increased by 24 per cent since the low point in early April, shortly after the start of lockdown.
  • Almost two-thirds of SMEs say they are planning to invest in their business over the next 12 months

Barclaycard Payments’ second SME Barometer found that, despite UK businesses predicting poor short-term performance, and reporting a dip in sentiment compared to last quarter, there are early signs that they have begun the road to recovery.

The report found that business sentiment has dropped by 31 points this quarter, down to 79 points out of a possible 200, with any score below 100 indicating a negative sentiment. This is paired with low expectations for business growth, with revenue predicted to fall by 28 per cent in Q2 and contract by 5.1 per cent over the next 12 months.

More than four in five (82 per cent) SMEs say coronavirus has already had a negative impact on their business and nearly three quarters (73 per cent) forecast coronavirus to continue to have a significant negative impact for the next three months.

However, many businesses remain positive about the future. Only one in five (19 per cent) think the virus will still have a significant impact after 12 months, and just 8 per cent feel it will still have a significant negative impact in two years’ time, with 70 per cent expecting a slight or no noticeable impact.

There are also early signs of growth in the short term, with Barclaycard Payments data revealing that the number of SME clients actively taking payments, both online and offline, has increased by 24 per cent since the low point in early April, shortly after the start of lockdown.

Demonstrating a determination to succeed, almost two-thirds (64 per cent) of SMEs say they are planning to invest in their business over the next 12 months. Their top areas of focus will be marketing (26 per cent) and new equipment and technology (20 per cent).

Konrad Kelling, Head of Small Business Acquiring, Barclaycard Payments, said: “It’s encouraging to see small and medium-sized businesses starting to come online again as we emerge from lockdown.  While we don’t expect an overnight recovery, the resilience and perseverance of small businesses gives us optimism as we look towards the next 12 to 24 months.

“It’s not surprising to see that small and medium-sized businesses feel the environment will continue to be challenging this quarter, with SMEs highlighting disruption to their supply chains, difficulty reaching customers and adapting to entirely new ways of working as key challenges. We understand why SMEs are worried – and we are working tirelessly to make it as easy as possible for small business owners to get the information and support they need.”

Business impact: size matters

Micro, small and medium-sized businesses are feeling the impacts of coronavirus differently. Micro businesses have been the hardest hit by the virus downturn, expecting revenue to drop by 30 per cent in Q2 compared to last quarter and reporting a sentiment score of 75, down 34 points from last quarter. Meanwhile, small businesses stand at a sentiment score of 88 and medium-sized businesses at 87.

Moreover, the way in which businesses have been affected also varies depending on size. Medium-sized businesses are most likely to say they’ve had to reduce staff hours or lay off staff (64 per cent), compared to a national average of 47 per cent. They were also most likely to report a drop in staff productivity – 41 per cent report this problem compared to a national average of just over a quarter (26 per cent). Small businesses were more likely to report disruptions to supply chains, at 47 per cent over a national average of 37 per cent.

Emma Jones, Founder of Enterprise Nation, says: “We’ve seen a 200 per cent increase in traffic to our website since the crisis began. Initially, businesses were searching for help to access financial support. Since then, we’ve seen a gentle shift as businesses start to look beyond the three-month horizon and have started to ask for advice on how to pivot, access their customers in new ways and increase their skills for when we can get back to business.

 “We are also seeing evidence that they are using this time to plan and absorb advice that they may not otherwise have had the ability to do in normal circumstances. Despite low levels of short-term optimism, it’s also good to see that founders are expecting to see a more positive future over the next two years.”

Sector breakdown

Graph of SME sentiment, broken down by sector*

Graph of expected quarter-on-quarter revenue growth, broken down by sector

About the data

Research was conducted online by YouGov on behalf of Barclaycard between 1 – 21 April 2020. YouGov polled 576 senior members of staff working in UK SMEs, weighted by region to reflect SME distribution in the UK.

This data has been compared to Barometer data, run by YouGov with 562 senior members of UK SMEs between 10 – 24 January 2020.

About the Barometer and input breakdown

*To measure SME sentiment, Barclaycard and YouGov have aggregated SMEs’ viewpoints on ten key topics to create an overall index score out of 200, with anything over 100 indicating a positive outlook, while anything under 100 is negative. The breakdown of key topics is below, including the change in sentiment score for each category from the Q1 Barometer.

Measure

Score Q2

vs. Q1

Business sales pipeline

87

-31

Planned investment

75

-29

Supply chain

111

-20

Legislation impact

89

-7

Cash flow strength

96

-25

Raising finance

81

-36

UK economy prospects

52

-48

Sector prospects

71

-36

Business prospects

83

-34

Business stability

47

-45

NATIONAL AVERAGE

79

-31

NOTE: Micro businesses are defined as any business with a turnover of under £2m. Small businesses are those between £2m – £10m. Medium-sized businesses are £10m - £25m.

Wider Barclays support for SMEs

Please find below an update on Barclays’ lending figures for BBLS, CBILS, CLBILS and CCFF. Data collected close of business Sunday 17th May:

Barclays has facilitated a total of £14.4 billion into the economy through the following schemes.

BBLS

  • Approved – 104,444
  • Value - £3.2 billion

CBILS

  • Approved – 6,764
  • Value – £1.4 billion

CLBILS

  • Approved - 24
  • Value – £114 million

CCFF

  • We’ve facilitated £9.8bn of commercial paper issuance for clients, representing 48% of total funding under the scheme [48% of total BoE CCFF funding as of Thursday 14th May]

Find out more about the businesses that we are helping to manage the impact of the COVID-19 pandemic here

Get Local

Nextdoor and Barclays have launched a new ‘Get Local’ partnership to help businesses let their local communities know they’re still open for business.

The ‘Get Local’ partnership will enable UK businesses on Nextdoor to directly connect and communicate with new customers, as well as existing local customers. The new features will allow businesses to opt-in to a dedicated ‘Coronavirus Open for Business Directory’ so that residents can easily see which local businesses are trading.

For more information, please visit https://go.nextdoor.com/local-businesses

For more information about the press release, please contact:

Barclaycard:
Oliver Stevenson, Media Relations, +44 (0) 207 116 3837, oliver.stevenson@barclaycard.co.uk

About Barclaycard

Barclaycard, part of Barclays Bank PLC, is a leading global payment business that helps consumers, retailers and businesses to make and take payments flexibly, and to access short-term credit. In the UK we process nearly £1 in every £3 spent using credit and debit cards, and in 2019 we processed over £272bn in transactions globally. We also partner with a wide range of organisations across the globe to offer their customers or members payment options and credit.

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