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UK SMEs optimistic about 2020 growth following a strong performance last quarter

25 Feb 2020 04:00

  • Barclaycard’s inaugural SME Barometer shows small and medium enterprises (SMEs) are upbeat about the year ahead, predicting annual revenue to rise by 6.3 per cent on average
  • Barclaycard sales data also reveals that UK businesses performed well in Q4 2019, with the total volume of merchant transactions up 5.1 per cent year-on-year
  • One in five SMEs said that they began trading internationally last year, with a further 10 per cent intending to start doing so in 2020
  • The new report combines billions of merchant transactions processed by Barclaycard with research data to provide an in-depth look at the prospects of the UK SME economy

Barclaycard today launches its inaugural SME Barometer, in partnership with YouGov, revealing that UK SMEs performed well last quarter, and are positive about the year ahead.

SMEs saw a strong end to 2019, with Barclaycard processing 5.1 per cent more merchant transactions in the fourth quarter (Q4), compared to the same quarter the previous year.

Barclaycard, which processes almost £1 in every £3 spent in the UK, also reveals that the total value of merchant transactions is up 4.4 per cent in the first half of Q1, compared to the first half of Q4 2019. This puts SMEs well on track to meet their quarterly revenue growth target of 3.3 per cent.

Less than a month after leaving the EU, longer-term expectations are even more positive, with SMEs expecting to grow by an average of 6.3 per cent over the next 12 months*.

Small businesses in construction and real estate have the highest predicted quarterly growth at 6.3 per cent, while professional services SMEs are most confident about the year ahead, expecting an annual boost of 9.8 per cent.

Businesses in the North East, Yorkshire & The Humber were the most optimistic in both the short and long term – forecasting quarterly revenue growth of 5.3 per cent, and an annual uplift of 7.9 per cent.

SMEs in Scotland reported the highest performance year-on-year, with a revenue increase of 6.6 per cent, and they have even stronger expectations for 2020, predicting annual growth of 7.7 per cent.

Barometer sentiment score

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 figures indicate that SMEs are generally feeling confident, with a combined sentiment index score of 110. One of the areas small businesses are most positive about is the strength of their cash flow (122), which could be explained by the growth in the range of solutions available for cash flow management, such as business credit cards, unsecured/secured loans, and invoice financing.

Measure

Index Score

Supply chain

130

Cash flow

122

Business sales pipeline

118

Business prospects

118

Raising finance

116

Sector prospects

108

Planned investment

104

UK economy prospects

100

Legislative environment

96

Business environment stability

92

TOTAL

110

Challenges and opportunities

Interestingly, SMEs report the strength of the domestic economy as both the largest opportunity (19 per cent) and biggest challenge (19 per cent) they face this year. They reported the next top opportunity as technology (11 per cent), while the top three challenges are rounded out by competition (14 per cent) and the availability of skills (13 per cent).

Wider economic outlook

Asked about prospects for the UK economy, on average businesses were positive, with one third of SMEs (33 per cent) saying they were optimistic. The same percentage of SMEs (33 per cent) also said that they felt positive about prospects for their sector.

Expectations jumped when it came to their own businesses, with 42 per cent of SMEs feeling positive, indicating a determination to succeed despite the more balanced outlook for their sector and the broader UK economy.

In another sign of economic growth, 17 per cent of businesses reported that they had started to trade internationally in the past 12 months, with a further 10 per cent intending to start doing so this year.

Finally, almost three in ten (28 per cent) SMEs say it is taking clients longer to pay them than it did a year ago, with manufacturing suffering the most, with nearly half of businesses (49 per cent) reporting this as a trend they’re seeing.

Rob Cameron, CEO, Barclaycard Payments, said: “Small and medium businesses are the engine of the UK economy and a vital indicator of economic wellbeing. It is crucial that we understand both their performance and their overall confidence, so that we can target support at the areas where it will have the most impact, driving further economic growth.”

“It’s very encouraging to see that SMEs expect to increase revenue in both the near and longer-term. As they grow and start to trade internationally, SMEs should look for a payments provider who can scale alongside them, helping them to meet the needs of their customers, both today and in the future.”

Emma Jones, Founder of Enterprise Nation, said “Being an entrepreneur has its peaks and troughs. With the economy stabilising, resilient self-starters and business owners are being realistic about the next 12 months. They are embracing opportunities like the potential for new partners and availability of support, and they are alive to the advantages that affordable technology can bring.

“In an environment with changing business conditions, a widening skills gap and inevitable competition, in the true spirit of entrepreneurship, the UK’s small businesses are getting on with the job with enthusiasm and determination.”

Notes to editors

* To estimate year-on-year growth, SMEs were asked to estimate how much their revenue would increase/decrease in Q4 2020, compared to their revenue in Q4 2019.

For more information, please contact:

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

About the data

Research was conducted online by YouGov on behalf of Barclaycard between 10 – 24 January, 2020. YouGov polled 562 senior members of staff working in UK SMEs, weighted by region to reflect SME distribution in the UK.

The report also includes data taken from billions of transactions processed by Barclaycard on behalf of its business clients each year.

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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About Barclays Market and Customer Insights

Barclays Market and Customer Insights helps businesses keep up to date with spending trends, monitors their market position and enhances their understanding of customer behaviour, based on actual customer spending. Visit insights.uk.barclays/MCI or email contact-MCI@barclays.com.