While corporate appetite for investment has reached record highs the UK’s small-to-medium-sized enterprises (SMEs) are still reluctant to invest, reports The Telegraph.
HSBC’s latest Ambitious Businesses report surveyed 750 SMEs and found that two-thirds of business leaders feel confident of the current economic climate but 36pc still believe it is too risky to invest heavily at this time.
Confidence has been boosted by rising revenues this year: micro businesses have increased turnover by an average of £30,000 to date, small firms have generated an additional £80,000, and medium-sized businesses grew revenues by an average of £440,000.
SMEs need to be bold with their capital now to capitalise on the upturn or risk “missing the boat”, the report said. Some 47 per cent of businesses leaders admitted that if they don’t invest in growth in second half of this year, they will lose out to the competition.
Amanda Murphy, head of business banking for HSBC, said, “There is still a sizeable minority of businesses that are cautious about the recovery and reluctant to make significant investments now. These firms risk falling behind their more ambitious peers.”
In contrast, larger businesses are increasingly bullish about their investment intentions. According to financial services firm Deloitte’s quarterly survey of chief financial officers, 65pc of CFOs claimed that now is a good time to take risk on their balance sheet, up from 45pc during the same period last year, the second highest level on record.
Cost-cutting is no longer a priority for the 112 CFOs surveyed, which include 31 from FTSE 100 companies and 37 from FTSE 250 firms. Just 26pc said that reducing costs was their main focus, down from 34 per cent last year.
“UK corporates have shifted from balance sheet repair to growth and business spending is emerging as a driver of the UK recovery,” said Ian Stewart, chief economist at Deloitte.
Further evidence of rising business confidence in the UK is provided by accountants BDO. Its Optimism Index has risen by 0.4 to reach 104.8 in June, driven mainly by the services sector. Manufacturers, in contrast, are under pressure due to a shrinking pool of skilled workers and potential cost increases, which has caused a slight dip in confidence.
Ongoing uncertainty over interest rate rises and other policy changes are the main issues dampening confidence, BDO found. “We still don’t know when interest rates will rise and businesses cannot plan for growth on the basis of vague or conflicting statements,” said BDO partner Peter Hemington.
A separate survey, also released today, reveals that the Aim market has raised a total of £2.4bn this year. This is the highest sum in six years, indicating a return to pre-recession investor confidence. According to research by UHY Hacker Young, the accountants, 82 companies have floated in the last 12 months, compared with 46 during the previous year.
Notable Aim listings from the past year include Luke Johnson’s Patisserie Holdings, the high end bakery, and discount shoe retailer Shoe Zone. The largest IPO was global payments provider Safecharge International, which raised £75.5m in the first week of April.
Departures from Aim also remain low, with a 75 per cent decrease in delistings over the last five years, from 275 in 2008 to just 70 in the last 12 months.