Cautious optimism sees SMEs rally for recovery

Ahead of the Government’s roadmap next week, small and medium enterprises (SMEs) are getting ready for post-pandemic life, with three in 10 (32 per cent) saying they are prepared for no more national lockdown measures.

SMEs predict an 8.1 percent rise in revenue in 2021, and nearly four in ten (39 percent) say they are optimistic about their prospects. Though the future still looks uncertain for many, nearly a quarter (24 percent) say their output has surpassed or returned to the pre-pandemic levels of January 2021.

The quarterly Barclaycard Payments SME Barometer also shows business sentiment is beginning to look more positive, at 98 points out of a possible 200. While any score under 100 indicates negative sentiment, this is the highest score reported forever of the pandemic. Sentiment has risen steadily over the past three quarters from a low point of just 79 points in Q2 2021 when compared with an initial pre-pandemic high of 110 in February 2021.

However, though cautiously optimistic, SMEs continue to be weary of continued upheaval, and are braced for further short-term losses, anticipating an initial revenue drop of 7.5 percent over the first three months of the year.

Looking past lockdown

The quarterly report reveals that four in ten (42 percent) SMEs think the current lockdown will be the final ‘strict’ or national lockdown and, of these, 70 per cent are optimistic or cautiously optimistic for what’s next. However, there's more apprehension when it comes to restrictions that affect businesses in some way with only 27 per cent thinking restrictions that impact them will end by April, rising to 49 per cent by June.

When economic recovery does get underway, the top ways SMEs are preparing to take advantage of it is by: increasing marketing spend, with 62 per cent having done so or likely to; saving cash (42 per cent); or changing their offering to focus on customers once life opens back up to a ‘new normal’ (42 percent).

SMEs expect the greatest growth opportunities in recovery will be increased consumer footfall (21 percent) and supply chains returning to normal (17 percent).

Ecommerce will also continue to be key; though overall spend (including in-store transactions) was significantly down, Barclaycard Payments data for that first five weeks of 2021 shows the typical daily value of online SME transactions is up six per cent compared to the same period in 2021.

The other key aspect affecting SMEs is, obviously, the UK’s departure from the European Union, with international trade accounting for 23 per cent of SME revenue before the pandemic. With the UK now setting its very own trade policy, small and medium companies are looking for new global opportunities – with SMEs citing the most positive aspect of leaving the EU being the possibility of new trade deals in countries outside of it (19 per cent).

Rob Cameron, CEO of Barclaycard Payments, said: “While 2021 offers many of us hope for a national recovery, small businesses especially are looking forward to emerging from coronavirus uncertainty.

“SMEs have proven their agility, adapting quickly to obtain online, catering to a nation stuck both at home and changing how their teams get the job done.

“While the world may be returning to some form of normal this year, small businesses have realised the benefits of flexible working and digital skills, with lots of already looking at what improvements they are able to take forward into 2021.”

Role of tech

Businesses increased their investment in technology to stay operational throughout the pandemic and are committed to this investment even after lockdown ends. In Q4 2021, half (50 per cent) of SMEs said they committed to digital upskilling for themselves or their staff, and in Q1 nearly a quarter (24 per cent) plan to continue this investment even if restrictions ease, while an additional 23 per cent also intend to continue increasing activity on social networking (23 per cent).

Nearly three in ten (29 percent) SMEs will invest in new equipment and technology in 2021, and lots of view technology as the top chance of growth over the next year (13 per cent).

Boosting employment

Small businesses are optimistic about their employment ability as lockdown eases. Three in 10 (30 percent) SMEs expect their number of full-time employees to improve over the course of 2021 – a metric that has promisingly held steady from Q4 predictions (also 30 per cent).

Since the start of the pandemic one fourth (25 per cent) of SMEs say they have seen an increase in job applications. Transport businesses have seen the largest rise (41 percent), with more than half (52 percent) of SMEs in this industry believing a smaller business, or working away from the city centre, is becoming more appealing to prospective candidates.

What’s more, SMEs are planning to keep flexible working once they bring their staff to work after lockdown, with 41 percent saying they will continue offering flexible working and don’t mind where their staff are based. Of these not asking for a return to the office, these changes have led to long-term mind-set shifts – with three in 10 (30 per cent) SME employers saying they no longer feel staff need to be around the premises to do a good job.

Kate Hardcastle MBE, independent expert, said: “SMEs have experienced to show a great deal of resilience and entrepreneurism to outlive what has been an unprecedented time, and even many have shown great ingenuity and creativity.

“Finding new methods to work, and maximising the opportunity with new technology, has enabled some businesses to build greater engagement with customers.

“There is certainly cautiousness about the months and even years ahead, and there's no trivialising the tenacity that will be required, yet as more organisations find better working practices along the way for stakeholders, customers and local-entrepreneurism – this might also symbolise a significant turning point for many businesses.”