By Daniel Hunter
The Smith & Williamson Enterprise Index measures entrepreneurial confidence in the economy. Now in its second year, the initial benchmark was set at 100.
For the second quarter of 2014, the Index’s 324 respondents maintained a higher level of confidence than they felt through 2013, although the overall score was one point lower than reported in the first quarter, down from 108.7 to 107.7. This shows a reassuringly steady level of confidence despite the Bank of England signalling that interest rates could start to rise later this year.
Notably, 92% of the Index’s respondents are confident about their businesses prospects and the economy over the next 12 months. This is in line with data released by the Office of National Statistics in June, which reported that the UK economy remained 0.6% smaller than before the start of the financial crisis in the first quarter of 2014, but looks set to overtake its pre-crisis level this quarter.
The latest Enterprise Index also found that respondents were largely uninspired by the business measures announced by the Chancellor in the 2014 Budget; almost 70% were unable to identify any direct benefit for their business.
Despite this lack of enthusiasm, it was accepted that the Chancellor is generally doing a good job for the economy, with some welcome measures including the changes to pensions. A significant number of participants also agreed that the export credit facility for SMEs looks very promising. However, when asked whether they expected their export turnover to increase in 2014, only 22% of respondents indicated that they currently export at all.
David Cameron and Vince Cable have labelled SMEs the lifeblood of our economy on numerous occasions and while it is true that many small and medium sized businesses are selling their services and products abroad, the statistics from this quarter’s Index reveal that a great deal are not yet realising their global potential. In addition, the CBI has recently released research stating that the public procurement of goods and services in 12 key emerging markets will almost triple to £452 billion by 2030, but has also warned that the UK will only capture £11 billion of this growth if its current market share stays the same.
One of the most interesting statistics revealed in this quarter’s Smith & Williamson Index related to apprenticeships. Almost 70% of participants indicated that they are either planning or are in the process of hiring apprentices to work within their businesses.
Over half of responding entrepreneurs reiterated their concerns about the UK’s education system and its ability to prepare students for the workforce. The Government is raising the school leaving age to 17 but, as a measure on its own, it is questionable how effective this will be in tackling the skills gap.
Guy Rigby, head of entrepreneurial services at Smith & Williamson, commented on the results of this quarter’s Index: “It is encouraging to see a steady level of optimism continuing among the UK’s entrepreneurs. However, it seems that additional effort should be made to put school leavers’ future business prospects on the education agenda, and to increase awareness of entrepreneurship in schools.”
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