By Daniel Hunter
Research carried out by Baker Tilly has revealed that 45% of small to medium-sized enterprises (SMEs) in the UK are confident about growth opportunities for their businesses over the next 12 months, yet are reluctant to invest in growth.
Almost half of all SMEs expected to increase turnover by 5% or more in the next 12 months. However 96% of respondents said they were content with their current levels of success and 84% were not prepared to take on more debt to expand.
The findings were revealed in the Baker Tilly Your Business Outlook 2014 which surveyed 750 SMEs across the UK about their expectations, opinions and priorities for the coming year.
Unsurprisingly, SMEs in London were the most optimistic when it came to growth, with 62% saying they were confident about their prospects for the coming year, with businesses in the Midlands the least confident at 39%.
But despite the feeling of optimism for growth, the survey revealed that many remained cautious about investing in resources.
Only 18% of those surveyed said they planned to take on new staff within the next 12 months, 20% planned to increase their capital expenditure, 23% planned to increase their sales and marketing spend, and a mere 16% planned to up their R&D spend.
More surprisingly, almost 90% said they had not used or were not planning to use any of the main tax incentives being offered by the Government to SMEs.
Overall, the research revealed the majority of SMEs surveyed were extremely risk- adverse and cautious about their business growth plans for the next 12 months. Even though 70% experienced some form of uplift in turnover last year, only 23% said they would seriously consider using alternative forms of funding, such as leasing or invoice finance.
"Despite the fact that over the last few years SMEs have faced extremely challenging market conditions, there is real optimism emerging around their prospects for growth," Neil Sevitt, Partner at Baker Tilly and SME specialist said.
"However it is difficult to envisage where this growth will come from, with the majority of these businesses remaining cautious about investing in the resources and activities to deliver growth. There should be more emphasis on research and development and more time dedicated to exploring international opportunities. Businesses also need to have confidence in less traditional funding options such as invoice finance, to help make their growth plans a reality.
"There is real concern that if SMEs do not take a long-term view and ignore opportunities for investment and expansion, economic recovery will remain hesitant and uneven. Businesses need to take more courageous and strategic decisions and make the best use of tax incentives and Government assistance available to them."
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