By Daniel Hunter
The latest quarterly findings from BDRC Continental’s Business Opinion Omnibus reveal that small to medium sized enterprises (SMEs) continue to remain cautiously optimistic about the UK economy, posting a net optimism score of +10% in Q1 2013, more than twice the level seen in the same period last year.
While this signals that at an overall level, SMEs have started recovering from the lows of economic pessimism experienced over the past couple of years, it remains to be seen whether this recovery is sustained in 2013 amidst fears of a triple dip recession.
As for UK SMEs’ own trading prospects expectations, that has remained stable this quarter at a net balance score of 27%.
Typically SMEs are considerably more confident in their own trading prospects than in the performance of the general UK economy and figures recorded this quarter continue that trend. However, over the past couple of quarters, this gap has narrowed somewhat, bringing levels of business confidence and economic confidence relatively more into line with each other.
In the second half (H2) of 2012, SMEs based in the Midlands showed a significant increase in confidence in their own trading prospects, rising above the net balance score for the UK and the other regions. At a net score of +33%, this was also nearly twice the level of business confidence seen amongst Midlands SMEs in H1 2012.
However, this improvement has not been sustained going in to 2013: SMEs in the Midlands recorded a fall of 9% in net balance to 24% this quarter, bringing them into line with other regions in the UK, where confidence remained more stable.
The decreased confidence in trading prospects amongst Midlands-based businesses has coincided with the sharp decline in optimism towards the regional economy, from 26% in the last quarter to -1% this quarter in this region.
However, this is most likely to be a case of self-correction in economic expectations among the Midlands-based SMEs rather than anything symptomatic of larger underlying causes in the regional economy.
Across sectors, business and economic confidence has remained fairly stable
By sector, levels of confidence in trading prospects and overall optimism in the economy have remained stable this quarter with the services sector remaining relatively, the most buoyant of all.
However, it is encouraging to see that despite the recent negativity surrounding the UK manufacturing industry related to stagnation of growth and output issues, business confidence in their own trading prospects has shown steady growth over the last year for this sector, net balance rising steadily from -5% in Q2 2012 to 10% in Q1 2013.
Confidence towards both trading prospects and the economy in general remains lower within the retail / distribution sector.
“Economic optimism amongst SMEs has remained low but stable going into 2013, despite the constant threat of a triple dip recession in the UK, unresolved Eurozone crises and stagnation of growth in the domestic economy," Swagata Sen, Business Opinion Omnibus Manager, said.
"Additionally, it is encouraging to note that SMEs continue to remain fairly confident of their trading prospects over the next year.
"However, regional variations in optimism and expectation of business prospects have evened out this quarter with the growing confidence amongst the Midland-based SMEs that we saw previously, not sustained this quarter."
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