By Daniel Hunter

UK businesses are more confident about their future growth than they have been in the past three years, according to the latest annual business growth survey by Santander Corporate & Commercial.

The findings, which looked at growth expectations for companies with turnover of up to £20 million, revealed businesses are predicting turnover growth of an average 134% in the next five years1, equivalent to 18.5% a year, and up considerably from the 88% five-year growth forecast in last year’s survey2, and the 104% forecast in 20113.

This high level of confidence was reflected by Office for National Statistics GDP statistics released in July which revealed the UK economy grew by 0.6% in the second quarter. The figures were also matched by a stronger outlook for employment with around one in eight (13%) companies stating that hiring new staff is an immediate priority — the highest it has been since 2011.

In a further sign of increased confidence, SMEs also reported they are turning to acquisitions for growth, with the number reporting this to be an immediate priority doubling to 14% this year from 7% in 2012 and up from 5% in 2011. The number looking to grow organically also rose to 32%, compared with 29% in 2012 and 30% in 2011.

Despite the increase in optimism, however, businesses are still facing stiff challenges with half (50%) of those polled reporting they are focussed on ‘survival’ as an immediate priority. This is down from 54% in 2012 but higher than in 2011 when the figure stood at 47%.

The tough trading environment is still seen as the biggest challenge to growth by UK businesses, cited by 46% of respondents — although this is down from 50% in 2012. Access to capital was also seen as a challenge by more than a quarter of respondents (26%), up from 21% in 2012 and 18% in 2011; whilst 14% of businesses said their ability to hire and retain the right staff was a concern, up from 12% in 2012 and 8% in 2011.

Not surprisingly, smaller companies are the most optimistic, with those with a turnover of £50,000 — £100,000 forecasting 607% growth over the next five years. This is followed by businesses with a turnover of £250,000 — £500,000 (204%) and £1 million — £5 million (117%). The least optimistic were the largest firms, with businesses with a turnover of £5 million — £20 million predicting a 44% increase in turnover over the next five years.

Marcelino Castrillo, Head of SME at Santander Corporate & Commercial, said: “Understandably, many businesses remain cautious given the current environment. However, our latest growth survey reveals the most optimistic five-year outlook for three years. It also found that since 2011 more SMEs are looking at growing both by acquisition as well as organic expansion, which we believe is positive news for the UK economy. Figures that indicate firms are increasing efforts to hire new staff are also to be welcomed.

“Given the increase in optimism, we encourage businesses to remain focused on business fundamentals and plan responsibly for future growth. For companies that have survived the past few years of economic volatility and are well positioned to seize future opportunities, basics such as effective cash flow management, first-rate customer service and long-term strategic planning remain crucial to realising their growth ambitions.”

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