Northern Ireland’s small and medium-sized enterprises are deeply concerned about the outlook for the economy, new data from the Close Brothers Business Barometer reveals, with most business leaders wary about their prospects for growth. The research suggests SME confidence has actually fallen back since the beginning of the year, with businesses now buffeted by a broad range of headwinds.
Fewer than one in ten Northern Irish SMEs in the latest barometer survey now say they are confident about the steady recovery of the economy, with a further 40% suggesting that the path back to prosperity will be slow, even though they feel the worst of the challenges associated with the economy are now behind us. Almost a quarter (24%) of SMEs told Close Brothers they feared the economy could decline again, only slightly down from the 26% of SMEs that felt this way at the beginning of the year.
In addition, more than a quarter (28%) actually warned that Northern Ireland had not yet seen any true economic recovery, up markedly on the 17% that reported this negative outlook at the start of the year.
The pessimism of so many SMEs reflects a variety of problems. The macro-economic outlook worries many business leaders, as the UK faces uncertainty ahead of the referendum on European Union membership later this month and the global economy continues to waver. But firms also face issues such as the higher costs of the national minimum wage, pension auto-enrolment and new tax regulation.
Just a fifth (20%) of SMEs in the region expect their business to expand over the next 12 months, while half are anticipating no growth at all. A small but significant 12% even expect to see their business contract over the year ahead.
“SMEs are deeply concerned about their prospects for the next 12 months,” warned Ciaran McAreavey, MD of Close Brothers Commercial Finance. “We know that many entrepreneurs and business leaders have exciting and ambitious plans for their companies, but fear their plans are not achievable against a backdrop of economic uncertainty and rising costs; in many cases, SMEs now feel even more pessimistic than they did at the beginning of the year.”
Close Brothers Commercial Finance’s figures also indicate that SMEs can ill afford another 12 months of disappointing results, with many having achieved no growth over the past year. 64% said their businesses hadn’t grown at all during the past 12 months.
“Our latest Business Barometer paints a worrying picture of the fragile state of confidence amongst Northern Ireland’s SMEs today,” added McAreavey. “After the financial crisis of 2008, we saw similar low levels of confidence in SMEs. We found it was the businesses that explored every possible funding option and ensured their enterprises were constructed on firm financial foundations that were able to ride out the uncertainty and continue working towards their growth ambitions.”