Small and medium sized enterprise (SME) owners remain optimistic for the year ahead, despite concerns surrounding inflation and higher interest rates, research from Premium Credit reveals.
Premium Credit’s Insurance Index monitors insurance buying and how it is financed, and found that 50% of SMEs expected their revenues to increase over the next 12 months, compared with 9% who expected revenues to fall.
Around 15% expected revenues to be broadly unchanged, while 26% were unable to make a forecast.
The results were broadly similar to last year’s index, where 49% predicted an increase in revenue while 11% predicted a drop.
Around 14% expected revenues to stay the same, and 26% were unable to make a prediction.
However, 24% said they would raise prices for customers while 15% aimed to cut staff costs by not replacing people who leave and limiting pay rises.
Around 12% said they would put expansion plans on ice, while 11% planned to cut investment in their business, and the same number would consider more remote working to keep office costs down.
Just under one in 10 (9%) planned to cut back on office space and buildings.
Around 36% said their optimism was driven by plans to expand into new markets, while 34% were going to launch new products.
The continuing recovery from COVID-19 drove optimism for 25% of firms, and a hopeful 19% expected interest rates to fall in the year ahead.
Among firms that expected revenues to drop, the main reason was rising energy bills cited by nearly 46%, with 36% pointing to rising interest rates.
Around 33% said the rising cost of materials would hit revenues, and 28% said their client base had shrunk, with firms going out of business.
Late payment of bills remained an issue – around 22% of SMEs said the issue worsened in the past year.
That was slightly lower than the 24% who said the situation had worsened in the previous index.
The number who said late payment issues had improved also improved slightly, to 4% from 3% previously.
Adam Morghem (pictured), strategy, marketing and communications director at Premium Credit, said: “SME confidence remains high despite continuing economic challenges and the impact of higher inflation and interest rates.
“Managing cashflow remains a major issue however with many firms looking at potential cutbacks and price rises.
“Our existing support for vulnerable customers is tried and tested, and we are reviewing what additional support is appropriate during this time of uncertainty.”
