SMEs say simpler tax system is top of government policy wish list
– UK SMEs say a simplified tax system is the top of their government policy wish list, followed by greater tax relief for exporters and better access to credit
– SMEs remain confident in the UK economy despite current uncertainty around the outcome of the election and six in ten (59%) plan to increase investment in their business this year, up from just under half (49%) a year ago
– More SMEs are looking beyond the Eurozone to China for market growth, with one in five (21%) SMEs now exporting to China, up from 15% in the previous quarter
New research, published in the latest Western Union Business Solutions International Trade Monitor (ITM), reveals the quarterly economic confidence survey of more than 1,000 UK small and medium-sized enterprises (SMEs) engaged in international trade.
The survey asked SMEs which government policy they would change in order to make them more successful. The top three are:
– A simplified tax system (87%)
– Greater tax relief for exporters (81%)
– Greater access to credit/finance (68%)
Confidence in the UK’s economic climate remains high at 84%, which can be attributed to improving macroeconomic conditions in the last 12 to 18 months. Nearly 90% of SMEs believe the improvement in the domestic economy is sustainable, and feel it is encouraging to see that over half of business owners (59%) plan to increase investment in their company in the near future, a 10% increase from the same period last year.
Despite deflation, nearly half (47%) of SMEs have seen rising costs in their businesses. To combat this, 22% said they will increase the prices they charge in the next 6 to 12 months, an increase from 18% nine months ago in Q3 of 2014.
Export markets all eyes on China
UK SMEs are also more confident about international trade conditions, with 91% of respondents feeling confident during the first quarter of 2015, compared to 87% the previous quarter. This is reflected in the fact that now over a quarter (26%) of SME business revenue comes from exports, a 10% rise from the previous quarter.
A fifth of UK SMEs (21%) now export to China, an increase from 15% the previous quarter. Exports to Europe remain consistent, with 78% of SMEs exporting to the Continent in the last 12 months. The research shows that sluggish Eurozone growth has led to more UK SMEs turning their gaze toward the Chinese and Indian markets. Over a third (34%) of UK SMEs said China has the greatest export market potential in the future, an increase from 25% six months ago. British SMEs also are increasingly regarding India as a growing export market, possibly in line with the country’s economic advances; 10% of SMEs believe India is the country with the biggest export opportunity, more than double the proportion from Q3 2014 (4%).
Optimism remains in the UK’s ability to sell overseas, with 45% of SMEs believing that the proportion of export earnings to overall revenue will increase in the next 12 months. This is a signal that export assistance from the UKTI as well as the Bank of England’s investment in micro-financing initiatives is being felt by business owners and exporters across the country.
Commenting on the results, Tony Crivelli, UK managing director of Western Union Business Solutions, said: “Despite Inflation falling to zero, we cannot ignore the fact that Britain’s businesses are still faced with rising costs. Whilst previous surveys showed that SMEs were reluctant to pass on these costs to customers, the mood is beginning to change; one in five plan to increase their prices in an attempt to protect profit margins.
“SMEs are seeking new customers in the growth markets of China and India. Both of these markets represent two of the largest growing middle classes across the globe. Expanding into these markets is not without risk; SMEs would be wise to implement robust risk management strategies in order to manage exchange-rate volatility when sending or receiving international payments to remain competitive in the global market.”
Top SME concerns:
SMEs continued to be worried about economic basics, but there is a distinct “creep” in concerns about regulation and political influence in the lead up to the general election and uncertainty and the UK’s position in the EU. Top SME concerns are:
– 64% – Overall health of the economy. Despite topping the list, this figure continues to fall; in the same quarter in 2014 the figure stood at 72%.
– 60% – Cash flow. SME worries have risen steadily over the last 12 months, rising from 50% in Q1 2014.
– 60% – Cheaper competitors.
– 56% – Currency volatility
– 53% – International regulation and compliance – breaking through the 50% mark for the first time
– 41% – Political influence, up from 32% in the previous quarter
