Number of SMEs predicting growth drops to 14%
The proportion of UK small and medium enterprises (SMEs) predicting growth in the next three months has dropped from 39% to 14% in the last three months, according to analysis by Hitachi Capital Business Finance.
The research found that 31% of business owners had scaled back their business, and 30% felt they would struggle to survive between now and the end of June.
The proportion of SMEs predicting growth for the next three months has remained consistently between 34% and 39% over the last seven quarterly surveys.
Only 4% of SMEs predict significant expansion in the coming months, although this is the same figure as in Q2 of 2019, and has only reached highs of 7% twice in the past seven quarters.
The industries in which business owners most feared collapse were hospitality and leisure (50%), retail (40%) and transportation and distribution (37%).
For the first time, every sector recorded more business leaders predicting contraction or collapse than growth.
Regionally, Wales (73%) and Scotland (69%) saw the highest proportion of small businesses expecting to struggle.
Small businesses in London were the most likely to predict some form of growth (19%).
Due to the COVID-19 outbreak, 32% of SMEs have temporarily closed, with 1% so far closing permanently.
A third (34%) have adjusted to a home working regime, 12% have moved entirely online, and 4% have diversified their services.
Only 13% have reported no change to their trading status.
Small businesses in hospitality (73%) and construction (47%) were most likely by sector to have temporarily closed.
Retail businesses were most likely to have gone online (24%), while IT (53%), media (51%) and legal services (50%) were the widest adopters of home working.
Among small businesses that were already largely online pre-crisis, 28% are now predicting growth, compared to 7% of offline businesses; 28% had seen no change to their trading status, compared to 13% of offline companies.
Enterprises that were not online were more likely to fear contraction or collapse, at 68% compared to 45% of their online counterparts.
Offline businesses were also more likely to have temporarily closed (37%) compared to those online (16%).
Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, said: “Small business outlook in recent years has at times defied gravity.
“Through the uncertain periods of the Brexit era, the Scottish Referendum and various UK General Elections, our study has shown small business outlook to be stoic and positive.
“The current climate, though, has brought a sudden and seismic shift in confidence and outlook.
“Many small businesses have been unable to trade and many are having to revise growth forecasts as the whole supply chain has been shaken by the current period of lockdown.
“Whilst we expected to see a big fall in confidence for this quarter, the true test will be if and how it recovers during the summer months.
“The fact that only 1% of small businesses have permanently closed their doors suggests the majority will bounce back.
“It is going to be a different world though, and at Hitachi Capital Business Finance we are working hard to help established small businesses to plan for change.
“We predict the digital economy will be bigger for the small business sector and business owners will have to diversify and adapt.
“As the country looks to get back on its feet the small business sector will be more important than ever to power economic growth for the country at large.”