UK small firms more confident in face of risk, says report

UK Small firms are growing in confidence about the risks they believe they face, according to a new report.

Small and medium-sized enterprises (SME) in the UK are growing in confidence in the face of risk – even though some still face tough financial situations.

That’s according to the latest SME risk index from Zurich. The study analyses SMEs’ perceptions of the risks that they face to get a sense of their outlook on the business landscape and even though conditions are still tough for many, it’s clear they’re looking forward to a bright future.

The index fell from 42.17 in the second quarter of 2014 to just 39.92, indicating that more and more small firms feel that the risks they face are diminishing. It seems the majority of this decline came from a drop in concern over regulation and compliance, since that measure alone dropped by ten per cent from Q2 to Q3.

Interestingly, confidence is rising in spite of some real pressures that the survey lays out. A fifth of SMEs said their business had shrunk over the quarter, while 60 per cent said they doubted the economic situation will improve over the coming three months, even though economic data continues to point towards improvement.

“It’s great to report again that SMEs are continuing to feel better about the risks their businesses face, reflecting wider signs of growth in the UK economy,” said SME director at Zurich Richard Coleman.

“However, it’s clear that the wider economic environment is a source of increasing concern for SMEs even as their concerns over some of the more specific risks reduce.”

While it’s clear the UK isn’t totally out of the woods yet, other indicators have pointed towards a more positive outlook among SMEs. For example, the Sage Business Index recently found that SME confidence was at a four-year high.

Meanwhile, the British Chambers of Commerce has published the findings of its Workforce Survey, which showed that SMEs, as well as firms in IT, mining, energy and construction were the most positive about their chances of creating new jobs.

Within that, a third of micro and 38 per cent of small businesses had actually increased pay above inflation last year, which suggests that firms are confident enough to commit to hiring new staff and increasing their wages. Wherever they stand, the outlook is certainly improving for SMEs.