Prime Blog

February 2015

My thoughts on the “CBI Quarterly SME Trends Survey”

Positive outlook
In 2010 I started writing a regular blog, the first one looked at how some of our clients had reacted to the recession and managed to trade successfully. The plan was to look at how clients manage change in those times of uncertainty and share their stories. Well this is the long awaited second instalment, because I never got round to writing another one!

In the subsequent 5 years we have exited recession, double dipped, although apparently we didn’t as they changed the stats later, and now it is generally accepted we are definitely out of recession and things are picking up.

The latest CBI survey of SME’s agrees that things are positive, with optimism still good for the future.

This reflects what I am seeing with my clients, there was a notable change of optimism midway through 2013 and this has continued since. I think the change was caused not by people believing things would get better in the future, but after five years they finally decided that the economy would not get any worse and started to do the things they had put off for years, such as buying that machine they needed, or taking on that extra person they had delayed. It seemed that the whole market had the same thought at the same time and this kick started the recovery.

Business is hard
This appears to come as a bit of a surprise to the business owners I have spoken to. When we were in recession everybody accepted it was hard in business, and they had to work extremely hard in securing the future of the business, whether this was by finding the sales, reducing the costs, increasing efficiencies and managing the working capital.

Now that things are more positive businesses are still facing the challenges above, although admittedly nowhere near the same extent. However nearly every business is complaining about lack of resources to do all the work they have but primarily around the shortage of labour.

According to our clients they are facing higher staff turnover, which is partly due to the increased competition because of skills shortages, but also the fact that employees were too cautious to move on during the recession, but now have the confidence to do so.

However when you look at the CBI trends, SME’s believe the factor most likely to limit output, is not capacity, it is the ability to win new orders, so business owners are still concerned about finding the sales.
Most businesses say that they have the necessary capacity to do their expected work level, which does seem to be contrary to the messages we are told by clients. Although I guess people are always more worried about winning sales as this is the hardest thing to predict, most businesses can forecast their costs much more easily?

The survey also reflects that of those businesses looking to increase plant, more are doing this to increase efficiency than to expand capacity, which makes sense considering they are finding it hard to recruit. Now is also a great time to invest in plant as there are 100% capital allowances on the first £500,000 of expenditure for qualifying companies.

Change is always required
So in summary SME’s are positive about the future but are still finding it hard to be successful, which is as it should be otherwise anybody could be good at running a business!

My advice is to make sure you have recently re-evaluated your business plans, your approach five years ago when your priority was survival has almost certainly changed now you are planning for growth.
Concentrating on having the best product, staff and efficiencies will give you a competitive edge and will more than likely result in increased sales and output. Those businesses more concerned over sales levels than product, efficiency, staff and plant are always less likely to succeed anyway.

Therefore hopefully as most of our clients are more worried about how they can do the work rather than how they can get the work, they will be more successful than the rest of the market.

The third instalment of my regular blog on the economy will be released in 2020!

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