SME confidence lifts as firms head online to try to lift competitiveness

Business confidence in the SME sector rebounded from three-year lows in the September quarter according to new research from National Australia Bank, with confidence among SMEs back at the same level as the top end of town for the first time in two years.

NAB’s quarterly survey of SME confidence and conditions shows the confidence index climbed from -11 points in the June quarter to -3 points in the September quarter, thanks in part to better news on interest rates and moves by central banks in Europe and Asia to provide further support to those economies.

Confidence rose sharply in wholesale (up 15 points to -6 points), finance services (up 14) and property services (up 13) and was strongest in property services (+15) followed by finance services (+4) and accommodation, cafes and restaurants (+3).

Confidence was weakest in the health sector and manufacturing.

However, confidence still remains below the long-term average of -2 index points and there are some worrying signs on the horizon, with capacity utilisation remaining at six-year lows and forward orders still “very poor”.

The survey also showed that business conditions have improved somewhat, rising from -4 index points in the June quarter to -3 index points in September. However, conditions remain well below the long-term average of +5 index points.

While the indices tracking trading conditions, profitability and employment all improved, they remain at or below levels seen at the same time last year. The index tracking cashflow also rebounded in the quarter, but only after a worrying fall in the June quarter.

What’s hurting SMEs most is poor demand – and how quickly that situation turns around remains to be seen.

But what is clear from the research is that SMEs are turning to the internet to become more competitive.

A special survey found that 60% of SMEs have made improvements to their website or developed additional online capability to improve their competitiveness over the past 12 months.

The second most popular strategy to boost competiveness was launching a new product (54%), followed by online marketing (36%) and cutting prices (31%).

Only 20% of SMEs have invested in additional research and development, while 18% have outsourced and 7% have moved premises.