Current reality not great, but future high hopes for SMEs

SME confidence took a dive prior to the September federal election, however economic optimism is dramatically up for the year ahead, new research from Sensis finds.

The latest Sensis Business Index surveyed 1800 SMEs across regional and metropolitan Australia, and covers the period from May to July this year, as well as forecasts to July 2014.

In the quarter, 43% of SMEs felt the economy was slowing, while only 10% felt that it was growing.

The net balance of -33% was down from net -29% in the previous quarter, and the lowest since August 2011 when economic perceptions hit -35%.

However SMEs think the economy is looking up for the year ahead.

They were optimistic about Australia’s economic growth, with the strongest level of optimism since the Sensis August 2010 survey.

The states with the most optimism about the future economy were Queensland and South Australia, while the ACT and Western Australia were the least optimistic.

While SME owners were confident about future economic growth, they were less confident about their personal business prospects, with overall confidence falling from 22% to 17%.

Small businesses in NSW and Victoria had the biggest drop in confidence, with NSW at 12%, down from 28%, and Victoria at 14%, down from 21% in the previous quarter.

Tasmania was most confident about personal business growth, at 27%, followed by Western Australia and the Northern Territory, both at 26%.

Key concerns noted by SMEs included a shortage of work or sales, 25%, the economic climate, 19%, and cashflow at 14%.

The survey found that exports improved in the quarter, with 12% reporting to be exporting, up 2% on the previous quarter.

Report author Christena Singh told SmartCompany that the survey showed a climate where SMEs were “definitely ready for growth”.

Singh says there were positive signs, such as SMEs getting easier access to finance, and an increase in companies that export and the amount that they were exporting.

She says reasons for a slip in confidence during the quarter reflected a decrease in sales and profitability, with consumers tightening their spending.

Singh also highlights that some industries were struck harder than others, such as the building industry, while the health sector showed a split in fortunes between businesses offering discretionary and non-discretionary services.

“Small and medium businesses are hoping to see increased spending in their businesses in the months ahead, and if this occurs, we should start to see real lifts in confidence and sentiment from the sector,” she says.