• SME confidence reaches 68% in Q3 2013 – the highest number on record
• Confidence amongst SME manufacturers outpaces that within the retail sector
• SMEs expect more trade with Europe; exports to emerging markets dip
The Western Union Company (NYSE: WU), a leader in global payment services, today announced the latest findings from the Western Union Business Solutions International Trade Monitor (ITM), the quarterly economic confidence survey of over 600 UK small and medium-sized businesses engaged in international trade.
Confidence in the UK economy in the period July-September improved across the board:
• 68 per cent of British SMEs expressed confidence in the UK economic climate, an increase of 12 per cent over last quarter and 22 per cent over Q3 2012; this number is the highest reached since records began in March 2010.
• 50 per cent of SMEs believe the UK's general business environment will improve, up from 37 per cent in Q2 and 29 per cent in Q1.
• 41 per cent of SMEs have also seen an improvement in the domestic economy, up from 20 per cent last quarter and a mere seven per cent in Q3 2012.
• Moreover, 77 per cent of SMEs thought that international trade would improve, another new high, beating the previous record of 68 per cent set in Q4 2012.
The International Trade Monitor also found that SME manufacturers expressed more confidence in the UK economy than their retail counterparts, 72 per cent compared to 64 per cent. Retailers cited domestic economic conditions as having a negative impact on their international activity; 39 per cent said global trade has been adversely affected by the UK economy compared to only 24 per cent of manufacturers.
Nearly one in five SME retailers (19 per cent) think the UK economy has worsened over the last six months, compared to only one in ten manufacturers, whilst 42 per cent of manufacturing SMEs believe there will be an export-led recovery in the UK, compared to 29 per cent of those in the retail sector.
Kerry Agiasotis, Chief Commercial Officer, Western Union Business Solutions, said:
"Small and medium-sized businesses are embracing improved economic conditions. In Q2, larger companies were expressing optimism, but this has been slower to trickle down to SMEs. What we are seeing now is the first significant rise in SME confidence as domestic economic data grows stronger.
"It is particularly encouraging to see that Britain's SME manufacturers are finally expressing more confidence, but retailers continue to feel the pain of reduced individual and family budgets.
"SME sentiment indicates that we are in the midst of a real recovery but its sustainability is still being questioned. The green shoots we are seeing could easily be crushed by a seismic event, such as a renewal of the sovereign debt crisis in Europe. It is too soon to be complacent."
The International Trade Monitor also found SMEs have increased trade expectations with Europe:
• 35 per cent said they expect trade with the Eurozone to increase in the next six months, a 10 per cent increase quarter on quarter.
• Only 5 per cent expect trade with Europe to decrease, the lowest number on record.
• 34 per cent of SMEs expressed concerns about Eurozone instability compared to over 60 per cent at this time last year.
Overall exports to global markets remain largely steady, but SME exporters with customers in India have fallen for the first time in a year, from 15 per cent to 11 per cent, corresponding with a steep decline in the value of the Indian rupee. Exports to Africa and Australasia fell by seven per cent as concerns about the end of the Federal Reserve's Quantitative Easing (QE) programme impacted emerging market economies.
The overall health of the global economy still remains the overriding concern amongst SMEs, with 72 per cent naming it as a worry and over half of SMEs were concerned about currency volatility (53 per cent), suggesting that market movements tied to the end of QE remain a source of anxiety. Worries over cash flow and customer loss also remained at 47 per cent and 51 per cent of SMEs, respectively.
"UK SMEs are once more looking to their traditional trade partners in Europe for growth, an encouraging sign that the emerging confidence is not limited to the UK economy.
"We have seen an increase in SMEs seeking customers abroad over the past year and it is positive to note that 40 per cent of the companies we surveyed expect to grow their trade with emerging markets. Market volatility and reverse capital flows, however, can have an impact on their international prospects, which was clearly demonstrated this quarter by the dip in trade with India.
"The prospect of rising interest rates and policy changes will continue to influence emerging economies in 2014. Increased SME exposure to global markets means there is an increased need for them to take steps now in order to protect their margins and improve their cash flow in the long term."