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November 15, 2013 - Rachel Miller

Business caution threatens to hamper growth

Business caution threatens to hamper growthNew research shows that while 45% of SMEs in the UK are confident about prospects for their businesses over the next 12 months, they are reluctant to invest in growth.

Accountancy firm Baker Tilly polled 750 SMEs across the UK about their expectations, opinions and priorities for the coming year for its report, Your Business Outlook 2014. It shows that while almost half of all SMEs expected to increase turnover by 5% or more in the next year, the vast majority of respondents (96%) said they were content with their current levels of success and 84% were not prepared to take on more debt to expand.

SMEs in London were the most optimistic when it came to growth, with 62% saying they were confident about their prospects for the coming year, with businesses in the Midlands the least confident at 39%.

But despite this optimism, the survey has found that many small business owners remain cautious about investing in resources. Only 18% of those surveyed said they planned to take on new staff within the next 12 months, 20% planned to increase their capital expenditure, 23% planned to increase their sales and marketing spend, and just 16% planned to up their R&D spend.

In addition, 90% said they had not used or were not planning to use any of the main tax incentives being offered by the government to SMEs.

The research paints a picture of a risk-averse SME sector – even though 70% experienced some form of uplift in turnover last year, only 23% said they would seriously consider using alternative forms of funding.

Neil Sevitt, SME specialist and partner at Baker Tilly said: "Despite the fact that over the last few years SMEs have faced extremely challenging market conditions, there is real optimism emerging around their prospects for growth. However it is difficult to envisage where this growth will come from, with the majority of these businesses remaining cautious about investing in the resources and activities to deliver growth. There should be more emphasis on research and development and more time dedicated to exploring international opportunities.

"Businesses also need to have confidence in less traditional funding options such as invoice finance, to help make their growth plans a reality."

He added: "There is real concern that if SMEs do not take a long-term view and ignore opportunities for investment and expansion, economic recovery will remain hesitant and uneven. Businesses need to take more courageous and strategic decisions and make the best use of tax incentives and government assistance available to them."

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