SME confidence surges as the UK labour market heats up

Vistage, the world’s leading business performance and leadership advancement organisation for SME’s, announced that its quarterly CEO Confidence Index has hit a new all-time high at 141.4 points. The survey of UK and Ireland SME businesses found that business leaders remain highly optimistic with the majority of respondents (75%) expecting the economy to improve in the next 12 months.  

Additionally, a whopping 83% of companies anticipate sales revenues will increase in the next 12 months, and 64% expect profitability to improve in the same period. Half (51%) of CEOs also believe that their level of customer growth and new orders is getting better.

The cost of Inflation

The latest UK inflation figures unexpectedly jumped to 2.1% past the Bank of England target in May, according to Office of National Statistics. The rise in the cost of living impacted SME’s to a greater extent. Vistage’s survey found that half (53%) of CEOs ranked the rising cost of raw materials as the leading impact of the country’s growing inflation on their operations. Another 50% identified the increase in the cost of labour as the second most serious impact of inflation on their business.

Unsurprisingly, 60% of businesses expect prices of their products and services to rise in the coming months in response to the rising inflation.

Changing labour market

According to KPMG, the easing of Covid restrictions and reopening of various sectors has driven demand for workers at its fastest rate in 23 years. Vistage’s Index found that 73% of companies expect to expand their workforce in the next 12 months cementing the national trend on demand for labour, particularly in the hospitality and IT sectors.

The current labour market dynamic means that workers have a greater choice of employment than at any time since the pandemic began. Almost 2 in 5 (35%) of British and Irish bosses revealed that the biggest reason for staff leaving is to secure higher wages elsewhere.

Furthermore, two-thirds (62%) of SMEs have revealed that hiring challenges is impacting their ability to operate their businesses at full capacity.

“The rising confidence in the UK and Ireland economies highlight the ability of businesses to recover from the disruption from the pandemic,” said Geoff Lawrence, Vistage, Managing Director UK and Ireland. “There is plenty of reason to be optimistic despite the inflation. The economic engine is clearly starting to heat up which could be a consequence of the pent-up demand during the lockdown. As the economy gradually unlocks, many of the bottlenecks in the economy, such as supply chain issues and labour shortages, should become less acute freeing up the inflation pressures.”

“Our members have been using this time to take stock of their business culture and employees’ wellbeing. Many of them have identified talent retention as the most important lever in their ability to build on the momentum in their businesses. The overall message is for SME leaders is to ensure they put together a strategy for upgrading their teams and maximising their business performance as the economy continues to show signs of a speedy recovery.”