SMEs bet on post-Covid-19 bounce with more than one in four planning investment boost in 2021

SMEs bet on post-Covid-19 bounce with more than one in four planning investment boost in 2021

SMEs bet on post-Covid-19 bounce with more than one in four planning investment boost in 2021.png
 
 

More than a quarter (27%) of SMEs surveyed plan to invest more in their businesses in the year ahead than during a typical pre-pandemic year, underlining their focus on growth in a post-Covid-19 future, according to a recent survey by Virgin Money. Over a third (35%) of SMEs plan to invest between £10,000 and £10 million this year, a rise of 32% from 2020. 

The research is reported in the Virgin Money Business Pulse, which provides a comprehensive insight into the performance of the UK’s SMEs and the environment in which they operate.

There’s more good news in the latest Virgin Money Business Pulse, where the business creation indicator was at a record high in the last three months of 2020 as the annual growth rate in the number of registered companies surged to 8.3%. That’s the highest since the Business Pulse began in 2014 and highlights growing confidence among entrepreneurs. This is underlined by data from Companies House2 which shows the pandemic has seen over 90,000 more businesses created in 2020 than in 2019.  

The overall measure of business performance and outlook rose from 33.6 in Q2 to 45.9 in Q3 2020, as restrictions eased and industries such as hospitality and retail reopened in the third quarter of 2021. The relaxation saw the economy bounce back with quarterly GDP up 16.1%. But the return of lockdown restrictions at the end of the year saw the business performance and outlook score drop to 42.9 in Q4, which remains below pre-pandemic levels.

More than half (57%) of SMEs surveyed currently have staff on furlough, but just one in five (19%) expect to be able to retain all furloughed employees after the Coronavirus Job Retention Scheme comes to an end. More than a third (38%) of SMEs expect to shrink their workforce this year. Of the firms expecting to make near-term redundancies, the need to cut costs (29%) was listed as the main driver for the job cuts.

On the positive side, nearly one in five (18%) expect to take on more employees in 2021 as they focus on pursuing growth.  Nearly half (47%) of SMEs looking to increase their headcount will be doing so due to expansion plans. Around a quarter (26%) say improvements in the economy will make them confident enough to expand their workforce, and 23% say they need more staff to deal with pent up consumer demand once restrictions are lifted.

Gavin Opperman, Group Business Director at Virgin Money said: “It has been an incredibly challenging environment over the last 12 months, but our latest Business Pulse shows that many firms have adapted with incredible pace to the new environment, demonstrating extreme resilience and innovation to navigate through the difficult landscape. 

“While there are undoubtedly significant challenges ahead, many businesses remain optimistic and intend to invest for the future as the economy recovers. We will always be led by our customers, evolving our approach to help them plan and finance the changes needed for whatever the future brings.”

Both the North East and Yorkshire and the Humber were bright spots in Q4 in the Business Pulse. The North East was the only region to record an increase in its score in the final three months of the year, due to a more stable employment picture and an acceleration in the rate of business creation, while Yorkshire and the Humber was the top-scoring region with a 22,000 increase in employment from Q2, bucking the trend seen elsewhere.

In Q4, the lowest scores in the Business Pulse were recorded in Scotland and the North West of England. In the North West, this was partly due to stricter Covid-19-related restrictions in many parts of the region throughout much of the summer. Meanwhile, the annual rate of business creation in Scotland was significantly below the rest of the UK, which weighed on its overall score.

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