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UK SMEs outperform Q2 expectations

Barclaycard Payments’ quarterly SME Barometer has revealed that small and medium businesses in the UK have exceeded their revenue predictions for Q2. At the start of April, SMEs predicted a 28% decline for the quarter, but now that Q2 is in the books, the research reveals that on average they reported a loss of 14%, which is 50% less severe than predicted.

A more positive business outlook

Stronger-than-expected Q2 performance has led to a boost in optimism, with index scores jumping from 79 out of a possible 200 points at the start of Q2, to 95 points at the start of Q3. This is also reflected in business outlook - 36% of SMEs share a positive outlook for their own business this quarter, up 15% versus Q2. Across all sectors, SMEs predict a 5% increase in revenue for Q3 compared to Q2, which grows to 14% over the next 12 months.

Sectors that rely on card payments, such as hospitality and leisure, were hit particularly hard in Q2, and many were not able to re-open until the start of Q3. Fortunately, initial data shows that these sectors are recovering well - Barclaycard SME transaction data for the first half of Q3 has shown consistent week-on-week growth, and the average daily transaction value has risen by 60% compared to the daily average for Q2. However, card transactions for the first half of Q3 remain 13% behind the same point last year, indicating that card-taking SMEs have a way to go to match pre-pandemic performance.

The percentage of SMEs reporting that coronavirus has negatively impacted their business has dropped this quarter, falling from 82% in Q2 to 74%. While the pandemic continues to cause disruption, with 60% of SMEs expecting it to have a significant impact until at least the end of September, the future looks more positive - that number drops to just 13% by this time next year.

SMEs are also proactive in their own recovery - 80% plan to invest over the next 12 months, with new equipment and technology (32%) and marketing (28%) being the greatest areas of focus.

“SMEs are once again proving their resilience and reaffirming their role at the heart of the UK economy, especially in the face of the challenges posed by coronavirus," commented Rob Cameron, CEO of Barclays Payments. "Despite uncertainty and business disruption, SMEs are outperforming their own revenue expectations and beginning to look to the future by returning to work and thinking about investment. We welcome these signs of growth and optimism - and hope that SMEs continue to take advantage of the support available, whether from finance partners or the Government, to continue this recovery.”

The return to ‘normal’ for SME employees

The biggest change SMEs have implemented to mitigate the effects of coronavirus is reducing staff numbers (26%), which rises to 47% among medium businesses. The top benefit of coronavirus reported by SMEs was also related to staffing - with a third (33%) welcoming the opportunity to improve remote working capabilities.

Many SMEs can see life returning to how it was before coronavirus, with 42% expecting a return to ‘normal’ at some point, and 31% saying they have made small changes and improvements that they intend to keep, and will not return to normal as it was before.

Similarly, many SMEs have already started to return to their offices, with 21% reporting that employees worked on the premises throughout lockdown, while 22% began encouraging a safe return to work with the easing of Government restrictions in July. Just over one in ten (11%) SMEs have revealed they will be moving to a permanent working-from-home model and not asking employees to return to the office.

“We’ve seen SMEs begin to emerge from lockdown in a place of strength - a huge testament to their resilience and their willingness to seek and take advice," said Emma Jones, founder of Enterprise Nation. "It’s heartening to know that the Government support measures and resources have helped our nation’s small businesses during the pandemic."

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