Despite a 28 per cent projected dip in revenue over the next three months, Barclaycard’s second SME Barometer has revealed that many small and medium-sized businesses (SMEs) feel optimistic

Since the UK went into lockdown, businesses have looked at how they can continue to function with many taking immediate action and pivoting their business models to better suit our new way of life. While some of these changes are temporary stop-gaps, others may represent new beginnings, sparking new trends and ways of working to carry us into the future. As the UK takes its first small steps on the road to recovery, we explore what shape that recovery might look like.

The SME Barometer

Combining data from billions of merchant transactions processed by Barclaycard with research data, the SME Barometer takes a closer look at the prospects of the UK SME economy; created in collaboration with YouGov, it is designed to measure SME sentiment and confidence. According to the latest quarterly report at the end of May there are early signs that the UK may have begun a road to recovery, despite a fall in sentiment compared to last quarter. The report found that business sentiment has dropped by 31 points this quarter, down to 79 points out of a possible 200, with any score below 100 indicating a negative sentiment.

Barclaycard’s report also revealed that revenue among SMEs is predicted to fall by 28 per cent in Q2, with almost three quarters (73%) of SMEs expecting coronavirus to have a significant impact on business for the next three months. But longer term the survey reveals that only 19 per cent expect to see a significant impact after 12 months, and just 8 per cent after two years.

A time to grow

In what could be viewed as early signs of growth, Barclaycard Payments data revealed that the number of SME clients actively taking payments has increased by 44 per cent since the low point in early April, shortly after lockdown began. Presented with a new reality, almost two-thirds of SMEs say they are planning to invest in their businesses over the next 12 months. Commenting on these findings, Konrad Kelling, Head of Small Business Acquiring at Barclaycard Payments, said:

“The green shoots are finally starting to appear. It’s encouraging to see businesses of all sizes starting to come online again as we emerge from lockdown. It’s hard to know what we are going back to, and of course we know things won’t bounce back overnight, but the quiet strength, agility and resilience of small businesses give us optimism.”

All of this is not to say that the road ahead is a smooth one. Of course, where businesses go from here depends a lot on individual circumstances including the sector they operate in. Each industry faces its own unique challenges and restrictions. According to the Barclaycard report, the sectors ranking the highest sentiment included manufacturing, construction & real estate, IT & telecoms, transportation & distribution and financial services.

Sector spend trends

Although consumer spending contracted 26.7 per cent year-on-year in May, according to further spend data from Barclaycard, some positive signs are seen as more sectors adapt to social distancing restrictions to keep their doors open. Spending on essential items grew slightly in May by 0.9 per cent, and supermarket spend rose 24.5 per cent – which increased to 27.0 per cent in the week preceding the VE Day weekend as Brits made the most of the sunny bank holiday.

In an ongoing trend, consumers have remained loyal to local specialist food and drink outlets, such as greengrocers and independent convenience stores, with the category seeing a growth of 42.5 per cent – the highest increase since restrictions were introduced. Also, online purchases at specialist retailers – including sports and outdoor outlets – and general retailers was another bright spot this month, rising 96.3 per cent and 85.8 per cent respectively as people bought items to help them exercise and keep fit while gyms remained closed.

Other sectors are starting to show positive movement with more than one in ten (14 per cent) Brits now buying food and drinks from a pub, and 10 per cent are purchasing takeaway coffee. Elsewhere, 27 per cent of Brits are now planning a trip to the garden centre or DIY store, signalling a likely continued upwards trend in spend for this category in the weeks ahead.

With additional UK retailers starting to open up again in June, it is likely that more sectors will see glimmers of hope, particularly for the SME community. With a shift in consumer spending habits as a result of COVID-19, there is a growing willingness to support more local businesses, something for SMEs to think about as the restrictions start to ease and consumers return to shopping outlets.