Cautious optimism sees SMEs rally for recovery as Barometer reveals 8.1 per cent expected growth in 2021

• SMEs are expecting a steady rise in revenue this year as vaccination programme continues to roll out at pace
• A quarter say their output has already surpassed, or returned to, pre-pandemic levels seen at the start of 2020, though caution remains about the months ahead
• SME sentiment has steadily risen by 19 points to 98 from an early-pandemic low of 79, as businesses prepare for economic recovery
• The quarterly Barometer from Barclaycard Payments also reveals a quarter of SMEs have seen a jump in job applications

Ahead of the Government’s roadmap next week, small and medium enterprises (SMEs) are getting ready for post-pandemic life, with three in 10 (32 per cent) saying they are prepared for the end of national lockdown measures.

SMEs predict an 8.1 per cent rise in revenue in 2021, and nearly four in ten (39 per cent) say they are optimistic about their prospects. Though the future still looks uncertain for many, nearly a quarter (24 per cent) say their output has already surpassed or returned to the pre-pandemic levels of January 2020.

The quarterly Barclaycard Payments SME Barometer also shows business sentiment is starting to look more positive, at 98 points out of a possible 200. While any score under 100 indicates negative sentiment, this is the highest score reported since the beginning of the pandemic. Sentiment has risen steadily over the past three quarters from a low point of just 79 points in Q2 2020 compared to an initial pre-pandemic high of 110 in February 2020.

However, though cautiously optimistic, SMEs are still weary of continued upheaval, and are braced for further short-term losses, anticipating an initial revenue drop of 7.5 per cent over the first three months of this year.

Looking past lockdown

The quarterly report from Barclaycard Payments reveals that four in ten (42 per cent) SMEs think the current lockdown will be the final ‘strict’ or national lockdown and, of these, 70 per cent are optimistic or cautiously optimistic for what’s next. However, there is more apprehension when it comes to restrictions that affect businesses in some way with only 27 per cent thinking restrictions that impact them will end by April, rising to 49 per cent by June.

When economic recovery does get underway, the top ways SMEs are preparing to take advantage of it is by: increasing marketing spend, with 62 per cent having done so or planning to; saving cash (42 per cent); or changing their offering to cater to customers once life opens back up to a ‘new normal’ (42 per cent).

SMEs expect the greatest growth opportunities in recovery will be increased consumer footfall (21 per cent) and supply chains returning to normal (17 per cent).

Ecommerce will also continue to be key; though overall spend (including in-store transactions), was significantly down, Barclaycard Payments data for the first five weeks of 2021 shows the average daily value of online SME transactions is up six per cent compared to the same period in 2020.

The other key aspect affecting SMEs is, of course, the UK’s departure from the European Union, with international trade accounting for 23 per cent of SME revenue before the pandemic. With the UK now setting its own trade policy, small and medium businesses are looking for new global opportunities – with SMEs citing the most positive aspect of leaving the EU being the possibility of new trade deals in countries outside of it (19 per cent).

Rob Cameron, CEO of Barclaycard Payments, said: “While 2021 offers all of us hope for a national recovery, small businesses especially are looking forward to emerging from coronavirus uncertainty.

“SMEs have proven their agility, adapting quickly to get online, catering to a nation stuck at home and changing how their teams get the job done. While the world may be returning to some form of normal this year, small businesses have realised the benefits of flexible working and digital skills, with many already looking at what improvements they can take forward into 2021 . As a banking and payments partner, we’re here to help our SME customers get online at this crucial time, and finance the changes they need to prepare for whatever comes next.”

Role of tech

Businesses increased their investment in technology to stay operational during the pandemic and are committed to this investment even after lockdown ends. In Q4 2020, half (50 per cent) of SMEs said they invested in digital upskilling for themselves or their staff, and in Q1 nearly a quarter (24 per cent) plan to continue this investment even if restrictions ease, while a further 23 per cent also intend to continue increasing activity on social media (23 per cent).

Nearly three in ten (29 per cent) SMEs will invest in new equipment and technology in 2021, and many view technology as the top opportunity for growth over the next year (13 per cent).

Boosting employment

Small businesses are optimistic about their employment ability as lockdown eases. Three in 10 (30 per cent) SMEs expect their number of full-time employees to increase over the course of 2021 – a metric that has promisingly held steady from Q4 predictions (also 30 per cent).

Since the start of the pandemic a quarter (25 per cent) of SMEs say they have seen an increase in job applications. Transport businesses have seen the largest rise (41 per cent), with more than half (52 per cent) of SMEs in this industry believing a smaller business, or working away from the city centre, is becoming more appealing to prospective candidates.

What’s more, SMEs are planning to keep flexible working once they bring their staff back to work after lockdown, with 41 per cent saying they will continue offering flexible working and don’t mind where their staff are based. Of those not asking for a return to the office, these changes have led to long-term mind-set shifts – with three in 10 (30 per cent) SME employers saying they no longer feel staff need to be on the premises to do a good job.

Kate Hardcastle MBE, independent expert, said: “SMEs have had to show a great deal of resilience and entrepreneurism to survive what has been an unprecedented time, and indeed many have shown great ingenuity and creativity.

“Finding new ways to work, and maximising the opportunity with new technology has enabled some businesses to build greater engagement with customers. There is certainly cautiousness about the months and even years ahead, and there is no trivialising the tenacity that will be required, yet as more organisations find better working practices along the way for stakeholders, customers and local-entrepreneurism - this could also symbolise a significant turning point for many businesses.”

Notes to editors

About the Barometer and input breakdown

*To measure SME sentiment, Barclaycard and YouGov have aggregated SMEs’ viewpoints on ten key topics to create an overall index score out of 200, with anything over 100 indicating a positive outlook, while anything under 100 is negative. The breakdown of key topics is below, including the change in sentiment score for each category from the Q4 2020 Barometer.

NOTE: Micro businesses are defined as any business with a turnover of under £2m. Small businesses are those between £2m – £10m. Medium-sized businesses are £10m – £25m.

Find out more about the businesses that we are helping to manage the impact of the COVID-19 pandemic here.

For more information, please contact Polly Ewell at polly.ewell@barclaycard.co.uk or on +44 (0)7882 088493.

About the data

Research was conducted online by YouGov on behalf of Barclaycard Payments between 20^th January – 9^th February 2021. YouGov polled 574 senior members of staff working in UK SMEs, weighted by region to reflect SME distribution in the UK.

The term SME is defined in the release as: all three categories below, determined as a weighted percentage. Individual categories are defined as follows:

• Micro businesses under £ 2 million turnover.
• Small businesses are defined as those with a turnover of £2-10 million.
• Medium sized businesses are those defined with a turnover of over £10 million and up to £25 million.

About Barclaycard

Barclaycard, part of Barclays Bank PLC, is a leading global payment business that helps consumers, retailers and businesses to make and take payments flexibly, and to access short-term credit. In the UK we process nearly £1 in every £3 spent using credit and debit cards, and in 2019 we processed over £272bn in transactions globally. We also partner with a wide range of organisations across the globe to offer their customers or members payment options and credit.

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