UK SMEs are cautiously optimistic and plan to increase both capital expenditure (capex) and headcount over the next 12 months, according to GE Capital’s latest European SME Capex Barometer.
The research, conducted amongst 2,250 SME business leaders across seven European markets* during Q1 2013, indicates that UK SMEs intend to invest an estimated £51.5bn on capex in the next 12 months. This represents a 12% increase on their spending intentions in Q3 2012, a 38% rise versus the same period last year, and translates into an average spend of £51.1k per UK SME.
Estimated losses of income due to outdated or inefficient equipment have fallen by 56% to £6.4bn over the last 12 months. However, 7% more firms are expecting to replace deteriorating equipment in the coming year than in Q3 2012 (47% compared to 40% in Q3 2012). In direct contrast, the number of companies investing in better equipment purely to boost productivity has fallen by the same proportion (7%), suggesting that more companies are delaying investing until they believe it is absolutely necessary.
Other key findings include:
•Expanding the workforce continues to be a top priority for the next 12 months, as UK SMEs plan to create over 525,000 new full-time jobs (up 16% from the last survey).
•The main focus of capex investment in the coming year is manufacturing equipment (£20.2bn, up 38% compared to when the survey was last completed in Q3 2012) and commercial vehicles (£16.7bn, up 106% on Q3 2012).
•Investment in IT equipment has fallen back to £11.2bn, down 36% on Q3 2012, but still up 5% on the Q1 2012 survey.
•Overall net confidence amongst UK SMEs is at 33% with more than half of respondents feeling positive (52% vs. 19% negative).
•The UK is still playing catch up to Germany and Italy. The research indicates that German SMEs plan to invest over £139bn in the next 12 months, an increase of 59% on Q3 2012. Italian SMEs now plan to spend over £67bn, up 13% on Q3 2012.
Ilaria del Beato, Chief Executive of GE Capital UK, commented: “This Capex research is a good barometer in sentiment of the wider market here in the UK and shows a degree of positivity. However, whilst investment is increasing it’s telling that replacement rather than growth is the key driver.
“Plans to increase hiring are extremely positive and if realised will build on the recent increases in UK employment levels and boost the overall health of the economy.”
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