South East: Santander Corporate & Commercial survey shows record business growth sentiment for UK’s SMEs

Confidence among UK SME owners regarding five-year growth prospects has hit a record high, according to the latest Business Growth annual survey by Santander Corporate & Commercial. It found that businesses with an annual turnover of up to £20 million are predicting turnover growth of 33% a year on average – the highest such number since the survey began three years ago.

One fifth of business owners (20%) reported that their business had never been in better shape, up sharply from 13% in 2013. The figures were matched by a strong outlook for employment, with just under a third (30%) of companies stating that retaining existing staff was an ‘immediate priority’ – up from 19% in 2013 – and ranked now as the second most important priority after ensuring the survival of their business (57%). One in eight (12%) respondents said they were focused on hiring new staff.

More SME owners also reported that they are looking at acquisitions for growth, with the number reporting this to be a priority rising to 17%, up from 14% in 2013. Moreover, just under a third (29%) of business owners said they were looking to grow their business organically. A quarter (25%) said the long-term aim for their business was to grow it regionally, while 6% said they were targeting long-term growth internationally – double the number from 2013 (3%).

Despite the strong optimism and business confidence, business owners still report facing challenges. A tough trading environment was still seen as the biggest challenge to growth by UK businesses, cited by 47% of respondents (compared to 46% in 2013). A fifth (22%) said that reducing costs was a priority, although this is down significantly from 33% in 2013.

Access to capital was also seen as a challenge by a quarter (25%, versus 26% in 2013), while 18% of businesses said their ability to hire and retain the right staff was a concern, up from 14% in 2013.

Despite these challenges, however, the number of business owners looking to sell their business and retire has fallen from 25% in 2012 to just 17% this year (19% in 2013).

Marcelino Castrillo, managing director of SME Banking at Santander, said: “It’s extremely encouraging for UK plc that business confidence in the UK is at its highest level for three years, with businesses focused on growth both at home and overseas. While business owners report that trading conditions remain challenging, a fifth believe that their business has never been in better shape. The outlook for staff retention and new job creation is also positive, which is welcome news for the wider UK economy.

“Santander is committed to helping businesses prosper and has been a consistent supporter of businesses in the UK, with lending over the past four years growing by an average of 17% per year. Our innovative Breakthrough programme is designed to support the UK’s best fast-growing small businesses and our international proposition supports UK companies by providing them with access to a worldwide network with proven expertise in international finance.”

Santander has extended £5.8 billion of new facilities to UK SMEs and corporates in the first nine months of 2014.

Current turnover and expected annual growth

Source: Santander Business Growth 2014*