UK SMEs predict strong festive trading period

As the festive period approaches, UK SMEs are starting to feel more confident about the performance and resilience of their own businesses, according to the latest quarterly Barclaycard Payments SME Barometer.

The results found that the business owners surveyed are starting to feel more optimistic about their own performance, with almost three in 10 (29%) expecting their most successful festive period since 2015.

However, concerns about inflation and rising bills are still having a broader impact as confidence in the wider economic outlook has dipped.

Earlier this month, we wrote about the effect that rising inflation is having on small businesses, with research showing that four in five SMEs are currently being affected by hikes in supply chain costs.

How are SMEs feeling about the upcoming festive season?

Encouragingly, following last year’s restrictions, the survey results show that almost three in 10 (29%) SMEs predict the upcoming festive trading period will be their most successful since 2015.

Many retailers rely on Christmas sales to supplement cash flow and give them a final push through to the end of the financial year, and it’s typically around this period that they’ll see the biggest boost to their revenue.

However, perhaps in response to the chaos of last year’s regional and national coronavirus lockdowns, celebrations have begun unseasonably early this year.

This week, The Scotsman reported that two-thirds of Scots have already started their Christmas shopping as festive cheer sees consumers opening their wallets earlier than usual.

This is backed up by Barclaycard Payments, which processes £1 in every £3 spent using credit and debit cards in the UK and services over 350,000 SMEs. The data shows that in the three months up to 31 October, transaction volumes among this group were up 38.1%, versus the same period in 2019.

All I want for Christmas is a rise in revenue

The report also shows that concerns about inflation and rising bills are still having a broader impact on small businesses, with 64% feeling neutral or optimistic about the UK economy. That’s down by 12% compared to Q3 2021.

However, while consumer confidence has declined against a backdrop of inflation and rising utility bills, business owners anticipate a rise in revenue as they believe consumers will be having larger celebrations after spending Christmas 2020 apart from many of their families and friends (25 %).

Other reasons for optimism given by small firm owners were a perceived preference for small businesses among shoppers (14%) and customers choosing to spend more with small businesses (10%).

Looking ahead to 2022

The long-term outlook for UK SMEs appears promising. More than half of SMEs (54%) believe the pandemic has helped future-proof their business and made them more resilient, as many look to invest in the year ahead.

36% plan to hire more staff, with businesses in Wales being the most active in their recruitment drive. Almost a third (29%) intend to upgrade their technology and more than a fifth (22%) said they will extend their product range.

Plus, while many respondents say the pandemic and associated restrictions was their greatest challenge of the last year, just 11% expect this to remain the most significant barrier to performance in 2022. Instead, many cite access to talent as a significant obstacle they expect to experience.

Colin O’Flaherty, Head of Small Business at Barclaycard Payments, said: “It’s encouraging to see that small and medium businesses are feeling positive about their performance ahead of the festive period. While there may still be challenges that lay ahead, the data from our Barometer indicates SMEs are right to feel cautiously optimistic about the prospects of their own business as they head into 2022.”

Kate Hardcastle MBE, Business and Consumer Expert, said: “It is exciting to see that so many British businesses feel they’re coming out the other side of the pandemic stronger, but they must remain cautious to the macroeconomic environment, which is vital as we head into what is typically their busiest trading quarter. This positive picture can be attributed partially to their agility and ingenuity, but also to the UK public, which has doubled down on its efforts to support small companies and their local high streets.”