SMEs split on future optimism

On the opposite end of the scale, 31 per cent of SMEs predict their revenue will contract in the next six months, on average by 8.5 per cent.

The report, which surveyed 720 SMEs with annual revenues of $1 million to $20 million in February 2023, showed that the current economic situation is challenging for many businesses, with significant discrepancies in revenue projections.

ScotPac chief executive Jon Sutton highlighted the critical role the federal budget, which is expected to be handed down on Tuesday (9 May), will play in SME confidence over the next 12 months.

Mr Sutton said that tough economic conditions and the end of government-backed pandemic relief measures are taking a significant toll on cash flow-dependent businesses in many parts of the sector.

“The Albanese Government has publicly stated that SMEs will be ‘front and centre of the May Budget,” Mr Sutton said.

“It is critical for the confidence of SME owners and operators that the Budget delivers some material support to address the increasing cost and compliance pressures they are facing.

“There is no doubt that tough economic conditions and the end of government-backed pandemic relief measures in the past 12 months is taking a huge toll on cash flow-dependent businesses in many parts of the sector.”

However, the report also highlighted the sense of optimism some SMEs still hold in the face of uncertainty.

The average projected growth rate of SMEs forecasting positive enterprise revenue over the next six months was 8 per cent, which is the most upbeat outlook in almost a decade.

Additionally, the six-month revenue forecasts for SMEs ranged from -20 per cent to +12.5 per cent, which is a record spread for the SME Growth Index.

The average revenue growth projection across all SMEs was up 2 per cent.

“This is by far the largest spread of revenue growth projections we have ever seen in the SME Growth Index, which is consistent with surging rates of insolvency in the past quarter,” Mr Sutton said.

“The fact that more than half of the country’s SME owners are predicting revenue growth is both remarkable and encouraging when you consider they continue to deal with the rising cost of doing business, particularly in key areas like wages, energy and interest rates.”

The data backed the CreditorWatch Business Risk Index (BRI) for March 2023, which revealed that business activity had returned to pre-COVID-19 levels, despite high inflation and rising interest rates.

The data showed that credit inquiries increased by 28 per cent from February to March and were up a significant 149 per cent year on year. This growth in credit inquiries is a sign that business confidence is on the rise.

The Banjo SME Compass report for 2023 also reported one in three SMEs were planning to acquire for growth this year.

[Related: Business activity returns to pre-covid levels: CreditorWatch]