Report: SMEs to create record 737,000 new jobs in 12 months

Posted on 18 May 2015 by Callum Bentley

GE Capital’s 2015 international Capex Barometer reveals that UK SMEs are planning to create a record 736,973 jobs and spend £37.9 billion in the next 12 months.

The investment will predominantly focus on equipment upgrades to boost productivity.

According to the report of over 3,400 senior executives, after two years of increased capex investment, spending intentions have softened, resulting in a 36% decrease in investment year on year, as SMEs respond to growth opportunities with faster workforce expansion and efficiency programmes.

Echoing official data, the survey shows that more UK SMEs had revenue growth in the past year than in any other European country surveyed at 61%. This compares to 59% of German SMEs and 54% of SMEs in both Italy and France.

The UK also leads the way on confidence, with two thirds (63%) feeling optimistic about growth in their sector, compared to 55% in Germany, 53% in Italy and 50% in France.

The survey also confirms that mid-market companies offer the biggest opportunity for economic growth through export, with the UK’s ‘Brittelstand’ mid-market companies more likely than SMEs to have increased overseas revenues in the past year. As expected, their capacity to take on new staff is also much higher – on average each mid-market company is expected to create 25 new jobs, compared to less than one (0.75) on average per SME.

Ian Wilkins, leader, UK Commercial & Corporate Lending at GE Capital said: “All the current indicators point to an important ‘cooling off’ period in the capex investment cycle after a strong period of spending. Coupled with a well-founded belief that greater opportunities for growth lie ahead, UK businesses have made purposeful decisions to focus on hiring and operational expenditure and capitalise on the investment made to date.

 “This is great news for the economy but does raise concerns for business leaders; the increase in the value of missed opportunities illustrates how businesses that fail to invest can put themselves at a competitive disadvantage.

“Encouragingly, we are seeing businesses become more savvy and deliberate in their investment choices and how they finance them. According to ABFA, asset finance through leasing and hire purchase in 2014 was at its strongest rate for 7 years, indicating businesses are thinking more strategically about their mix of finance.”

Key findings from the report include:

  • More than half of UK SMEs (53%) plan to increase headcount in the next 12 months compared to only 5% planning to decrease
  • The main focus of UK SME capex investment in the coming year remains manufacturing equipment (£13.9bn) followed by commercial vehicles (£12.7bn), IT hardware (£5.3bn), IT software (£4bn) and office equipment (£2.1bn)
  • However, total capex investment intentions have fallen by 36% during the past year with a quarter of SMEs citing recent upgrades as the single biggest constraint on investment. This was most frequently referenced as the greatest barrier this year, replacing concerns about economic uncertainty as the main constraint
  • Whilst the number of SMEs claiming to have lost out on income due to outdated or inefficient equipment has remained stable, total estimated losses have increased from £5bn to £7bn in the past year
  • One in six SMEs (16%) cited lack of affordable finance as the factor that is restricting investment the most
  • UK SMEs would consider the use of various funding sources for financing capital investment. The most favoured source is buying outright with company capital (70%), followed by 60% who would consider leasing equipment via a vendor agreement or structured finance, and a minority 44% who would consider the use of a bank loan