After what seemed to be a road towards recovery and a strong Christmas period, SME revenue and confidence experienced a decline early this year.
The Feburary edition of ACA Research’s SME Sentiment Tracker revealed that 40 per cent of SMEs reported lower revenues than before the pandemic and only 43 per cent reported a profit for the month of January compared to 54 per cent in December. Sentiment about the Australian economy has also dropped significantly with 69 per cent expecting weaker conditions over the next three months.
Furthermore, the number of growth focused SMEs continues to steadily decline to just 32 per cent from a high of 43 per cent back in August.
Concerns about rising costs are significant and clearly impacting SMEs, with 83 per cent concerned about inflation and rising interest rates. To offset higher costs, 63 per cent have increased their prices, but most SMEs have only partially recouped the extra costs.
Business conditions are impacting investment intentions across the board, with many SMEs expecting to decrease capital investment (27 per cent), employee numbers (15 per cent) and wage growth (13 per cent) over the next 3 months.
The demand for additional finance also continues to decline as interest rate hikes persist. Only seven per cent expect to incur more debt over the next three months compared to 15 per cent in December. Furthermore, 12 per cent of SMEs reported they will have difficulties meeting their existing loan repayments over the next 6 months.
Support for the Government has also declined. From 39 per cent that was recorded last month, the latest data shows only 34 per cent of SMEs are satisfied with the ability of the Government to deliver effective policies that will support their business needs.
ACA Research, Managing Director, James Organ commented, “It feels like many SMEs are now at a tipping point, experiencing declining revenue and profits and difficulties managing rising costs and interest rates. Accordingly investment intentions are falling and the demand for new employees, capital equipment and finance are all lower this month. With another interest rate rise just announced, there is more pain ahead for SMEs in the short term.”
