IT is disappointing to note that owners of small and medium enterprises (SMEs) are not quite as optimistic about business prospects as they were for most of last year. The worrying turnaround in business sentiment was confirmed this week in the latest quarterly Business Trends Survey for the first three months of 2016, issued by their umbrella group, ISME.
There had been a gradual improvement in sentiment over 2015 in the economic indicators tracked by ISME, but the results for the end of March show nine out of 12 indicators deteriorating in stark contrast to ten of 12 improving at end of 2015. The group attributes mainly domestic economic factors among the reasons for the drop, the main one being the delay in forming a new government, described by it as a ‘developing circus.’
The general election campaign revealed that the economic recovery had not reached a huge section of the population, but the government’s ‘inaccurate cheerleading’ about it had already led to what ISME calls ‘exorbitant trade union wage demands’ that are worrying its members. Also of concern are increasing business costs and the continuing difficulties for some in accessing bank finance.
External factors affecting business sentiment for SMEs, especially those involved in exports, include ‘scaremongering over Brexit’ causing adverse currency movements and an ongoing threat of Eurozone deflation.
The urgently-needed new government must quickly tackle the domestic issues they have control over in order to keep the economic recovery on track and to ensure that the effects of it are felt by more people, especially in rural areas where it will be driven mostly by the SME sector.