British SMEs are starting to feel more confident about the performance and resilience of their own businesses, despite challenges in the wider economy, according to the latest quarterly Barclaycard Payments SME Barometer.

Over half (54%) of UK SMEs are expecting revenues to increase in Q4, compared with performance in Q3 2021. Yet concerns about inflation and rising bills are having a broader impact, with 64% feeling neutral or optimistic about the UK economy, down from 76% in Q3 2021.

As the Christmas shopping rush gets underway, data from Barclaycard Payments, which processes £1 in every £3 spent using credit and debit cards in the UK and services over 350,000 SMEs, shows that in the three months up to 31 October, transaction volumes among this group were up 38.1% (versus 2019).

Encouragingly, following last year’s restrictions, the research also shows that almost three in 10 (29%) SMEs predict the upcoming festive trading period will be their most successful since 2016.

Year-on-year payments volumes are also showing strong growth up 21.9%across the board, with the retail, food & drink and leisure & entertainment sectors benefitting from 15.58%, 27% and 54% uplifts respectively.

While consumer confidence has declined against a backdrop of inflation and rising utility bills, business owners which anticipate a rise in revenue attribute this to: an expected boost in sales as they believe Brits will be having larger celebrations after spending Christmas 2020 apart from many of their families and friends (25%), an increased preference for small businesses among shoppers (14%) and customers choosing to spend more with small businesses (10%).

The majority of businesses also remain relatively confident (56%) in the resilience of their supply chains, despite a small decline in sentiment compared to Q3 2021 (59%). Reassuringly, as Christmas shopping peaks, over seven in 10 SMEs (71%) have put measures in place to limit the impact of supply chain challenges, which includes 85% of retailers when looking at specific sectors.

Looking ahead to 2022

The long-term outlook for British SMEs appears promising. While three in 10 (31 per cent) say the pandemic and associated restrictions was their greatest challenge of the last year, looking forward into 2022, just 11 per cent expect this to remain the most significant barrier to performance, while almost one in 10 (9%) cite access to talent as a significant obstacle they expect to experience.

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. Close to four in 10 (36%) plan to hire more staff, with businesses in Wales (47%) being the most active in their recruitment drive. A further 29% intend to upgrade their technology and more than a fifth (22%) will extend their product range.

A family run business who has successfully responded to changing consumer behaviour as a result of the pandemic is T.H.Burroughs farm shop in Swindon. From introducing new products in the run up to the festive period, to creating a popular Christmas savings club, this local business has gone from strength to strength. As Covid-19 encouraged shoppers back to their local high streets, T.H.Burroughs managed the extra demand by increasing permanent employees, and taking on an apprentice.

Graham Burroughs, owner, T.H. Burroughs said “Our business always grew by word of mouth, but since the start of the pandemic, our trade increased significantly. Footfall almost trebled as customers returned to small businesses and nearly two years later we have seen regular repeat customers from the local community.

“As a seller of local produce, we are not overly concerned with the current supply chain issues, and are confident that with our suppliers, our customers will have the produce they need this Christmas.” 

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 the overall economic backdrop remains challenging amidst rising prices, slowing economic output and muted consumer confidence, UK SMEs continue to impress me with their resilience and their focus on controlling what they can control to meet the needs of their customers as they’ve weathered the ups and downs of the past 20 months.

“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.”

The research, which polled 592 senior staff working in UK SMEs, found that overall business optimism scored 53 out of a possible 100 in Q3, up from a low of just 40 points in Q2 2020. This is the fourth highest level recorded (with Q1 2020, Q2 2021 and Q3 2021 recording 55 each), since the Barclaycard Payments SME Barometer started in February 2020, before the first lockdown.