Nearly nine in 10 small and medium sized enterprises (SMEs) expect to be selling online by the end of next year compared to 64 per cent of SMEs who say they sell online today, according to the Q4 2017 SME Growth Tracker, a report by Capital Economics commissioned by Amazon UK and Enterprise Nation. The report now in its second year and informed by a comprehensive YouGov survey of over 1,000 SMEs, provides an assessment of the confidence and health of British SMEs and monitors key financial and economic trends of businesses that account for 60 per cent of UK private sector employment.
SMEs using e-commerce set to benefit this Christmas and in the year ahead
The significant increase in the number of SMEs planning to use e-commerce in the coming year is primarily driven by a surge in business owners planning to sell via their own company website (rising from 50 per cent to 68 per cent) and their own mobile apps (increasing from 13 per cent to 24 per cent). More businesses also expect to sell via third party online retailers (rising from 21 per cent to 27 per cent).
SMEs who use e-commerce anticipate significantly faster revenue and jobs growth next year. Compared to SMEs that don’t use e-commerce, those who do are expecting more than triple the revenue growth (+1.9 per cent compared to +0.6 per cent) and double the jobs growth (+0.8 per cent compared to +0.4 per cent).
“The contrast in performance between businesses who use e-commerce and those that don’t is significant, so it’s reassuring for the UK economy to see small businesses investing in digital,” said Doug Gurr, UK country manager, Amazon. “The impact digital tools and services have on a small business cannot be underestimated. They can improve productivity, boost revenue growth and provide real export power for SMEs. That’s why next year we’ll re-double our efforts to help businesses of all sizes embrace the digital economy, with programmes like the Amazon Academy, to ensure the UK remains globally competitive long term.”
The Q4 SME Growth Tracker also finds that almost a third (32 per cent) of small business owners who use e-commerce believe digital tools and services will increase their sales this Christmas, with online sales up 0.4%, compared to SMEs that don’t use e-commerce forecasting a -0.4% decline in Christmas revenues.
“Greater digital adoption brings greater Christmas cheer for Britain’s small businesses which is good news for all,” said Emma Jones MBE, founder of Enterprise Nation. “With the uncertainty of Brexit and the turbulence of the global economy, small business owners understand the need to adapt and innovate to stay ahead of the curve, and digital adoption is a key enabler of this.”
SME confidence remains negative
SME confidence in the broader UK economy has slightly deteriorated this quarter with the SME Growth Tracker Economy Confidence Index score edging down to -24 compared to -22 in the third quarter and -15 in the fourth quarter of last year. This year, confidence in the economy was lowest in the second quarter soon after the general election, when the Economy Confidence Index score fell to -27.
Confidence of small business owners in the prospects for their own business is largely stable this quarter with an SME Growth Tracker Business Confidence Index score of -7 compared to -8 in the third quarter. However, the index is lower than last December’s -4. The overall lack of confidence this quarter was shared by SMEs across the UK with the exception of SMEs in the West Midlands who expect business conditions for their own company to improve slightly over the coming year (score of +6).
“Our thermometer of SME confidence remains below zero, with few owners and managers still seeing a lot of headwinds in the economy,” said Mark Pragnell, chief project economist at Capital Economics. “But while the figures show confidence remains low among SMEs as a whole, e-commerce users are less pessimistic about business conditions over the next twelve months. This is perhaps due to their expected increase in revenue over the festive period from online sales. Given these results, it is no wonder that more SMEs expect to start using digital tools to sell goods and services in 2018.”