SMEs more confident than larger companies

BUSINESS support measures announced in the recent autumn statement will, according to the Treasury, benefit 114,000 small and medium enterprises in Northern Ireland. The success of SMEs is vital to the economy in part because investment and employment decisions are made here in Northern Ireland but also because small businesses can be flexible and innovative. A buoyant, confident SME sector is fundamental to growth and development of the region’s economy.

Looking at the wider UK picture, SMEs are more confident about their prospects for growth in the next 12 months than their larger counterparts, according to a major new survey of marketing professionals.

The Marketing Confidence Monitor, run by the Chartered Institute of Marketing (CIM) and supported by Deloitte and Forbes, found small and medium sized companies are planning solid investment and expecting increases in headcount in the coming year. Larger companies, by contrast, are setting cautious growth targets, reining in marketing budgets and expecting reductions in staff numbers.

CIM’s new study, which will be repeated quarterly, produced an overall confidence score of plus-4.12, on a scale of plus/minus-100, indicating some cautious optimism amid widespread uncertainty about the next 12 months. The index, produced from a weighted representative survey of more than 1,200 UK marketing professionals, will add to the debate about whether the UK is heading for a possible ‘triple-dip’ recession next year.

Despite general agreement that macro-economic conditions in the UK have stagnated or worsened in the past 12 months, respondents have mixed expectations for the coming year – businesses were split equally between expressing reduced confidence compared with this time last year (30 per cent), similar confidence (30 per cent) and increased confidence (29 per cent).

The study found marked differences between SMEs and larger companies. Almost a third of micro (31 per cent) and small (33 per cent) businesses anticipate an increase in marketing spend in the next year but 40 per cent of mid-sized and 44 per cent of large companies expect a cut in budgets.

In addition, a quarter of large companies are expecting to cut their marketing headcount in the next fiscal period. By contrast, the same proportion (26 per cent) of small businesses are expecting to hire new marketing staff.

Overall, small organisations were more confident than large companies that their business could meet its financial and growth targets – 45 per cent of micro businesses and 38 per cent of small businesses were more confident this year than last year, while 29 per cent of mid-sized and a quarter of large companies expressed declining confidence.

Anne Godfrey, chief executive of CIM, pictured, said: “Marketing plays a crucial role in driving growth and performance, and marketers are uniquely positioned between the business and the customer. They understand how consumer confidence and business sentiment interact and our study shows that times are clearly still very tough.

“It’s encouraging to see that small businesses are pressing forward with marketing investment and jobs – critical for fuelling growth – but it’s worrying that so many large companies are still expressing such uncertainty.

“We’ll be updating our confidence index every three months, so we will be able to track whether that uncertainty translates into a ‘triple-dip’ recession or the beginnings of a real recovery.”

The index also reveals particularly high confidence from marketers in the manufacturing and construction industry, and low confidence in the banking and financial services sector.

Manufacturing and construction outperformed the UK average index for confidence in levels of marketing investment by 15 points, while banking and financial services fell four index points below the UK average on the same measure.

In the overall confidence index, manufacturing and construction scored nine index points above the UK average. Almost a quarter (23 per cent) of manufacturing and construction companies are anticipating an increase in marketing headcount in the next 12 months, but (30 per cent) of banks and financial services firms anticipate job losses.

Lee Campbell, chartered marketer and business development and marketing manager at Mivan, said: “With so much negativity in the economy generally, it is encouraging to hear that there is growing confidence, albeit modest, from the marketing community, especially from marketers who should be at the forefront of winning new business and contributing to economic growth.

“The construction and manufacturing sectors have suffered more than most in recent times. But the recession has made companies look at their cost base and re-adjust their sights on key target markets.

“Many SMEs in Northern Ireland are now looking to Great Britain and further afield for new business. For construction companies especially, it is vital that they have a differentiator or a specialist niche where the level of competition is not so intense and profit margins have been less squeezed.

“Traditionally, construction companies have not been great at doing this, thus getting lost in the crowd.”