UK SMEs invest £74.9bn over next 12 months as businesses prepare for growth
12 July 2011
New research from GE Capital reveals that UK SMEs plan to invest £74.9bn in capital expenditure in the next 12 months, whilst also showing that companies had missed out on over £8bn of new business as a result of out-dated equipment. Some 92% of businesses surveyed in GE Capital’s first ‘SME Capex Barometer’ survey said they planned to invest in their business, spending on average £73,805 on items including manufacturing equipment, commercial vehicles, company cars, IT, and office equipment.
Nearly all (96%) medium-sized businesses (50-249 employees) and small businesses (10-49 employees) were planning to invest. While micro businesses (2-9 employees) were more cautious with only 81% looking to invest in the next 12 months.
Despite the overwhelming intention to invest, UK SMEs remain less confident than their European counterparts, with SMEs in Germany and France on a comparable basis looking to invest €145bn (£130.7bn) and €101bn (£91bn) respectively. SMEs in Germany are particularly bullish on capex with companies looking to invest an average of €120,361 (£108,500) over the next 12 months – 30% more than UK SMEs.
UK companies are looking to modernise and update equipment after suffering significant lost revenue over the last 12 months as a result of out-dated equipment. One in eight businesses (12.5%) said they had lost out on new income or new business opportunities as a result of dated or inefficient equipment, having put off replacing it during the downturn. On average businesses have lost by £8,301 each, equating to £8.3bn of lost revenue across the UK as a whole.
Companies were investing for a variety of reasons. Almost one in five investments (17.8%) were being made to support new orders and new business opportunities, while 24% were due to deterioration of their existing equipment. The most prevalent motivation was to enhance efficiency and productivity (34%).
IT hardware seems to be the most pressing need for UK SMEs with 85% of companies stating that they were looking to invest a total of £8.6bn in upgrading and replacing existing company laptops, servers and other hardware. Companies were also looking to renew manufacturing and plant equipment, with 81% of UK SMEs looking invest a total of £36.5bn over the next 12 months.
John Jenkins, Chief Executive of GE Capital UK said: “Despite popular belief, the appetite for investing in growth amongst UK SMEs is actually very strong, with many businesses having reached a tipping point where putting off investment is no longer possible without compromising their ability to create revenue. Many businesses not planning to invest in the next year have already recently upgraded, further illustrating that we are in the midst of significant renewal.
“However, when compared to our findings in other markets such as Germany and France, where SMEs are looking to increase capital expenditure to a much greater degree, it’s clear that there is still room for improvement, particularly in supporting the smallest businesses with their plans for growth”.
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