A sharp drop in capital expenditure by UK SMEs has been forecast
for the coming year in new research published by GE Capital.
The commercial finance provider has found that while there is
still some appetite to invest – mainly in upgrading or replacing
existing equipment – actual spending will fall 12% from last year’s
£42.1bn expenditure.
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As stated in Leasing Life’s UK country profile last month, more
than 20% of UK capex is achieved through asset finance, meaning
this will come as worrying news for leasing companies relying on an
increase in demand from small businesses to prosper in 2013.
Another concerning point is that even though the bulk of
investment will be via equipment replacement, further research
shows SMEs are still reluctant to make replacements promptly, and
are risking losing potential revenue as a result.
GE Capital’s ‘SME Capex Barometer’ found that UK SMEs lost out
on £9.3bn in sales this way last year due to “outdated or
inefficient equipment.” According to the report, this translates to
an average loss of over £9,200 for each business and represents an
increase of almost £1bn from last year across the entire UK.
There is good news for the reputation of the asset finance
industry, however: almost half of business owners stated the
uncertain economic environment as a reason for unwillingness to
invest; with only just over a fifth blaming a lack of available
financing.
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By GlobalDataCommenting on the findings, John Jenkins, Chief Executive of GE
Capital UK, encouraged businesses to not be so hesitant to spend:
“Those companies that continue to invest and take advantage of the
latest technology are likely to gain share and grow the quickest
when the market fully returns.”
Other European countries are losing even more revenue than the
UK due to tired equipment. Italian SMEs have been hit the hardest,
with losses up 238% from the previous year, resulting in £21.5bn of
potential lost revenue.
The combined potential loss of revenue across the four largest
Euro economies – UK, France, Germany and Italy – is £60bn; almost
double the figure from the previous year.
Further research from the financial services arm of General
Electric has revealed that UK small and medium sized businesses
have slashed their employment intentions by over a third for the
coming year.
SMEs are aiming to employ 378,000 people in the next 12 months,
but new research from GE Capital shows that this number is “31%
lower than their intentions just six months ago.”
GE Capital found that the number of SMEs planning to reduce
their headcount doubled from 7%, 6 months ago, to 14% in the latest
survey. The ‘SME Employment & Optimum Pulse’ survey also
revealed a 7% decrease in the number of SMEs that were planning on
increasing their number of full time staff.
This pattern is noticed in all four largest European economies,
with combined intended job creation across France, Germany, Italy
and the UK falling 45% over the past six months.
