European SMEs plan to spend 413bn in capital expenditure in the next 12 months, boosted by growing confidence in Western European economies, according to GE Capital.
The firm’s latest SME Capex Barometer research, conducted among 2,250 SME business leaders in seven economies during the first quarter of 2013, found intended investment was up 20% on the figure from the third quarter of 2013.
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The highest figures were in Germany, where SMEs intended to invest 164bn, up 59% on the third quarter of 2012, Italy with 79bn of intended investment, up 13%, and Britain and France where intended expenditure was up 13% to 59bn and 5% to 63bn respectively. In contrast the other three countries surveyed, Czech Republic, Hungary and Poland, saw a 23% overall decline in intended capex expenditure compared to the third quarter of 2012, down to 48bn overall.
On average, each SME in Germany is likely to spend 138,000 on capex, compared to 70,000 in Italy, 58,000 in the UK, and 54,000 in France.
Among the four Western markets, estimated loss of income due to old or inefficient equipment decreased 30% to 52bn, while for the three CEE countries it was down 3% to 5.7bn.
Manufacturing drive
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By GlobalDataCompanies expected the biggest investment to be in manufacturing equipment, up around 20% to 190bn compared to the third quarter of 2012, while commercial vehicles were expected to account for a further 69bn.
Across the companies surveyed, there was an expected increase in headcount of 2.4m over the next 12 months, with German companies expecting to employ 986,000 more people, up 12% compared to the previous quarter, UK businesses expecting to employ an extra 526,000, up 16%, and Italy expecting a rise of 43% to 379 extra employees.
Just over half of all respondents cited upgrading existing equipment as a driver for investment, while 42% said the main barrier for capex was economic uncertainty. Respondents are still turning to high street banks for finance, with 42% listing them as the preferred choice, but only a quarter said they were likely to secure a loan.
In the UK, while 7% more firms expected to replace deteriorating equipment in the coming year than in the third quarter of 2012, there was a corresponding 7% drop in companies investing purely to boost production, which GE said suggests more companies are delaying investment until they believe it is absolutely necessary.
UK companies also saw increased business confidence, with 52% of respondents feeling confident compared to 19% feeling negative given a net confidence rating of 33%
Ilaria del Beato, chief executive of GE Capital UK, said the research showed a degree of positivity among UK SMEs but added: "However, whilst investment is increasing it’s telling that replacement rather than growth is the key driver."
Maurice Benisty, chief commercial cfficer of GE Capital EMEA, said: "Whilst economic fundamentals are still weak, our research points to an appetite among SMEs – particularly in Western Europe – to increase investment and staff.
"For us, and many businesses in Europe, the focus in 2013 is on delivering results, outperforming and building a platform for future growth."
An interview with Ilaria del Beato in which the GE Capital UK chief executive talks in more detail about the research and what means for UK leasing will appear in the June issue of Leasing Life.
