SMEs are entering 2012 with mixed emotions according to research by AXA Commercial Lines.

The survey found that while hopes for an increase in turnover are strong, expectations of profitability and plans for recruitment are less positive and it’s widely believed that downward price pressure will adversely affect success.
In spite of the widespread concerns for economic growth, 43% of UK small and medium sized enterprises expect their turnover to grow and only one-in-six expect to see a decrease during the coming 12 months.

There is however a sharp contrast in optimism depending on the size of the business. When it comes to sole traders, only 23% believe that turnover will improve in the coming year. This figure more than doubles when it comes to SMEs with 50-99 employees. Here over half (51%) expect turnover to improve.

However the outlook on profitability is less positive across the board with 21% expecting it to worsen and only just under a third (32%) expecting it to improve.

While there is a sizable middle ground of firms who expect both turnover and profitability to increase or remain stable over the coming year this does not translate into expected growth in employment levels, with only one in seven firms surveyed expecting to take on more staff during the year. 82% of UK SMEs say that headcount will either stay the same or worsen. While revenues might be expected to increase in 2011-12, this will be on narrower margins with 62% of SMEs agreeing that “Pressure to keep consumer prices down” will adversely affect their business. Nearly one-third (29%) expect this to have a major impact.

Matthew Reed, Managing Director Intermediary for AXA Commercial Lines comments: “When it comes to the fortunes of the UK’s SMEs, there is a more complex picture out there than the headlines would lead us to believe. It’s not all doom and gloom for sure.

However there is a real need for valuable advice when it comes to risk management given the fact that, when asked to identify key risks facing their business, nearly a quarter of UK SMEs (23%) couldn’t name a single one. I find this quite staggering. In my view it means that brokers have a major role to play in helping their clients to both understand the risks their businesses face during these difficult times as well as manage them.”

Contributed by: AXA UK – http://www.axa.co.uk/business