The confidence of SMEs and their faith in the federal government have plummeted in the face of declining demand and sales, according to the latest Sensis Business Index (SBI).
The SBI, published on Thursday, surveyed 1400 small businesses and 400 medium businesses with staff numbers between 20 and 199 people.
The results show that slumps in consumer spending and demand and increased competition have given rise to the lowest confidence levels among SMEs since February 2009 (down 17%), leaving a greater majority of SMEs worried about their business prospects and the state of the economy.
Confidence fell in most states and territories this quarter, with the exception of Tasmania, which reported a 10% increase due to a change of government, increased profitability and greater future business prospects.
Confidence was highest in the finance and investment sectors (up 29%), followed by increases in confidence in the café, restaurant and accommodation sector, with these sectors the only ones to reveal growing confidence this quarter.
On the other hand, the manufacturing sector reported the biggest decline in confidence (down 5%) due to decreased sales and tougher competition from cheap imports.
SMEs were over twice as likely to believe the economy was currently slowing (34%) rather than growing (15%). However, a greater majority said they thought the economy would show improvement in a year’s time.
Despite this, perceptions of the Australian economy were negative overall among those who participated in the study, with 23% nominating this as their most pressing concern, followed by lack of work of sales (21%), competition (10%) and cash flow, bad debts or profitability (9%).
Fewer than one in five SMEs reported they did not experience any significant problems in operating their business in the last quarter.
Meanwhile, the index also revealed a 10% decline in support for the federal government among SMEs, with some business owners concerned that policies were working against them. However, others said they were in favour of the government’s proposed reduction in red tape.
The Australian Capital Territory showed the highest level of government support, followed by Tasmania, which showed the highest increase in support. Victoria also showed a slight increase.
SMEs in all other states and territories indicated a decline in support for the government, with South Australia recording the lowest level of support (negative 41%).
Across different sectors, SMEs in the retail sector voiced the biggest opposition (down 18%), while finance and insurance was the most supportive sector.
Christena Singh, the author of Sensis Business Index Report, told SmartCompanythe findings of the report paint a bleak picture of the expectations of SMEs across Australia.
“The crux of the report this quarter is that demand is falling, [and] it leads to profitability and cash flow issues,” says Singh.
“More businesses are experiencing less profits and [the index] has been negative every quarter since the GFC.”
“We’ve seen a big fall in confidence for SMEs, with the main factors falling to the level of business coming through the door and consumers not spending money,” says Singh.
“Business competition has also been an increasing concern for SMEs and this is in a climate of decreasing demand, which makes the problem become fiercer.”
While Singh says some businesses were concerned about the level of uncertainty around the federal budget and its impact on consumer spending, she says some SMEs are in favour of the government’s plans to get the economy going.
Despite the bleak findings, Singh says that results show some SMEs are still experiencing growth in demand and it is important for a business that is in a rut to take steps to improve their situation.
“It really is important in a shrinking market to capture demand,” says Singh.
“From a business perspective you need to be strategic, to make sure your business is in a good position to get customers through the door. Making sure you’re optimising online presence and using your marketing effectively and managing your cash flow,” she says.