UK small businesses saw a 14% drop in revenue in the second quarter of 2020 because of the coronavirus pandemic but the impact was far less damaging than had been feared.
The latest quarterly SME Barometer from Barclaycard Payments has found that small firms have exceeded their revenue predictions for Q2 this year. At the start of April, they predicted a 28% decline for the quarter, but the data shows that the average drop in Q2 was actually 14%.
Stronger-than-expected Q2 performance has also led to a boost in optimism, with index scores jumping from 79 out of a possible 200 points at the start of Q2, to 95 points at the start of Q3. This is also reflected in business outlook - 36% of SMEs report a positive outlook for their own business this quarter, up from 21% in Q2. Across all sectors, SMEs predict a 5% increase in revenue for Q3 compared to Q2, which increases to 14% over the next 12 months.
Sectors that rely on consumer card payments, such as hospitality and leisure, now appear to be recovering well - Barclaycard SME transaction data for the first half of Q3 has shown consistent week-on-week growth, and the average daily transaction value has risen by 60% compared to the daily average for Q2.
The findings also show that SMEs are being proactive in their own recovery - 80% plan to invest over the next 12 months, with new equipment and technology (32%) and marketing (28%) the greatest focus.
Rob Cameron, ceo of Barclays Payments, said: "SMEs are once again proving their resilience and securing their role at the heart of the UK economy, especially in the face of the challenges posed by coronavirus. Despite uncertainty and business disruption, SMEs are outperforming their own revenue expectations and beginning to look to the future by returning to work and thinking about investment.
"We welcome these signs of growth and optimism - and hope that SMEs continue to take advantage of the support available, whether from finance partners or the government, in order to continue this recovery."
The biggest change SMEs have implemented to mitigate the effects of coronavirus is reducing staff numbers (for 26% of SMEs), which rises to 47% amongst medium-sized businesses.
Four in ten SMEs can see life returning to how it was before coronavirus; a further 31% say that they won't return to normal because they have made changes that they intend to keep. Just over one in ten (11%) say they will be moving to a permanent working-from-home model and not asking employees to return to the office.
Commenting on the findings, Luke Davis, ceo and founder of SME investment firm IW Capital, said: "The latest feedback from the SME Barometer is very much what we have been seeing when interacting with small and medium-sized businesses in the post-COVID economy … For those businesses looking to push on and grow, entrepreneurs and business leaders need greater support from the government to expand and be a vital part of the economic recovery post-COVID."
Written by Rachel Miller.