Daily News: December 16, 2014

GE Capital: Confidence Increasing Amongst European SMEs

Firms are set for €410 billion capital expenditure over the next 12 months, with 2.4 million new jobs planned across seven European markets. Sixteen percent of firms say they have ‘no restrictions’ on their investments and can spend as they wish.

According to GE Capital International’s latest European SME Capex Barometer, SMEs across Europe are much more confident about the economic climate and their prospects in 2014. Total net confidence levels – defined as the proportion of businesses which reported positive sentiment, minus those reporting negative sentiment – reached 33% in Q1 2014, up from 15% in Q1 2013. The most confident markets are the UK (54%, up 21%) and Germany (flat, 45%), with confidence increasing across all other markets surveyed.

The research, based on interviews with more than 2,250 SME business leaders in Q1 2014, finds that SMEs no longer see economic uncertainty as being such a significant obstacle to investment. Only 29% of firms reported this to be a barrier, compared to around 43% last year.

Encouragingly, 16% of firms reported having ‘no restrictions’ on their capital expenditure, saying they were able to invest as they wish.
The report shows that while confidence is returning, the picture for capital expenditure is mixed. Total capital investment is relatively stable year over year, (€410bn vs. €416bn in 2013), but different markets are moving at different speeds. German SMEs remain most bullish about their spending intentions, albeit posting an 18% drop on 2013, to €136bn. German SMEs cite the single biggest obstacle to investment as ‘having already invested’ (22%), suggesting prior spend may be impacting future investment intentions.

Across other markets, significant increases in capex are expected in France (€90bn, up 41%), the UK (€71bn, up 18%), and Poland (€31bn, up 29%) – these are also the three markets with the strongest levels of confidence. Hungarian SMEs are set to increase spend from €7bn to €10bn whilst conversely two markets are set to decrease spend: Italy (€60bn, down 24%) and Czech Republic (€13bn, down 24%).

Maurice Benisty, Chief Commercial Officer of GE Capital International, said: “The economic recovery in Europe is gaining traction and we are encouraged to see many markets feeling more positive about their future growth prospects. We are now looking to see this optimism translate into increasing business investment which will help fuel further growth.”

Other key findings of the research include:

  • existing company capital (37%), followed by leasing the equipment (17%)
  • Firms plan to add 2.4M new jobs in 2014 – a similar total to 2013. This is driven by Germany (890k new jobs planned), the UK (661k), France (299k) and Poland (232k)
  • Headcount in Western Europe is being driven by the improving economic climate (37%), whilst increasing orders/new business (42%) is driving job creation in CEE
  • The average Polish SME plans to spend more than any other market (€119k, up 33% from Q1 2013), perhaps reflecting their much higher confidence
  • Estimated loss of income due to out-of-date equipment totals €63bn in 2014, with the vast majority (€59bn) being reported by Western European firms
  • Enhancing productivity remains the top reason for upgrading equipment cited by almost half (48%) of firms, across seven markets