SME businesses in the UK experienced a huge earnings boost in the final quarter of 2021 compared with the same period in the prior year.

The quarterly Barclaycard Payments SME Barometer found that 56% of small- and medium-sized businesses reported a rise in earnings.

Data from Barclaycard Payments, which processes £1 in every £3 spent in the UK and services over 350,000 SMEs, supports this trend – with transaction volumes up 42% in the same period.

2022 has started positively for many SMEs despite concerns around economic uncertainties, with almost three-fifths predicting an increase in revenue this quarter compared to the same period last year when the UK was in the third COVID-19 lockdown.

On average, businesses forecast a year-on-year increase in Q1 turnover by 14%. Perhaps unsurprisingly, hospitality and leisure operators – whose physical premises were closed this time last year – expect the largest turnover increase (34%), followed by retail (17%), transport and distribution (15%) and financial services firms (11%). 

This is likely due to the impact of coronavirus settling and SMEs feeling more confident to invest or seek investment – evidenced by 33% UK SMEs who plan a ‘high level’ of investment in their business over the next 12 months.

The research, which polled 577 senior staff working in UK SMEs, found that overall business optimism is beginning to build, scoring 55 out of a possible 100, up from a low of just 40 points in Q2 2020. This quarter equals the highest levels recorded since the Barclaycard Payments SME Barometer started in February 2020, before the first lockdown.

Yet, while almost half are optimistic about the outlook for their firms, confidence in the broader economy is less pronounced, with those reporting a neutral sentiment (40%) outweighing those who are optimistic (24%).

Just under two-thirds of SMEs are worried about a rise in the cost of living and inflation and a similar proportion highlight a feeling of nervousness about increases in their energy bills, with four in ten stating that it will impact their ability to remain competitive, while 10% will reconsider the need for a physical retail outlet as a result.

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When asked to select the number one challenge for this year, SME leaders now view the rising cost of living as a bigger headwind than the ongoing uncertainty around the pandemic. 

Colin O’Flaherty, head of small business at Barclaycard Payments, said: “Small and medium-sized businesses have had a positive start to the year and it’s encouraging to see so many seeking to add to their workforce. 

“SMEs are also remaining resilient by continuing to focus on areas within their control, such as by improving their operating models to overcome the hangover to supply chain disruption which peaked at the end of last year.

“The coming months will no doubt present continued challenges for British SMEs and the impact of rising costs will remain front of mind. Businesses will need to call on the same spirit for innovation and specialised support that has propelled them through the last two years.”