SMEs battening down hatches: Bank

Steve Atkinson.

Small-medium business are tightening their belts and putting pen to paper to plan their way through a tightening a number of challenges facing the economy, according to the findings of the latest Westpac Business Growth Monitor.

The biggest drop in confidence came from medium-sized businesses with 10-plus employees where expectations of growing the business have plummeted nearly 20 per cent from the last quarter - 49 per cent against 68 per cent. In the quarter to March 31, the Westpac Business Growth Monitor measured the confidence of more than 500 SMEs (with less than $5 million turnover) on the economy, their plans to grow, intentions to create jobs and need for funding.

Westpac's head of specialists commercial, Steve Atkinson said businesses were hunkering down and pausing for breath to an extent. As they plan their future carefully over the next year or so.

"There are a lot of factors now in play that businesses don't have control over - the Chinese economy, uncertainty in Europe, the US elections and closer to home, the dairy downturn," he said.

"Businesses are starting to put the dots together and trace these uncertainties back to their own businesses and their own future".

While the intention to hire staff has increased (13 per cent from 8 per cent in Q1), Atkinson said fewer businesses were looking to commit to large loans and it appeared business were looking at ways to self-fund more.

The monitor showed that overall, businesses are increasingly cautious. Of those looking to borrow in the next six months, only 31 per cent are looking for loans of more than $50,000, compared to 45 per cent in the previous quarter - a 14 per cent fall in $50,000-plus loans in just three months.

"This is hardly surprising in an economy linked so heavily to the primary sector, but overall we're being kept on a relatively even keel by buoyed confidence in construction, trade, transport and tourism, where businesses are hiring more.

"While only 35 per cent of primary sector businesses expected to grow in the next six months, trade, transport and tourism businesses were showing more optimism, with 17 per cent reporting increased employment over the last three months.

"In the last quarter we've seen a six per cent increase in the number of businesses who have a business plan in place to achieve their growth goal - 67 per cent from 61 per cent."