UK services businesses continue to grow

Small business domestic turnover rose by 0.43 percent between Q3 and Q4 2012 according to The Cashflow Barometer, a quarterly study by ABN AMRO Commercial Finance.

The Cashflow Barometer is an indicator of the financial performance of UK small businesses, based on analysis of 700 companies. Despite the latest quarter-on-quarter growth, SMEs experienced an overall contraction in turnover of 0.43 percent between 2011 and 2012. These results reflect a challenging year for the manufacturing, distribution and engineering sectors, all of which saw turnover fall during 2012, with this sector-specific decline cancelling out year-on-year growth in other industries, such as recruitment and services.

Peter Ewen, Managing Director at ABN AMRO Commercial Finance, says that since recession struck, we’ve seen sporadic recovery across all small business sectors: “However, as time has gone on, some industries have been able to maintain that growth while others have stalled.”

Between Q3 and Q4 2012, turnover in the services sector grew by 4.18 percent, while recruitment fell by 4.96 percent.

However, year-on-year, both of these sectors saw a rise in turnover, services by 5.54 percent and recruitment by 5.97 percent. Both recruitment and services also experienced a reduction in days outstanding for payment of invoices between Q4 2011 and Q4 2012 – recruitment by three days, and services by one.

Distribution businesses saw a significant spike in turnover of 10.74 between Q3 and Q4 2012 – historically a strong turnover period for this sector, due to seasonal demand.

Across the longer-term though, distribution turnover fell by 5.97 percent between 2011 and 2012, and debtor days increased by one.

Engineering experienced a fall in turnover of 8.22 percent between Q3 and Q4, and a year-on-year fall of 6.68 percent.

Manufacturing turnover fell by a modest 1.75 percent between Q3 and Q4 but had the most severe year-on-year retraction of any sector, falling 7.16 percent between 2011 and 2012.

“Despite seasonal blips, we’re seeing an overall trend emerge of turnover decline in engineering, distribution and manufacturing, coupled with growth in services and recruitment,” adds Peter. “Temporary and part-time employment has increased, bolstering the recruitment and services sectors, but this growth is not guaranteed to last in the long-term and is giving something of a false reading that everything is ticking along.

“In reality, engineering, distribution and manufacturing need a significant boost in order for a sustainable economic recovery to be truly achievable.”