Cautious optimism in the six-month revenue forecasts of Australia’s small business sector highlights the resilience of the country’s SMEs, though the recovery remains uneven and confidence remains subdued in the manufacturing sector.

The March 2021 edition of ScotPac’s SME Growth Index found almost half (48%) of SMEs predicting revenue growth. However, the proportion of SMEs expecting revenue to decline hit a new high at a critical moment on the road to long-term COVID recovery – one in four small businesses have forecast a revenue drop, on average by 5.5%. ScotPac CEO Jon Sutton said revenue uncertainty is more marked at the smaller end of the SME sector, with SMEs with revenues between $1m and $5m feeling the brunt more than their $5m-$20m revenue counterparts.

The survey showed particular uncertainty among manufacturers, with manufacturing revealed to be the second-least confident major industry (after retail). Almost one in five manufacturers (19%) are looking at closing, 27% say they will sell either immediately or within six months, and 17% of manufacturers are unsure if they will have to close or sell.

In comparison, fewer than one in 10 retailers are confident enough that they will not have to close or sell. More than one in three retailers (36%) say they’ll close without conditions significantly improving, while one in three (33%) say they’ll sell within the next six months. For transport (72%), business services (82%) and mining (86%) the vast majority of small businesses in these sectors felt they could ride out tough conditions without having to consider closing or selling.

Manufacturing is the industry sector most evenly poised between confidence and pessimism when it comes to revenue growth in 2021 – 36% of manufacturers are forecasting growth (by an average of 1.1%) for the next six months. A third of manufacturers (33%) say they’ll decline (-3.9% average) and a large cohort (31%) remain unsure.

  • Retail: 32% say they’ll grow (by 1.8%), but 39% expect to decline (by -5.3%)
  • Mining: 90% expect revenue growth (by 8.5% on average), 5.6% forecast a decline
  • Wholesale:5% expect growth (by 2.1%), with 29% forecasting revenue decline (-2.2%)
  • Transport: 59% forecast a revenue uptick (by 3.6%), with 10% expecting to decline (by -2%)
  • Business services: 57% expect to grow (by 5.5%), 9% to decline (by less than a percent)

On the positive side, the March 2021 results show almost half the 1,253 business owners polled (48%) anticipate positive revenue growth for the next six months, growing on average by 4.1%. This average revenue growth forecast has increased eight points from H2 2020, reflecting a strong “bounce back” in confidence for many small business owners.

“Overall the small business sector has rebounded well considering the depth of the challenge the pandemic created,” said Sutton. “But many SMEs are not out of the woods yet. There’s much uncertainty about the long-term pandemic recovery path for those SMEs weaning off government stimulus or coping with sector-specific challenges, in particular tourism, accommodation, retail and restaurants. For the businesses facing uncertainty, it’s crucial to focus on getting expert advice and putting in place sufficient funding to support recovery and growth.”