Smaller Australian businesses aren’t doing as well as their larger competitors

Photo by Joe Robbins/Getty Images

Smaller Australian businesses are doing it tougher than their larger competitors, says the National Australia Bank (NAB).

According to the bank’s latest Small and Medium Enterprises (SME) Business Survey, confidence levels and operating conditions fell during the June quarter, unwinding much of the improvement in the second half of last year.

The NAB says that the views expressed by SMEs were in stark contrast to those of larger firms over the same period.

“A pull back in both business conditions and confidence saw SMEs underperform compared to larger businesses in Q2,” the NAB said, noting that “the retreat in conditions and confidence was broad based across industries, firm sizes and states, with the exception of South and Western Australia”.

The bank said that the weakness was particularly pronounced for the smallest SMEs surveyed, those with annual turnover of between $2-$3 million.

“Trading conditions declined the most at the smallest SME firms, while mid-sized SMEs reported a slight deterioration and the largest SMEs continued to experience improving trading conditions,” said Alan Oster, chief economist at the NAB.

“The results highlight the challenges faced by the smallest SME firms, who often have a less diversified business model and may be constrained to a single location or product offering.”

This table shows how SMEs fared in the June quarter. A positive figure indicates that a majority of respondents were positive.

Source: NAB

While confidence and conditions were weaker than the prior quarter, both remained in positive territory and above the surveys long-run average.

So it’s not indicating that SMEs are in dire straights, but rather that things weren’t quite as strong as they were in the previous quarters.

This chart puts that in visual form.

Source: NAB

Indeed, while Oster described the result as “disappointing”, he said that it was not all bad news with the surveys lead indicators providing a mixed view on the outlook for activity levels.

“Rising capacity utilisation and capital spending intentions were encouraging, while on the other hand, we saw lower forward orders and cash flows,” he said.

“We will continue to monitor the conditions faced by the SMEs, as they are essential to job creation and our economic recovery.”