Supply disruptions and higher costs are dividing SME revenue forecasts over the next six months
Geopolitical instability in the Middle East and associated disruption to global freight and supply chains are adding strain for Australian small and medium-sized businesses, with knock-on effects for input prices, shipping routes and cash flow.
Firms reliant on globally traded essentials such as fuel, transport and fertiliser are likely to feel the impact most, with flow-on risks across construction, agriculture, logistics and manufacturing supply chains.
The uneven picture across the SME economy has sharpened, according to the latest ScotPac SME Growth Index Report, which was based on a survey carried out shortly before the current Middle East conflict began. ScotPac said the results were the most divided in the index’s 12-year history.
In the survey, 59% of SMEs anticipated short-term revenue growth, with projections ranging from 3% to 20%. Meanwhile, 36% expected revenue to fall over the next six months, an increase of nine percentage points compared with the previous year. Only 5% forecast no change, down from 29% in 2020.
“These global conditions are now creating a more complex and volatile operating environment for SMEs,” said Jon Sutton (pictured right), chief executive of ScotPac. “We’re seeing a clear split between businesses that are more exposed to rising costs and supply chain disruption, and those that remain well-positioned to take advantage of growth opportunities.
“There are clearly significant dislocations building in the global economy that will flow through to Australian businesses. The current geopolitical instability is already impacting key supply chains – particularly fuel, freight and critical inputs – and those effects are likely to intensify in the near term. For SMEs, that means having a working capital strategy that can absorb shocks and protect cash flow as conditions change.”
Sutton said the central issue for many businesses was the lag between faster-rising expenses and slower incoming revenue. “When costs move quickly but cash flow doesn’t, that’s when pressure builds,” he explained.
“Businesses that can scale funding up or down in line with their cash flow are far better placed to navigate uncertainty and respond to changing conditions.”
He urged SMEs to speak early with finance providers about funding structures as conditions shift.
“If businesses have concerns, they should be speaking with their finance providers early – don’t wait until the pressure is already building,” he stressed. “We’re ready to support SMEs through both growth and disruption, but the key is acting early and having the right structures in place.”
Sutton said brokers and non-bank lenders would be important in helping SMEs manage both volatility and expansion in coming months, particularly where working capital needs change quickly. ScotPac said it supports more than 9,300 businesses with flexible working capital facilities.
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