SMEs slow down on recruiting as inflation eats into costs

In its latest SME Sentiment Tracker, ACA Research found that although there has been a levelling out in revenue in October, recruitment in the SME sector has softened.

Survey results showed that last month, there was no indication that economic uncertainty was impacting turnover with revenue expectations continuing an upward trajectory with 35 per cent of small businesses expecting an increase over the next four weeks.

Additionally, SMEs said they expect to grow over the next 12 months, especially among the distribution and hospitality sectors.

While SMEs in Australia remain fairly positive, they are concerned over global and local economic conditions with 62 per cent saying they expect global conditions to weaken, while expectations about the local economy are only slightly higher at 58 per cent.

Unease about escalating operating costs has also increased throughout October, with concern about inflation and rising interest rates jumping to 81 per cent from 72 per cent in September.

Despite turnover remaining stable, 22 per cent of businesses reported an operating loss in October compared to 17 per cent in September, suggesting higher costs are starting to hurt margins.

Consequently, there has been a sharp drop in vacant job roles with only 24 per cent of SMEs recruiting compared to 30 per cent in September and 35 per cent in July.

With fewer SMEs looking to fill roles, the ease of recruiting has improved substantially over the past month with 43 per cent finding it very difficult to recruit compared to 57 per cent a month earlier.

SME financial indicators remain positive, but weaker confidence about local and global economic conditions continues to point to difficult times ahead. Heightened concerns about inflation and softer jobs data are a likely indication that SMEs are beginning to plan for some tough conditions over the next few months.