SME Sector Plans Slight Growth in Turnover and Profits

The domestic SME sector is planning slightly higher revenue and profit growth compared to the beginning of the year: on average, they expect an 8.6% revenue and 4.4% profit growth in the next year, according to the K&H SME Confidence Index 2023 second quarter survey, the results of which were released to MTI on Monday.

According to the statement, the not very encouraging financial expectations are also holding back investment intentions. Six out of ten firms plan to invest in improvements in the next year, mainly in information technology.

Zoltán Rammacher, head of SME marketing and sales at K&H, said that "the expected revenue growth rate has barely changed over the past year, and there has also been a slight correction in terms of profits compared to 3.3% in the previous quarter."

According to the results of the K&H SME Confidence Index for the second quarter of 2023, firms are not daring to dream of large increases in revenues and profits. The rate of expected revenue growth depends significantly on the size of the company: for micro enterprises, the expected growth rate remained practically unchanged at 8.6%, for small enterprises it increased from 7.6% to 9%, and for medium-sized enterprises the expected growth rate decreased from 8% to 7.1% compared to the previous quarter, the statement said.

In terms of profit, small businesses are expected to see the highest increase, up from 3.8% in the previous quarter to 6.1%. For micro enterprises, the expected profit growth rate increased from 2.8 to 3.7%, while for medium-sized enterprises it fell from 4.4 to 0.9%.

Looking at investment propensity, the downward trend since the beginning of 2022 continued. According to the bank, 58% of firms plan to make some kind of improvements in the next year. These are typically IT improvements, equipment purchases and replacing company cars. 29% of firms are planning to invest in IT in the next year, the share of firms planning to purchase machinery and equipment has fallen from 26% to 22%, and 19% of SMEs are planning to replace company cars, down from 16% in the previous quarter.

K&H's quarterly SME Confidence Index, which has been continuously compiled since 2004, is currently based on a survey of business decision-makers in 400 Hungarian-based companies with annual sales of less than HUF 2 billion. The latest survey, conducted by Impetus Research, was carried out between May 15 and June 9, 2023.