A survey by UK accountancy firm Azets found that 68% of SMEs feel positive about the economic outlook over the next 12 months and over half, 56%, expect their profits to increase.

In contrast to this time last year, 87% of businesses stated that they expect to be trading in a year’s time with only 6% saying that they are unlikely to be trading.

The research, which surveyed 760 of Azets SME clients revealed that as the UK went into lockdown last year 71% of SMEs felt ‘well supported’ by the government overall. The survey found that nearly three-quarters of businesses intend to bring back all staff from furlough.

The survey found that businesses in Scotland, the north east, north west and Yorkshire are less optimistic with 60% in Scottish and 59% in the north east, north west, and Yorkshire feeling optimistic about the UK’s economic outlook compared to 71% in London.

Peter Gallanagh, north regional CEO of Azets, said: ‘There is a robust level of optimism across the SME community and the investment and recruitment intentions are very encouraging.

‘The disparity in optimism between Scotland, and the north and the south, reflects the heavy weighting towards the service sector in the south, which is showing stronger and faster signs of recovery.  Hopefully, recovery in confidence in Scotland and the north will accelerate as the economy strengthens across the regions, entrepreneurs start to invest, and employment increases.

‘Clearly there are wider challenges with shortages of skilled labour, soaring raw material costs and the threat of inflation. SMEs will be adjusting their business models and considering innovative ways to reduce costs and their dependence on single supply chains.’

The research also found that the top three threats to UK SMEs and businesses, felt by those surveyed, were Covid-19, competition and Brexit which was named as the third biggest threat in all regions outside of London and the south east.

UK SMEs stated that financial health, adapting their business models and employee wellbeing were ranked as their top three priorities.

The UK government is currently pushing SMEs to embrace the race to net zero, but according to Azet’s SME Barometer sustainability and net zero commitments ranked ninth out of 11 in terms of priorities for the next 12 months.

Chris Horne, group CEO of Azets, concluded: ‘The biggest opportunity and biggest threat for SMEs is adapting their post Covid-19 business model using technology and flexible working. Those who get this transition right will be in a better position to survive and thrive.

‘Given the importance of ensuring that the SME sector continues to adapt and prosper as the economy recovers, these findings point to areas where further government policies are vital in delivering the support businesses need post Covid-19 and post-Brexit, right across the UK.’