Capital expenditure is increasing across Europe as business sentiment improves, but different economies are moving at different speeds according to the latest research findings from GE Capital’s European Capex Barometer.
Its Q1 2014 survey of over 2,250 senior decision makers from European SMEs across seven markets shows they are planning to spend a total of €410bn on equipment in the next 12 months and create an estimated 2.4m new jobs, figures that are broadly consistent with last year’s findings.
Business confidence has increased across all markets surveyed (France, Germany, Italy, UK, Czech Republic, Hungary and Poland), except Germany where it is level. However, the picture for capital expenditure is more mixed, with the predicted upswing in the UK and France counterbalanced by significantly reduced investment intentions in both Germany and Italy, although Germany is still set to spend more than any other market (€136bn).
The increase in capital expenditure intentions within the CEE markets is driven primarily by Poland where predicted overall investment is 33% above the level recorded in last year. Polish SME’s also plan to spend more per SME than any other market, perhaps reflecting their much higher confidence. The survey also identifies strong increases in SME confidence and spending plans in France, suggesting recovery is finally on the way.
Manufacturing equipment is again set to drive spend (€184bn), €66bn of which is down to German SMEs. IT (€81bn) and office equipment (€26bn) spend is also set to increase in the coming year. Investment in commercial vehicles is predicted to reach €120bn, of which €9.6bn will be spent in the Polish market.
Estimated loss of income due to out-of-date equipment totalled €63bn in 2014, with the vast majority (€59bn) being reported by Western European firms. Upgrading equipment to enhance productivity is the biggest reason for investment for Western European SMEs (49%), compared to the Central and Eastern European (CEE) markets (47%).
Buying outright with company capital (37%) is the most preferred method of financing for all SMEs, compared with the 17% who favour a leasing solution and the 15% seeking a bank loan. While a leasing solution is the next most popular choice for Western European SMEs, those in the CEE are more likely to consider financing from the EU. Although a relatively new option in most markets, 26% of companies across all seven markets surveyed would consider peer- to-peer lending to finance their investment.
More SMEs are likely to consider using a bank as their finance provider (75%) than financing from a manufacturer (62%) or a leasing provider (56%).In most markets, there has been a noticeable drop off in the number of SMEs who see economic uncertainty as a barrier to investment. One in five Western European SMEs say they face ‘no restrictions’ to investing, compared to one in eight in CEE markets.
Maurice Benisty, chief commercial officer, GE Capital International, said: “It is welcoming to see that business sentiment is improving – companies across Europe are feeling more optimistic – and broadly starting to invest and hire more. This is a hugely positive story.”
