Business

Fifth of UK SMEs halt growth and investment amid economic pressures

40% of UK businesses are looking to secure more finance in the short-term from mortgages and 23% from overdrafts and unsecured loans

One in five (20%) UK SMEs are planning to halt growth, investment and finance ambitions as they navigate financial pressures,  the Association of Chartered Certified Accountants (ACCA) and the Corporate Finance Network (CFN) SME Recovery Tracker found.

This figure reportedly rose to 30% in London, specifically with 25% predicted to not survive rising costs and rates over the next 12 months. The survey found that surging inflation, heightened supply chain issues, the energy crisis and complications gaining access to finance are causing “severe” interruptions to their long-term ability to grow.

In the next year, almost half (41.9%) of SMEs have already, or plan to, increase checks on the credit status of their customers and around a third (32.6%) on their suppliers.

Additionally, 40% of UK businesses are looking to secure more finance in the short-term from mortgages and 23% from overdrafts and unsecured loans. In Wales, this rose to 59% and 39% respectively.

ACCA said growth is also at risk of being restricted due to a shortage of skills. Although over two thirds (69%) of UK SMEs have adopted a hybrid or remote working model since the pandemic, over half (52%) are struggling to recruit more staff at the required skill level.

This number jumps to 69% in Wales and 53% in the rest of England, while Scotland and London note less of a struggle for talent at 29% and 24% respectively.

However, despite the pressures, over two thirds of SMEs (67.4%) anticipate they will have more employees on the payroll in the next 12 months, while accountants expect only 5% of businesses will not survive rising costs and rates over the next 12 months.

Glenn Collins, head of ACCA UK, said: “SMEs have already had a strained start to the year and urgently require certainty and further support to navigate the next few months.

“Our latest findings have shown that in the face of late payments and continued supply chain disruptions, 42% of SMEs are having to put extra credit checks in place to ensure they are financially protected. In order to protect UK businesses the government therefore needs to consider the ongoing pressures and offer the right support.”

Kirsty McGregor, founder of CFN, added: “With an increasing rise in the cost of living, it is vital that alongside offering support for households, the government doesn’t leave small business owners behind.

“While SMEs remain hopeful and the findings demonstrate an appetite for future growth, the onus rests on the government to support SMEs instead of creating more pressures for them to overcome.”

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