1 in 5 UK SMEs halt growth and investment as they face economic pressures

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1 in 5 UK SMEs (20%) are hampered in their growth and financial ambitions by their levels of existing financial pressures, reveals a monthly monitoring of the recovery of SMEs from ACCA (the Association of Chartered Chartered Accountants) and the Corporate Finance Network (CFN).

The survey, which asks accounting professionals about the financial outlook of their SME clients, finds that growing pressures such as soaring inflation, worsening supply chain problems, the energy and difficulties in accessing finance are piling up on UK SMEs, causing severe disruptions to their ability to grow over the long term.

UK SMEs are fighting for survival as they try to put in place measures to become more financially resilient in the face of supply chain disruptions and late payment challenges. Indeed, next year almost half (41.9%) of SMEs already have, or plan to increase, credit checks on their customers and about a third (32.6%) on their suppliers. . At the same time, 40% of UK businesses are seeking more short-term finance through mortgages and 23% through overdrafts and unsecured loans. In Wales, that rises to 59% and 39% respectively.

Despite current pressures, including concerns over the financial viability of UK businesses, UK SMEs are still optimistic about the opportunities for their businesses to grow over the next year. More than two-thirds of SMBs (67.4%) predict they will have more employees on the payroll over the next 12 months, while accountants note they expect only 5% of businesses are not surviving rising costs and rates over the next 12 months.

However, these aspirations do not correspond to the financial and resource reality of SMEs. Worryingly, only 22% of UK SMEs use and regularly update a cash flow forecast. Without closely monitoring cash flows, SMEs risk defaulting on their existing financial obligations, hampering any future growth plans.

This growth is also likely to be limited due to a shortage of skills. Although more than two-thirds (69%) of UK SMEs have adopted a hybrid or remote working model since the pandemic, more than half (52%) are struggling to recruit more staff at the required skill level. That number climbs to 69% in Wales.

Lloyd Powell, director of ACCA Cymru/Wales, commented on the results:

SMEs have already had a difficult start to the year and urgently need certainty and additional support to navigate the coming months. Earlier results in January noted that more than a third of SMEs felt more anxious and stressed due to financial pressures and it is crucial that measures are in place to help business leaders stop a further increase. Our latest findings showed that in the face of late payments and continued supply chain disruptions, 42% of SMEs need to implement additional credit checks to ensure they are financially protected. In order to protect businesses, the UK and Welsh governments must heed current pressures and provide the appropriate support to support the Welsh economy at a time of great uncertainty.

Although there is news of a successor program to the stimulus loan program once it ends at the end of this month, it is clear that it will not be available immediately after. It is therefore extremely important that SMEs are aware of the financing options available to them in the meantime.

Kirsty McGregor, Founder of The Corporate Finance Network, adds:

With a growing cost of living, it is essential that in addition to providing support to households, the government does not leave out small business owners. These results highlighted that one in five SMEs plan to suspend growth due to existing levels of financial commitments and other pressures, which is alarming for the short and long-term future of this vital sector. economy.

Although SMEs remain hopeful and the results demonstrate an appetite for future growth, it is incumbent on the government to support SMEs instead of creating more pressures to overcome.

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