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SMEs holding back on funding for future growth says report

SMEs are the lifeblood of the economy, but as the new year progresses, fewer are getting the finance they need to recover from the pandemic.

A report shows that around 80 per cent are not seeking the finance to expand over the next 12 months and instead are turning to short-term financing like overdrafts.

Analysis from ACCA UK (the Association of Chartered Certified Accountants) and The Corporate Finance Network (The CFN), shows UK SME activity levels are still below 2019.

Accountants questioned in the Recovery Tracker survey believe around a quarter of businesses have still not returned to pre-COVID-19 levels of productivity or turnover.

The report also showed a seven per cent month-on-month drop from November to December in their business clients looking to hire staff and a four per cent increase in those expecting to make redundancies next year.

The gloomy outlook showed that over the last month alone there has been a 10 per cent drop in the number of businesses that are expected to still be trading in 12 months – from 93 per cent in November to 83.8 per cent in December 2021.   

As well as this, a third (30 per cent) of accounting practitioners responding from around the UK anticipate their clients will need to use overdraft facilities in the next six months to fund their business.

A further third (30 per cent) expect their clients to apply for secured or unsecured business loans within the same period and nearly half (45 per cent) expect clients to apply for eligible business grants, demonstrating that it is becoming a more difficult environment in which to do business.

Claire Bennison, Head of ACCA UK, said: “I’m extremely apprehensive about the trends this data has revealed on the state of UK SMEs. Not only for the businesses themselves, but these continuing financial issues are resulting in long-term damaging impacts on the wider UK economy.”

Kirsty McGregor, Founder of The Corporate Finance Network, added: “Looking ahead, there are some major impacts coming in the new year, including business rates increases, an uplift in the national minimum wage, and the new health and social care levy introduction in April adding up to 2.5 per cent to payroll costs, all of which will have a further negative impact on these struggling SMEs.”

If you need assistance with monitoring and managing your business’s finances, please contact our accounting team at enquiries@stca.co.uk or 01494 552100 or speak to your usual Seymour Taylor representative today.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing on 17 February 2022.