SME Report
Every four months Close Brothers Asset Finance surveys nearly 1,000 small business owners from the across the UK about a range of issues, from their views on the economy and the cost of innovation to the impacts on mental health of the increased cost of doing business.
In this report we provide the results of the research, which was conducted in May 2024 on our behalf by survey specialists, Censuswide.
The most popular source of financial support and advice for SMEs is their Financial Advisor (30%), followed by their Accountant (26%) and their Bank Manager (13%); bottom of the list is their peers at just 3%. 66% of small business owners plan to seek funding for business investment in the next 12 months.
The five most popular forms of funding are:
19% of firms have been declined access to finance in the past six months, while 34% have missed a business opportunity due to a lack of available finance.
Half of SMEs agree that taking out funding to protect cash flow is a good business strategy.
If respondents were to take out finance in the upcoming year, they would spend it on (in order):
• Investing in new assets
• Protecting cash flow
• Employing additional staff
• Improving current business premises
• Stockpiling supplies
• Paying overheads
• Mergers and acquisitions, or Management Buy Outs
• Moving to a new premises
We asked the UK’s economic prospects, 45% of business owners are confident the economy is set to grow compared to 40% who are of the opinion it’s going to slow down; the remaining 15% don’t foresee any significant changes.
38% of participating company bosses think their firm will expand in the coming months. Only 8% say they will contract – the remainder will ‘stay the same’.
SMEs’ 10 main business concerns are, in order:
1. Energy costs
2. Inflation
3. Interest rates
4. Cash flow
5. Tax / VAT
6. Materials supply
7. Competitors
8. Lack of skilled staff
9. Late payments
10. Finding extra working capital
…and their primary business priorities are:
1. Achieving growth
2. Developing our products/services
3. Survival
4. Investing in staff
5. Business consolidation
6. Paying down debts
Late payments are an issue for 41% of SMEs, with the majority owed between £20k and £40k. Over a third say late payments are more of an issue today than a year ago – and only 5% say it’s getting better.
When it comes to being able to recruit adequately skilled staff
45% are concerned about the skills gap in their sector; a further 19% have the same concern, but about their region. The rest don’t think there’s a problem.
Nearly two thirds of SMEs already use – or would consider using – an ‘alternative funder’.
Open banking
Open banking is the practice of securely sharing financial data between banks and third-party service providers, such as fintech apps. Before open banking, consumer financial data was largely controlled by big banks.
Today, people can manage their financial information and access it across different platformsin theory receiving a smoother, more personalised experience in the process.
Open banking relies on application programming interfaces (APIs) that allows two programs to communicate with each other. These APIs provide a measure of safety when sharing your financial information, and third-party providers can use the data to offer personalised solutions.
Our data:
59% 44% 43% 47% 69% of respondents have heard of ‘open banking’ while 33% have not; the rest are unsure are confident they know how open banking works against 38% who do not
think their business would benefit from open banking but a significant minority of 36% aren’t sure
believe open banking makes securing funding simpler and easier trust banks to keep their business data secure – just 22% do not while the rest don’t know
Government-backed loan schemes
The various government-backed loan schemes – Bounce Back Loan (BBL), Coronavirus Business Interruption Loan Scheme (CBILS) and Recovery Loan Scheme (RLS), collectively provided access to funding for countless businesses across the UK as they coped with the impact of the pandemic.
Our data:
• 62% of business owners believe government-backed loan schemes are beneficial for businesses against 24% who are of the opposite view
• 55% would feel confident applying compared to 32% who would not; the rest are unsure
• A third of SMEs polled have at some point secured funding through at least one government-backed loan scheme
Industry events
Business events – including exhibitions, trade fairs and conferences - generate more than £30bn of direct spend for the UK’s economy each year, according to Conference News.
Another report from Allied Market Research states the ‘corporate events and seminars’ segment held the highest market share, accounting for more than a quarter of the UK events industry revenue, and is estimated to maintain its leadership status throughout to 2032.
Our data:
• Nearly three out of five SMEs (56%) attend industry events as a visitor while 39% exhibit
• Two thirds are of the opinion events have an important role to play in showcasing the sector
• Four in 10 (39%) think it would be detrimental to them if events were no longer held
• However, the cost of attendance is an issue for 43% of businesses
Cost of doing business and living
The rising cost of doing business has been very well documented, with rising inflation and interest rate hikes all playing their part in making most goods more expensive.
This led to – said the Financial Times – ‘corporate insolvencies in England and Wales rising to their highest level since 1993 last year, according to official figures that lay bare the challenges facing companies amid slowing demand and high production costs. There were 25,158 registered company insolvencies in 2023, up 13.7 per cent from the previous year — the highest number for 30 years, the Insolvency Service said.’
Our data:
71% of SMEs have been impacted by the rising cost of doing business; with 56% saying it’s negatively impacted their cash flow.
The top five inflationary pressures small business owners have felt are:
Two-thirds have seen their business insurance rise in the past 12 months, necessitating 85% (24% completely; 61% partially) to pass these additional costs onto their customers.
For their businesses to thrive, SMEs have highlighted economic stability as more important than tax cuts, lower interest rates and subsidised energy bills.
75% of business owners say the that the increased cost of living has impacted themselves and their employees.
This has resulted in 54% raising their employees’ wages since the start of the year.
A further 58% believe offering/allowing working from home for employees reduces their cost of living.
Mental health impact of the increased cost of doing business…
Running and building a business is both rewarding and stressful, often in equal measure. The impact this has, has been the subject of a number of studies, one of which states that 80% of small business owners have suffered with poor mental health at some stage.
Our data:
70% of business owners feel they need to be ‘always on’.
This has led to the following impacts on their mental health (respondents could select more than one option):
• I find it harder to switch off (34%)
• I feel more anxious (33%)
• I have low moods more often (24%)
• I feel lonely (14%)
• I have had sleepless nights (26%)
When asked which aspects in particular caused them concern, they stated, in order:
1. The economic outlook
2. Managing cash flow
3. Decreased profits
4. Meeting operations costs, such as rent etc.
5. Uncertainty about my business’s future
6. Duty of care to staff (financial and health / wellbeing)
To reduce their stress and / or anxiety, they are taking various steps, including (in order):
1. I give myself regular breaks
2. I am staying organised
3. I have tried to maintain a routine
4. I’m more flexible with my working day
5. I share concerns with colleagues or friends and family
6. I have sought professional help
7. I have not taken any steps to reduce my stress or anxiety
Mental and physical health at work
The key role employers play in their employees’ mental and physical health are becoming more widely recognised and are now entrenched in law.
All employers have a general, common-law duty to take reasonable care for the safety of their employees, including providing a safe place of work, safe tools and equipment, and a safe system of working. The Health and Safety at Work Act 1974 also imposes a general duty on employers to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all their employees. This extends to mental health and taking reasonable steps to prevent and manage work-related stress.
Mental health conditions may be considered a disability under the Equality Act 2010 if the condition or symptoms have a long term, adverse impact upon an employee’s ability to carry out normal day-to-day activities.
Our data:
77% of employers believe they have a big role to play in positively impacting their employees’ physical and mental health. 41% have experienced an increase in stress-related absence. Over half (51%) provide financial well-being support for their employees.
They also provide:
• Access to mental health first aiders (25%)
• Education/training (31%)
• Healthcare provision that includes mental health support (30%)
• Flexible working to support mental health needs (38%)
• Signposting for mental wellbeing organisations (25%)
When asked whether they believe UK businesses are doing enough to support their employees’ mental health, respondents said:
• Yes, we are doing enough and do not need to do more (15%)
• Yes, we are doing enough but they could do more (39%)
• No, we aren’t doing enough and they should be doing more (31%)
• No, we aren’t doing enough but it’s not their responsibility (7%)
• Don’t know (7%)
Innovation
The UK has traditionally been seen as a hub of innovation excellence, and according to the UK innovation survey 2023: report, published in May 2024, 36% of UK businesses were ‘innovation active’, which is a decrease of 9% - in the 2018-2020 period, it was 45%.
The percentage of ‘innovation active’ businesses was highest in England (37%) while in Scotland and Northern Ireland it is 32%, and 31% in Wales.
Our data:
55% of SMEs feel the UK is an innovative place to do business and a further 52% of business owners feel they are incentivised to be innovative.
Nearly half (47%) of firms polled intend to launch a new product or service in the next 12 months.
The top 3 drivers for launching a new product or service are because doing so:
1. Provides an opportunity to reach a new market
2. Increases competitive advantage
3. Improves brand awareness
However, two thirds say that innovation comes at a cost and is very expensive.
The main barriers preventing launching new products/services are:
1. Lack of capital
2. High risk
3. Lack of skills or equipment
4. Focus on core offering
5. Not enough data to support decisions
High streets
The UK’s high streets have for some time been under significant pressure as online shopping has impacted traditional retailers. In addition Covid, changing working practices and the cost of living crisis has further eroded visits to the high street.
Our data:
• Half of SMEs are confident there’s a future for the high street
• A further 50% say it’s important for their business that the high street rebounds
• 47% have seen an increase in consumer confidence in the high street
Retirement
A recent report from the International Longevity Centre – called State Pension Age and Demographic Change – contends the retirement age will have to rise to 71 for middle-aged workers across the UK because of the impact of growing life expectancy and falling birthrates on the state pension.
The UK pension age of 66 is set to rise to 67 by – latest - March 2028; from 2044, it is set to rise to 68; however, the research suggests that this is not enough, and that anyone born after April 1970 may have to work until they are 71 before claiming their pension.
Our data:
A quarter of respondents expect to retire after 65; the full list:
• Before 50 (5%)
• 50-55 (9%)
• 56-60 (20%)
• 61-65 (26%)
• Over 65 (26%)
• Unsure (9%)
• I do not have any retirement plans (6%)
Recent economic events have made 44% of business owners change the age at which they were originally planning to retire. 47% plan on taking a phased retirement and working part-time. 61% are comfortable with their current retirement plans. 28% say selling their business is part of their retirement plans; 42% say no – the rest are unsure. 41% have a succession plan in place for their business.
Dogs in the workplace!
Many firms – where it’s safe to do so - now allow dogs in the workplace because they are shown to boost staff morale, increase productivity, and improve employee retention and recruitment. It’s also a way to encourage home-based workers to return to the office. closeassetfinance.co.uk
Our data:
40% of firms surveyed allow dogs in the workplace say dogs boost employees’ moods
77%