Nearly half of SMEs are struggling with cashflow as Brexit burden drains resources

  • Rises in material costs (17%) and increasing competition (15%) are increasing pressure on SMEs
  • Half of the UK’s SMEs predict a recession in the next 12 months

Nearly half (44%) of the UK’s SMEs, equating to 2.5m  businesses, are struggling with cash flow as they attempt to prepare for Brexit, according to the latest SME Confidence Tracker from Bibby Financial Services.

The report, which surveys 1,000 business decision makers on a quarterly basis from across the UK, found that there has been a six per cent rise (to 29%) in the number of SMEs actively using funding in the past quarter. Seventy-two per cent of SMEs are investing an average of £16,400 more than predicted at the end of Q1. 

According to economic analyses from the PMIs and ONS, it appears that this additional investment is being used to offset risks associated with a no-deal Brexit. 

Sixty-nine per cent of SMEs are preparing to further invest in their businesses in Q3 as they attempt to protect themselves from any negative impacts of Brexit. While this does mark the end of five quarters of falling investment, it is not a return to historic levels last seen in Q4 2017 (80%).  

With half of the UK’s SMEs believing there will be a recession this year, they’ve turned to quick-fix forms of funding, with over a quarter (26%) of those needing finance making use of credit cards, bank overdrafts, and borrowing from family and friends.

Sharon Wiltshire, UK Commercial Director at Bibby Financial Services, said: “Ordinarily a rise in the number of companies investing in themselves would be a boon for the economy. But with increasing competition, rising materials costs and the broader economy stalling, businesses appear to be sourcing finance to cope with these challenging conditions rather than investing for growth.

“With the current uncertainty set to continue, it has never been more essential for SMEs to be aware of all the funding options available to them before they commit to more borrowing.”

29 July 2019

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