Recent research by independent SME funder, Bibby Financial Services (BFS), suggests that prevailing interest rates and political uncertainty are hindering many businesses from committing to long-term growth strategies vital for economic advancement.
The BFS Q1 2024 SME Confidence Tracker, based on a survey of 1,000 UK SMEs, indicates that a significant portion of businesses are deferring major investments until interest rates decrease, with 53% adopting this approach. Additionally, 43% of respondents are postponing investment decisions until after the next general election.
Despite these challenges, there are signs of growing optimism for the upcoming quarter. The data reveals that businesses are more positive this spring, with 61% of SMEs anticipating an uptick in sales over the next six months, compared to 54% in Q1 2023, marking a 7 percentage-point increase year-on-year.
Derek Ryan, UK Managing Director of Bibby Financial Services, said: “It’s clear that despite the hurdles faced last year, confidence is resurging among the UK’s 5.6 million SMEs. However, persistently high-interest rates since the Financial Crisis, coupled with an impending general election, are prompting a freeze in investment among these enterprises. This delay could potentially stifle economic growth in the foreseeable future. While the latest GDP figures offer some optimism, more concerted efforts are required to stimulate much-needed investment in the short term.”
The reluctance to engage in capital expenditure may be attributed to an uncertain credit landscape for small businesses, with over half (53%) indicating that accessing finance has become more challenging compared to six months ago. Additionally, 61% of SMEs report a reduction in credit availability from existing lenders in recent months, reflecting a retreat from SME lending observed in the most recent Bank of England Financial Stability Report.
Ryan further noted: “Despite the growing optimism among SMEs and signs of economic recovery, sustained growth hangs in the balance. Against a challenging credit backdrop and with the corporate insolvency rate reaching a 30-year high in 2023, SME supply chains remain strained, significantly impacting businesses’ cash flow nationwide.”
Source: https://www.leasinglife.com/news/interest-rates-and-political-uncertainty-hamper-sme-investments-bibby-survey/?cf-view