Recent research highlights a significant challenge faced by UK SMEs: a lack of financing has led to the suspension or pause of hiring and other business activities.
- Approximately 31% of these enterprises have been compelled to pause business operations, affecting growth and innovation.
- The study pinpoints hiring, marketing, and market expansion as the primary areas impacted due to financial limitations.
- Access to external finance remains a hurdle, with prohibitive costs and inflexible terms cited as major barriers.
- Despite these challenges, SMEs express optimism for growth in sales and new markets in the upcoming year, contingent on securing adequate financing.
According to new research commissioned by Manx Financial Group PLC, a considerable percentage of UK small and medium-sized enterprises (SMEs) have faced interruptions in their business operations due to inadequate financing. Nearly 31% of these businesses have halted or paused certain areas, significantly impacting overall business performance. The activities most affected include hiring personnel, marketing, launching new products, and expanding into new markets.
The investigation reveals a decline in the number of SMEs pausing activities from the previous year, dropping from 40% to the current 31%. However, the challenge persists as one in ten SMEs failed to secure necessary external finance or capital. Short-term business loans and secured loans emerged as the preferred options for external financing among SMEs.
SMEs have identified several barriers in obtaining external finance, including high costs (34%), lengthy processes (25%), and rigid repayment terms (25%). An additional 21% of businesses reported that lenders did not understand their business needs, further complicating financing efforts.
Despite these setbacks, SMEs anticipate growth in areas such as sales, market expansion, and product development within the next 12 months. The expectation for less stagnant growth is reflected in the declining percentage of businesses predicting stagnation—just 25% this year compared to higher figures in 2023 and 2022.
Significantly, with adequate external finance, SMEs project a potential growth of up to 29% in the upcoming year, a substantial increase from previous estimates. Douglas Grant, Group CEO at Manx Financial Group PLC, emphasized the ongoing difficulties in securing financing and the broader economic implications, noting that “securing financing remains difficult” and underscoring the importance of innovative solutions to bridge the existing funding gap.
Persistent financial constraints pose a substantial risk to UK SMEs, necessitating urgent policy interventions and innovative financial solutions.
