Growth ambitions of smaller firms being held back by political turmoil

● Uncertainty leads to subdued demand for lending from SMES, new survey finds

The uncertain political backdrop is making small and medium-sized firms reluctant to apply for finance to support growth, new figures have revealed.

The latest SME Finance Monitor from research agency BVA BDRC found that only 4 per cent of firms surveyed had applied for new finance in 2018, although 80 per cent of applications were successful.

The survey of more than 4,500 small firms found that almost one in four (24 per cent) of SMES now see political uncertainty as a major barrier to their business going forward, up from 15 per cent a year ago. Although four in ten SMES reported having grown in the past 12 months, more than half (53 per cent) said the future felt uncertain so they were being “very cautious” with their plans.

Shiona Davies, director at BVA BDRC, said the figures highlighted how many firms felt they faced an uncertain future.

“Demand for finance remained limited – a combination of confidence, attitudes to finance, the availability of other funding such as trade credit and other factors such as concern about the political and economic climate,” she said.

“It is difficult to say with certainty what the impact of this might be on future business performance – levels of profitability are currently stable, and more SMES are planning to grow, but levels of innovation have declined over time and an increasing minority of SMES say their business declined in size in the previous year.”

The survey found that those SMES that trade internationally were even more likely to be concerned about political uncertainty, with 37 per cent of those who import and export naming it as a major barrier, up from 18 per cent a year ago.

Thesurveyalsorevealedthat only one in 20 SMES see access to finance as a major barrier to growth.

Stephen Pegge, managing director of commercial finance at trade body UK Finance, said: “This survey suggests many small businesses are increasingly concerned about the ongoing uncertainty over Brexit, particularly those that trade internationally.

“The banking and finance industry has the capacity to support viable businesses whatever the outcome and lenders continue to approve over eight in ten of finance applications from SMES. We would therefore urge SMES to be confident in approaching their bank and discussing any financing needs.”

UK Finance recently launched an online guide for SMES on preparing for Brexit.