2.1 Million UK SMEs Are ‘Just About Breaking Even’

Last year, the UK government removed almost all of the coronavirus restrictions. As a result, many small-to-medium-sized organizations (SMEs) may have legitimately assumed that 2022 would be a year of sterling recovery.

And for some businesses, that has mostly turned out to be the case. However, issues like rising expenses and cash flow cases, have proven to be a significant and ongoing worry for many.

Growing business confidence but many faces challenges 

UK SMEs are eager to seize the chance to make up ground lost during the epidemic. However, they run the risk of falling down due to a number of growing concerns. For example, increased expenses and cash flow issues.

The findings of an annual confidence tracker survey have given an understanding of recent attitudes among SMEs across the nation. The Bibby Financial Services‘ (BFS) annual SME Confidence Tracker poll shows what small businesses have to deal with. It depicts that smaller businesses are experiencing friction and fragility due to this challenging operating climate.

The study looked at the opinions of 500 UK SME owners and decision-makers. So, it revealed that 82% of SMEs currently feel confident about their prospects this year. This is up six percentage points from 2021. Moreover, 56% of companies had reported a growth in sales over the previous six months.

However, the research puts some warnings forward. While SMEs have rightfully earned their reputation for being robust, this optimism is set against a background of ongoing uncertainty. According to the report, profitability is on a knife’s edge. Four out of ten SMEs, or nearly 2.1 million, now describe themselves as “just about breaking even. Meanwhile, only half say they are profitable. This is another worrying sign. Moreover, Many businesses are still trying to make sure they survive each day. Meanwhile, they should have been planning for growth in the future.

UK SMEs worry about their future 

According to Derek Ryan, UK Managing Director of Bibby Financial Services, Firms face a heady cocktail of concerns. These concerns threaten to influence growth estimates for 2022 and beyond. This includes skyrocketing inflation, skills shortages, and a cost of living crisis seldom seen on such a scale in the 21st century. The UK SME community has stoic resilience. However, many are still battling to stay afloat. In fact, they are bound to focus more on day-to-day operations than on future growth.

The survey highlighted important issues for SMEs. It emphasized businesses citing inflation, European strife, and supply chain disruption as their top worries. Additionally, there are ongoing COVID-19 troubles.

Industry-specific concerns can differ. However, SMEs in the manufacturing sector is particularly concerned about inflation. Other things that worry them are rising raw material prices, including those for steel, and personnel costs. Besides, most SMEs in the construction and wholesale sectors are busy with the conflict in Europe. The main concerns for transportation companies are financial flow. Meanwhile, Brexit, employee shortages, a lack of truck drivers, and the effect of red tape on international trade are other significant issues.

In general, more than 25% of enterprises mentioned cash flow as a problem. Nearly one in five reported needing greater cash flow support now than they did before the pandemic. Besides, 9% reported not even having the daily cash flow requirements.

How can these conditions affect SMEs?

Cash flow is so essential to corporate survival at this time. So, late or unsuccessful payments can be disastrous to this new tribe of “Just About Breaking Evens” at a time like this. Moreover, a quarter (28%) of businesses, or 1.5 million, report having experienced bad debt in the past 12 months. Meanwhile, sums were written off due to persistently unpaid customers. Thus, the survey indicates that SMEs wrote off an average of £10,329 in bad debt in the last year alone. This is much more than in 2021 when 20% of businesses recorded bad debt.

What should small businesses do in such a condition?

SMEs must continue to adapt and develop to properly manage the escalating costs of doing business, Ryan underlined. “SMEs tackled the pandemic with fortitude,” he said. Businesses continue to face problems with cash flow and payments. Thus, it’s more crucial than ever that they have access to working capital to fund daily operations and pay off debt accrued during the peak of the pandemic. However, they need help from both the public and private sectors to thrive. Therefore, we hope policymakers carefully consider larger tax cuts and energy grants to aid SMEs. This will also guarantee that they continue to play a crucial role in the UK’s economic recovery.