Productivity and growth forfeited as SMEs mitigate rising costs

• Rising operational costs a top concern for 79% of UK SMEs  
• The profile of funding they have accumulated over the past years is no longer fit for purpose with 86% saying they would like to restructure  
• This is stopping them from investing in productivity, widening the UK / G7 gap even further – just one in five businesses have invested in new technology (22%) or equipment and machinery (20%) 

SMEs across the UK are at risk of missing out on hard earned growth opportunities, as they battle the dual challenge of escalating costs and underwhelming productivity. 

New research carried out by Simply Asset Finance, the specialist business lending provider, casts a light not just on business concerns throughout the UK and its regions, but also on how they are preparing to tackle them and what it means longer-term. 

Looking at UK SMEs’ top concerns, rising operational (79%) and supply chain (75%) costs top the list. But productivity (72%) comes a close third. Crucially, trying to manage the top two means that too often, businesses are having to prioritise meeting spiralling costs over investing to solve their productivity issues and readying themselves for growth.  This is further evidenced by the fact that a fifth (20%) of businesses have had to overhaul their finances in the past year, with just 13% saying this was to help expand the business. An overwhelming 86% said they would restructure their debts if they had the opportunity, highlighting that the profile of funding they have accumulated over the past years is no longer fit for purpose. 

In the past 12 months, just one in five businesses have invested in new technology (22%) or equipment and machinery (20%). And one in five (20%) have introduced new/improved training programmes. It’s in the North East where we find businesses most readily investing for growth: in the past year, almost a third (32%) have invested in new technology and 28% in new equipment or machinery. Comparatively, the corresponding figures for the South East are 18% and 15%.  

Among these SMEs, cost concerns are such that the average SME has around £85k set aside for contingency costs – a significant sum that’s not being invested in growth. Notably, there’s also a huge disparity between the regions in terms on the size of their contingency pot. While SMEs in the East of England have £132k on average, those in the South West have just £52k.  

Its widely acknowledged that SMEs are the engine of UK growth, making up 99% of UK business1, but as a cohort they feel overlooked and undervalued. More than half (52%) feel their business needs are misunderstood or overlooked in today’s climate. Businesses in the East of England feel the most disconnected, with almost three quarters (74%) saying that they feel like their business needs are misunderstood or overlooked. 

Despite this, confidence is high when it comes to business outlook. More than two in five (83%) of UK SMEs say they’re optimistic about the future success of their business. In the West Midlands is also where we find SMEs the most optimistic about the future for their business (92%). 

 

% of SMEs optimistic about their future
West Midlands	92%
Yorkshire & the Humber	88%
East of England	87%
Greater London	84%
East Midlands	84%
North East	84%
South East	83%
North West	78%
South West	78%
Scotland	77%

 

 

Mike Randall, CEO at Simply Asset Finance, said: “The last few years have been a tale of unparalleled hardship for UK SMEs. After a seemingly endless grind through Covid, economic stagnation, and spiralling inflation, there is growth on the horizon – and the fact that some many SMEs are optimistic about their outlook is incredibly encouraging.

“But if they are failed now, then all that hard work will have been for nothing. It’s essential that businesses across the UK don’t just have suitable funding and support available to them, but that they know about it too.Businessesshouldn’t need to hold back cash that could have been invested in growthin order to keep the lights on. Crucially, both their own and the wider economic situation may have shiftedsince they last structured their financing meaning that it may be possible, beneficial, and in factadvised, that they restructure their debt. This could help give them much welcome breathing room that they just didn’t realise was now available. 

“It’s here where experienced and innovative finance providers really show their worth; by looking beyond the balance sheet to understand the unique wants and needs of SMEs – then giving them the on the ground support they need to seize on those hard earned and transformative growth opportunities in regions all over the UK” 

Earlier this year, Simply Asset Finance surpassed the £1bn lending milestone just five years since its 2017 inception, having funded over 13,000 agreements for more than 7,100 businesses across the UK. 

 

ENDS

Methodology

Research carried out by Censuswideamong 796 SME business leaders in the UK, aged 18+ (defined as director level and above). The fieldwork was carried out between 03.10.23 – 19.10.23.

Media contacts

Kathryn Cleaver/Henry Clatworthy 

Teamspirit 

simplyassetfinance@teamspirit.co.uk

About Simply Asset Finance 

Simply Asset Finance was founded in April 2017 by a team of asset finance specialists, in response to the need for innovation and disruption in the sector.  It offers an alternative financial model to banks and looks beyond a balance sheet and credit rating, supported by a digitally enabled customer journey. Simply Asset Finance consider a customer’s potential and work with them to identify and implement the best solution to help them succeed. Their highly experienced sales team is made up of people with extensive knowledge of the industries they lend to. This means they understand the day-to-day challenges that businesses face and the dedicated support teams guide customers through the process, helping them every step of the way.

Simply Asset Finance has lent more than £1bn to over 7,100 small and medium businesses across a wide range of sectors including transport, construction, manufacturing, recycling, and agriculture.