Our latest quarterly survey finds SME business confidence fell slightly in Q2 2023 whilst half of all UK5 hospitality trends for 2023 SMEs are concerned about cash reserves as inflation continues
Need to know:
- SME business performance has stabilised
- Increased optimism for future trading outlook
- ‘Cash crisis’ continues with rising costs draining reserves
- On average, UK SMEs owed £46k in unpaid invoices
Confidence in the UK SME community has fallen slightly as reduced consumer spend and higher operating costs have put the squeeze on SME business performance. According to new research from alternative finance provider Capify, overall confidence has marginally dipped despite a slight improvement in turnover and profit performance over the past quarter.
Released today, Capify’s SME Business Confidence Survey revealed that 39% of SME owners reported an increase in turnover between April and June, whilst one in three saw their profits increase in the same period. Despite this, 47% of respondents find themselves behind annual target for overall business performance – an increase of 5% on Q1’s levels.
The survey, canvasses the insights of hundreds of SME business owners from across the UK on areas of current business performance, trading forecast, and investment intentions, it uses the data to produce an overall confidence score between -10 (very unconfident) and +20 (highly confident). The confidence score now sits at -0.35, a drop of 0.36 points on last quarter’s score.
Green shoots of recovery
Just under 60% of SME owners expect turnover to grow over the coming year, with 53% expecting profits to grow over the same period. This improved confidence in operating conditions, means that 59% of firms are planning business expansion over the next 12 months – an increase of 8 percentage points on Q1’s findings.
Cash crisis
The survey also revealed that continuing inflationary pressure is placing a significant strain on SME owners’ cash reserves, with 50% of respondents reporting they were concerned about the level of cash in their bank accounts.
Concerns around cash reserves are undoubtedly accentuated by problems in cash collection. Over one in five owners (22%) stated that they were worried about unpaid invoices and the survey found that the average amount of money owed to SMEs in outstanding invoices was £46k.
Challenges prevail
Consistent with previous survey findings, cash flow challenges and cash reserves continue to be an issue for respondents. Just under 20% of owners cite cash flow as the reason preventing them from expanding their business, whilst just over a third of respondents cite cash flow as an ongoing worry.
Even with cost-cutting measures – 80% of SMEs have cut their spend in response to inflationary pressures – one third of respondents have required external funding to help with cash flow issues and depleted working capital reserves.
Turning a corner?
John Rozenbroek, COO/CFO at Capify, said: “Today’s survey findings will come as no surprise to most SME owners or operators. The Confidence Survey reflects what we see and hear every day – that SMEs are struggling to keep ahead of the challenges caused by this extended period of inflation and the impact it has on market dynamics”.
“If cash is king, then cash flow is the kingmaker. Seeing how many businesses are worried about the double whammy of increased production prices and unpaid invoices reinforces the importance of active cash flow management”.
“Cash is the great enabler for SMEs but cash flow issues and depleting working capital can put the brakes on even the most optimistic of businesses.”
Sources of finance
There continues to be concern around the availability of bank finance to support these cash flow requirements. Only 30% of respondents were extremely confident of being able to use their existing banking partners to fund any short-term needs. Interestingly, within this figure, significant gender differences exist. Only 20% of female respondents claimed to be extremely confident of securing bank funding, compared to 35% of male owners.
“We know that SMEs are finding it harder than ever to find finance solutions that work for them”, says Rozenbroek. “As bank’s tighten their lending criteria and assess their risk profiles, there are many owners who will feel less confident about their ability to secure finance. Our survey gives us the insights we need to address the uniquely challenging climate that SMEs are operating in.”
The Capify Business Confidence Survey canvasses the opinions of a broad base of SME owners across the UK on their perceptions of current business conditions and their outlook for future trading performance. Download the full Q2 2023 Survey findings here.
Capify offers a range of business loans to help support small businesses throughout their growth journey. Check to see if you’re eligible for one of our loans with our online eligibility checker. Or, if you’d prefer to talk to a member of our team, we’d be happy to guide you through the process. Give us a call today on 0800 151 0980.
