As the UK’s Spring Statement approaches, small and medium-sized enterprises (SMEs) are postponing major investment decisions, despite strong growth ambitions, according to new research from independent funder Bibby Financial Services (BFS).
The study reveals that while 87% of SMEs plan to invest in 2024 and two-thirds (66%) anticipate rising sales over the next six months, economic uncertainty surrounding Chancellor Jeremy Hunt’s speech on 26 March has led many businesses to take a cautious approach.
Nearly half (48%) of SMEs have chosen to delay significant investment decisions until after the Spring Statement, while 63% indicated that a lower interest rate environment would boost their confidence to proceed with investments.
Business Leaders Seek Stability
Derek Ryan, UK Managing Director at BFS, noted that while businesses are eager to invest, they require greater economic stability to move forward.
“UK businesses are demonstrating a clear appetite for investment, but many are in a holding pattern, waiting for clarity from the Chancellor’s Spring Statement. Following the National Insurance contributions hike announced in October, business leaders are seeking stability before implementing their investment plans. Without it, the government’s efforts to drive economic growth could be undermined,” Ryan said.
Impact of Autumn Budget Lingers
The hesitation to invest has been further exacerbated by the lasting impact of the Autumn Budget. More than half (52%) of SMEs reported being less likely to invest in the short term due to rising employer National Insurance contributions. Additionally, the number of businesses with no investment plans has risen from 8% in Q3 2024 to 13% this year.
The research also highlights a growing divide between businesses that rely on external finance and those that are self-funded. Among SMEs using external funding, only 6% have no investment plans, compared to 14% of self-financed businesses. Furthermore, businesses without access to external finance have suffered greater financial losses, writing off an average of £45,000 in bad debt over the past year, compared to £25,000 for those utilizing financial options.
Call for Reforms to Facilitate Business Growth
Ryan stressed the need for improved access to finance to ensure SME growth, stating: “Our SME Confidence Tracker highlights the disparity in outlook between businesses that have access to external financing and those that are self-funded. This underscores the importance of the Chancellor’s reform plans to simplify business trading and financing.”
With economic policy closely linked to business confidence, the upcoming Spring Statement is seen as a crucial moment for the government to instill confidence in SMEs and encourage investment.
“The Chancellor has a golden opportunity to set the tone for 2024 by fostering stability and stimulating investment among small businesses,” Ryan added. “After a challenging first Autumn Budget, attention is now focused on how upcoming fiscal changes will impact the nation’s ambitious businesses.”
The extent to which the Spring Statement addresses SME concerns and provides assurances on economic stability could prove pivotal in shaping the UK’s economic landscape in the months ahead.
