Patrick Crowder

Small to medium enterprises (SMEs) are facing increasing costs, issues with the supply chain, and staff shortages. A survey of 2,000 UK businesses conducted by MarketFinance shows the ways that SMEs are handling these issues and staying afloat.

According to the research, 79 per cent of SMEs have seen rising costs from their suppliers over the past six months, with the most affected companies being those in the North West of England. Only 32 per cent of the affected SMEs have been able to avoid passing these increased costs onto customers, with two out of five saying that they could increase prices up to 10 per cent in the period approaching Christmas. MarketFinance CEO Anil Stocker weighs in on the situation.

“The current economic environment with rising costs is presenting some headwinds and headaches for SME owners, but they are proving to be as resilient as ever,” Stocker explains. “The vast majority have been thinking ahead and accounted for the longer term scenario, which will hold them in good stead to do business.”

It’s great to see that SME owners are taking the long view and preserving their customer relationships and managing suppliers by having a finance facility in place to deal with the overhead for now. 

The British Business Bank announced in November last year that it will extend its Recovery Loan Scheme to June 2022. This extension will give SMEs easier access to more affordable finance they need to continue running and growing operations in the face of ongoing challenges such as staff shortages and supplier price increases.” 

While price rises are obviously not ideal for customers, evidence shows that they are understanding of and knowledgeable about the situation SMEs face. Only 10 per cent of customers surveyed said that they would challenge businesses over increased costs. Despite customers’ apparent understanding of the situation, Anil Stocker believes that avoiding price increases through early planning is essential to maintaining a customer base.

“It’s great to see that SME owners are taking the long view and preserving their customer relationships and managing suppliers by having a finance facility in place to deal with the overhead for now,” Stocker says.

For SMEs which do not have the rainy-day fund needed to cover the increasing costs, there are other measures in place to ensure that they can stay afloat.

“The British Business Bank announced last week that it will extend its Recovery Loan Scheme to June 2022,” Stocker continues. “This extension will give SMEs easier access to the more affordable finance they need to continue running and growing operations in the face of ongoing challenges such as staff shortages and supplier price increases.” 

These measures, as well as what appears to be an easing of the pandemic’s effect on the economy, has led to increased confidence from SMEs. The research shows that 48% of SMEs expect their turnover to stabilise or increase over the next year, and 68% expect their businesses to grow over the next three years.

“It’s clear that the business environment has shifted and SMEs are looking ahead with a quietly confident and cautiously optimistic view. UK businesses intend to ramp up growth through domestic and international expansion, digital transformation and even M&A activity,” Stocker says, “But as they reset their post-pandemic goals for a post-pandemic, they’ll need to be confident of their funding base.” 

During the height of the pandemic, many businesses froze their investments and went into ‘survival mode’, but now it appears that 70% of SMEs are planning on increasing their investments over the next year, with 25% of them even considering hiring on more staff. This growth will largely be funded through borrowing practices, though 71% of SMEs surveyed do not believe that the best way to borrow is through traditional banking. Stocker believes that the Recovery Loan Scheme will play a major role in helping SMEs invest and thrive.

“We expect to see a large number of SMEs taking advantage of the scheme over the next 6 months as their growth and expansion efforts gain momentum and they invest in ambitious plans for 2022 and beyond,” Stocker says.

Though it appears that we are now past the worst of the pandemic, it is clear that the economic impact is far from over. But for now, SMEs are finding ways to carry on.

Credit: www.marketfinance.com