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Ryan Etchells wearing a blue suit smiling.

UK SMEs poised to invest an estimated £2.4tn in next two years if barriers to growth are removed.

30 Jun 2024 | 5 min

With rampant inflation finally easing, the UK is teetering on the edge of a potential prosperity boom across the SME sector as business owners and leaders are poised to invest an estimated £2.4tn into individual firms over the next two years1 would it not be for major challenges holding them back.

Research from the UK’s largest specialist lender, Together, finds that 65% of SMEs are eager to put at least £100,000 into their businesses in the next two years, a lack of credit availability is holding them back– with huge implications for future growth in the UK economy.

27% of UK SME business owners and leaders stated that a lack of investment breaks and benefits from local and national government is holding them back. Indeed, 17% of SMEs are not confident in being able to pursue their investment goals over the next two years due to toughening of lending criteria and heightened cautiousness from mainstream banks (23%) along with a lack of understanding of their specific funding needs (21%) anticipated to play havoc with realising these growth plans in the short-term.

The research comes hot off the heels of Prime Minister Rishi Sunak’s call for a General Election on July 4th as small and medium-sized business leaders urgently look to a new Government for support and policy change to unlock maximum growth potential.

And support for SMEs could significantly bolster UK Plc - according to the latest Gov business population data, there were an estimated 5.5m SME businesses in 20232, with a significant 53% of turnover in the UK private sector contributed3 – but this could be increased even further still with improved support and a new, attuned government.

While improved somewhat, the course inflation and borrowing costs continues to take is also of critical concern to SME voters in the lead up to election day, each having a direct impact on how the state of the economy, general financial and business confidence are perceived.

In the coming weeks, opposing parties will do well to clearly state how they plan to nurture and maintain the growth recovery of the SME sector. As, over a third (31%) of SMEs are eager to prioritise the scaling up of production and increase in headcount (34%) within the next 12 months. 27% are also looking at investing in additional property to support their business expansion this year.

The top 5 ‘pent-up’ investment priorities for UK’s SMEs in the next 12 months:

Staff costs

34%

Scale up production

31%

Property

27%

Raw materials

20%

Plants and machinery

18%


And yet, the tougher lending criteria imposed by most mainstream and high street banks still creates an issue for well over half of SME loan applicants, with a further 55% agreeing they have no choice but to identify an alternative finance source or provider in order to fulfil their business objectives.

A vital solution to an investment injection to actualise full growth potential, is bridging finance – a product specifically designed to help the SME cohort – and typically provided by specialist lenders. Growth in appetite in the product as a solution to support business is seen in 14% of UK SMEs having used a bridging or short-term loan in the past. These enable a boost to cash flow, expansion, and the capitalisation on a commercial or residential property opportunity by unlocking short, sharp cash injections to allow business leaders to invest quickly and seize opportunities.

Ryan Etchells, Chief Commercial Officer at Together commented: “The UK’s 5.5 million small and mid-sized business owners are champing at the bit to realise their investment and growth plans over the next two years. This July 4th, the party who can communicate the most appealing pro-growth policies to liberate and support independent SMEs and UK entrepreneurship will win the day and minds of voters. Further stabilising the dire impact of energy, labour and running costs is a must, as well as ensuring that a new Government understands the specific financial and business needs of the sector.

“While there are early signs that inflation is finally returning closer to the Bank of England’s 2% target, bridging loans will continue to be crucial to maintaining investment activity for SMEs. These short-term, flexible loans are proving a more palatable option to businesses as a means of boosting funds for a variety of reasons from paying off an unexpected tax bill, buying raw materials to fulfil a large order or taking advantage of a business growth and expansion opportunity. Together expects the bridging finance market to grow by 19% over the next five yearsas businesses look further afield for agile finance solutions outside of the mainstream lending pool.”

Throughout 2024 Together has provided £1000 million of bridging finance support to businesses each month.

Any property used as security, including your home, may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

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