High inflation is the number one biggest challenge facing small and medium sized businesses (‘SMEs’) in the next 12 months as the overwhelming majority (88%) are set to be impacted by the cost of living crisis. This is according to new research1 commissioned by Manx Financial Group PLC, the financial services group.
Manx’s research showed that supply and logistical issues, recruitment, higher interest rates and marketing are seen by SMEs as second, third, fourth and fifth biggest challenges over the coming year respectively.
SMEs felt that the ongoing cost of living crisis will mean that within their business, sales will be most affected, followed by new markets expansion and new product launches. Opening new offices or sites and hiring the right personnel were also highlighted.
The findings of the study reinforce the significance of the financial pressures facing SMEs and follows earlier research2 by Manx Financial Group which showed that more than one in five (22%) SMEs that needed external finance and/or capital over the last couple of years were unable to access it. Moreover 27% have had to stop or pause an area of their business because of a lack of finance.
Manx’s most recent research also showed that despite concerns over higher inflation and the cost of living crisis, more than four in five (83%) SMEs suggested their overall sentiment is positive. Indeed, on average SMEs think that their business will grow by 18% over the next 12 months.
Douglas Grant, CEO of Manx Financial Group PLC, commented: “Our research highlights the difficulties facing SMEs with the overwhelming majority impacted by the ongoing cost of living crisis. For some time, SMEs have struggled with accessing finance and, worryingly, this lack of availability will cost them and the UK economy in terms of growth at a time when it is needed the most. The amount of growth that is being lost is becoming more and more common. The sector requires new solutions which are designed to address this funding gap.”
On 20th July 2022, the Government announced the extension of Recovery Loan Scheme (“RLS”), initially designed in April 2021 to help facilitate businesses’ recovery and growth after the disruption caused by Covid-19 and allowing firms of any size and sector to apply for funding of up to £10 million from accredited lenders. Conister was approved in August 2021 as a British Business Bank accredited lender for the RLS. It enabled Conister to extend the support it has provided to SMEs throughout the Covid-19 pandemic.
Douglas Grant continued: “The extension of RLS (“RLS Phase 3”) is very good news for UK business. The Recovery Loan Scheme (RLS), which Conister was accredited for in August last year, has provided the necessary catalyst that many sectors required to thrive. As demand for working capital soars to new highs, more businesses desperately require liquidity provisions to counteract record inflation levels, rising interest rates, supply chain issues and increases in wages. With the cost of borrowing set to increase and as our research shows, many SMEs are facing their own cost of living crisis.”
“The extension goes some way to stemming the short term pain but for some time now, we have been calling for a sector focused permanent government-backed loan scheme which brings together both traditional and alternative lenders to guarantee the future of our SMEs. As the government looks for ways to power the economy’s resurgence, the importance of a permanent scheme cannot be understated. It could act as the fundamental difference between make or break for many companies, and in turn, our economy. We very much hope this is something that becomes a reality.”