Nearly half of UK SMEs (44%), roughly 2.5 million businesses, are struggling with cashflow as they attempt to prepare for Brexit, according to a new report from Bibby Financial Services.
Its latest SME Confidence Tracker from Q2 this year shows almost a third (29%) of SMEs are now actively using funding, up from 23% in Q1.
Of those 1,000 SME owners surveyed, 72% are investing an average of £16,400 more than predicted at the end of the first three months of the year and 69% are preparing to invest further in Q3.
While this does mark the end of five quarters of falling investment, it is still not a return to historic levels last seen in Q4 2017, when 80% of SMEs were ramping up investment.
Half of UK SMEs think there will be a recession this year and they have turned to quick-fix funding, with 26% turning to credit cards, bank overdrafts and borrowing from family and friends.
Sharon Wiltshire, Bibby Financial Services UK commercial director, said: “Ordinarily a rise in the number of companies investing in themselves would be a boon for the economy.
“But with increasing competition, rising material costs and the broader economy stalling, businesses appear to be sourcing finance to cope with these challenging conditions rather than investing for growth.
“With the current uncertainty set to continue, it has never been more essential for SMEs to be aware of all the funding options available to them before they commit to more borrowing.”
Wiltshire said that SMEs using unsecured borrowing can mean paying higher financial or even personal cost to access additional capital.
She added: “The long-term sustainability of future investment will depend on whether SMEs build their investment plans on a secure footing or borrow from unsecured sources. The task for the industry is to support them as best we can.”
Download the full SME Confidence Tracker report here.
