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UK SMEs are ambitious for the opportunity to regain lost ground after the pandemic, but risk being held back by a myriad of rising pressures, including rising costs and cash flow challenges.
According to Bibby Financial Services’ (BFS) annual SME Confidence Tracker survey, this difficult operating environment causes friction and fragility among smaller businesses.

Examining the views of 500 UK SME owners and decision-makers, it finds that 82% of SMEs now feel confident about their prospects this year, an increase of six percentage points over 2021, and over the last six months has 56% of companies reported an increase in sales.

But the report warns that although SMEs have duly earned their resilient reputation, this optimism is set against the backdrop of continued uncertainty. Research shows that profitability is on a knife-edge, with four out of ten now describing themselves as ‘just about going into balance’, equivalent to 2.1 million SMEs and only half describing themselves as profitable.

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Derek Ryan, CEO of Bibby Financial Services in the UK, said: “UK companies are facing a heady cocktail of problems that threaten to impact growth forecasts for 2022 and beyond, including rising inflation, skills shortages and a cost-of-living crisis that not seen on such a scale in the 21st century.Although our report highlights a stoic resilience among the UK SME community, many are still struggling to keep their heads above water and work on a daily basis instead of looking ahead to growth. “

The report highlights key concerns for SMEs, with companies ranking inflation, conflicts in Europe and supply chain disruptions as key concerns in addition to the persistent challenges posed by COVID-19.

Concerns vary from industry to industry, where SMEs in the manufacturing sector are most concerned about inflation, the rising cost of raw materials – such as steel – and staffing costs. The construction and wholesale sector SMEs are mostly preoccupied with conflicts in Europe. While the biggest concerns for carriers include cash flow, Brexit and staff shortages, as well as the shortage of truck drivers and the impact of bureaucracy on cross-border trade.

Overall, more than a quarter of companies highlighted cash flow as a concern. Nearly one in five said they need cash flow support more now than before the pandemic, and 9% said they do not even have the cash flow they need to operate on a daily basis.

When the cash flow is so crucial to the company’s survival, late or failed payments can be fatal to this new strain of ‘Just About Breaking Evens’. More than a quarter (28%) – equivalent to 1.5 million companies – say they have suffered bad debts in the previous 12 months, with amounts being written off due to customers’ non-payment or long-term default. This is significantly higher than in 2021, where 20% reported bad debt, and the report finds that SMEs have written off an average of £ 10,329 in the last year alone.

Ryan continued: “SMEs faced the pandemic with courage and now they must continue to adapt and change in order to carefully deal with the rising costs of doing business. It is clear that cash flow challenges and payment problems continue to plague companies, and it is now more important than ever that they have access to working capital to support day-to-day operations and to repay debts raised at the height of the pandemic. But they can not succeed alone; the private and public sectors, and we urge policy makers to look closely at broader tax cuts and energy subsidies to help SMEs and to ensure that they continue to play a key role in the UK’s economic recovery. “

Source: News Dubai

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