SMEs are ready to ramp up investment despite concern over wider economy, new research finds
Small and medium-sized enterprises (SMEs) are increasingly optimistic about their own future, despite concerns around the wider economy.
According to Opinium data collected for Paragon Bank, 45 per cent of SMEs expect cashflow to improve over the next three months. Over the course of a year this figure jumps to 55 per cent.
Over a third of SMEs will use the increased cashflow to invest in their business, the data shows, with just ten per cent expecting to reduce spending. A third of businesses were also planning to recruit additional staff over the next six months.
Across sectors, over half of SMEs were confident in their own business despite the difficult environment in which many are operating, including high inflation and fears of a recession.
Confidence in the broader economy was less strong, with only 31 per cent of businesses taking a positive view on the UK economy.
John Phillipou, managing director of Paragon’s SME lending division, said: “No one should ever doubt the resilience and forward thinking of SMEs. After facing challenge after challenge, they are now ready to drive economic recovery throughout the UK.”
“Without growth in the SME sector, the wider economy cannot reach its potential. That SMEs are feeling confident, investing and planning for the future is a positive indicator that, despite the turbulence over recent months, the economy is once again heading in the right direction,” Phillipou continued.
The data reinforces the notion that small businesses have not just withstood a hostile economic environment but have sought to expand too. Paragon’s research found that 49 per cent of SMEs sought loans over the last three months.
Recent data from fintech firm Iwoca revealed that the most common reason for lending to SMEs was to finance expansion.
However, concerns have been raised that the strong performance of SMEs might be hampered by proposed changes to banking regulations, which would make it more difficult to lend to the sector.
Regulators are considering proposals as part of the Basel 3.1 regulations which would remove existing incentives for SME lending. These proposals have come under fire from many in the industry who argue that it could reduce lending to the sector by as much as third.