SMEs delay investments as uncertainty leaves firms on edge
Small and medium-sized firms (SMEs) are delaying investment decisions, a new survey has found, as Chancellor Rachel Reeves’ Spring Statement threatens to stifle businesses.
Uncertainty brought by an escalating global trade war and Reeves’ proposed reforms is making business leaders think twice about their appetite for investments in the short term.
The latest survey of 1,000 firms by SME funder Bibby Financial Services (BFS) said nearly 50 per cent of respondents were postponing their decision until after Reeves’ Spring Statement.
One fifth of companies said that the impacts of national insurance contribution hikes would be “significant” while two thirds said soaring costs were a challenge.
But SMEs were described as “bullish” in the report as it was revealed that around 87 per cent of companies made plans to invest this year.
Two thirds are also expecting a surge in sales, defying low growth forecasts by the Bank of England and the OECD.
Derek Ryan, the UK Managing Director of BFS, said SMEs were looking for some “fair wind” at Reeves’ Spring Statement next week after the Autumn Budget “didn’t really do anything for growth”.
“A lot of companies are waiting to see what the impact of this national insurance increase in April will be,” he told Morning Wire.
“People are still waiting to see whether there will be any boosts that [the government] will give to the economy to help things along.”
Research by Shawbrook earlier this week showed that more than four in ten SMEs feared national insurance tax hikes would have a “significant” impact
BFS’s survey considered how businesses would be affected, with over a quarter of businesses’ claiming the tax hikes may prevent them from recruiting more staff.
The survey also showed how businesses are split on trusting the government’s support for SMEs.
Nearly two in five businesses said they were doubtful of the government while 37 per cent said they backed its plans.
Many employers said they want Reeves to make bold announcements at the Spring Statement next week, with reforms to Britain’s complex tax system and an introduction of further incentives at the top of businesses’ wish list.
Optimism among many SMEs could be further undermined by increased tariffs, Ryan said, as UK steel bosses said they were moving to cancel orders.
“If we end up finding ourselves in a trade war, it won’t do anything to help business confidence,” Ryan warned.