Small Businesses Reveal Plans In New Research

The level of investment by British SMEs will soar in the next year, according to new research by Yorkshire and Clydesdale Banks.

A poll of 1,168 business owners by the banking group found four out of five plan to invest up to seven per cent of turnover into investment growth, the Daily Telegraph reports.

Paul Shephard, director for business and private banking at Clydesdale and Yorkshire Banks, commented:
“An increasing level of confidence is playing a critical role in fuelling the recovering economy. The SME segment is actively preparing to change up a gear to take advantage.”

The report found 79 per cent of firms see the UK as currently providing a positive economic environment, with average business growth expectations of ten per cent. Agriculture, manufacturing and construction are seeing the most upbeat sentiment and investment is planned in areas such as equipment, staffing and training.

Such a rise in investment could make a major difference to the fortunes of SMEs as they take advantage of the improving economic climate to make timely investments in order to expand.

However, while companies might look to make good practical use of their increasing income, other means of acquiring cash for investment remain at low levels. Speaking to the Telegraph, head of crowdsourcing site Money & Co, fund manager Nicola Horlick said her company's research has shown the gap between the latest request made by each company for bank funding and the actual amount lent was £4.3 billion.

“This research clearly shows that the banks are not providing UK SMEs with the finance they need," Ms Horlick remarked, adding: "The £4.3 billion funding gap isn’t just acting as a barrier to UK SME growth, it could potentially stifle the UK recovery.”

Despite this problem, SMEs are clearly upbeat and the survey by Clydesdale and Yorkshire Banks is in line with other research indicating a positive outlook.

The most recent Bibby Financial Services SME Index provided an example of this, showing growth levels at their highest since the first quarter of 2008, just before the recession began.

Expert Opinion

With positivity becoming increasingly prevalent across the business world, it is unsurprising and very welcome to see that small businesses are looking to the future and considering their next steps in terms of investment. <br/> <br/>"However, it must be remembered that small firms will undoubtedly face growing pains as they look to develop their operations and careful thought needs to be given to such issues if problems are going to be avoided. <br/> <br/>"These issues could include the need for more HR expertise as a larger workforce is established, as well as the various contractual arrangements in relation to larger premises or taking up new equipment. <br/> <br/>"Legal support is a key component of this and it is vital that small businesses discuss their plans with lawyers to ensure they are in the right position to thrive as the economy continues to improve." Steven Beahan - Partner