New findings from Bibby Financial Services (BFS) show that current interest rates and the approaching general election are leading many SMEs to postpone significant investments that could drive long-term economic growth.
According to BFS’s Q1 2024 SME Confidence Tracker, which surveyed 1,000 UK SMEs, 53% are waiting for interest rates to drop, and 43% are holding off until after the general election to make substantial investments.
Despite these delays, the research uncovers a sense of optimism for Q2, with 61% of SMEs forecasting an uptick in sales over the next six months—a 7% year-on-year increase from Q1 2023.
Derek Ryan, UK managing director of BFS, notes the resurgence of confidence but warns of the investment chill: “Interest rates remaining at record levels…and a forthcoming general election, are causing an investment freeze…more needs to be done to stimulate much needed investment in the short-term.”
The research also sheds light on the tough credit environment, with over half of SMEs finding it harder to secure finance now compared to six months ago, and 61% experiencing a reduction in credit availability.
Adding to these difficulties, the SME sector faces cashflow challenges exacerbated by delayed customer payments. Two-thirds report longer invoice settlement times than a year ago, and 30% have suffered bad debt from non-payment.
As the next general election approaches, 71% of SMEs consider economic growth and job creation as a critical issue. A strong majority, 65%, emphasise the need for the winning party to support long-term business growth.
