Economic uncertainty and the prospect of tax changes being introduced in the upcoming Budget have slowed appetite for external funding among small businesses, Atom bank’s ‘SME Pulse’ for Q3 2024 has revealed.
The quarterly poll of commercial brokers found that there has been a drop off in demand from SMEs for funding.
Nearly half (47%) of brokers reported seeing increased interest from their commercial clients, down from 62% and 63% respectively in the last two editions of the SME Pulse.
In addition, the proportion of brokers noting a decline in appetite from their SME clients has grown to 15% in Q3, up from 3% in the second quarter.
The majority of commercial brokers (80%) suggested that economic uncertainty was a key factor in this decline, with the upcoming Budget cited as the underlying influence.
Beyond the Budget, higher interest rates (60%) and the appetite of lenders to finance deals (60%) were also pinpointed as having had a detrimental impact on borrowing appetite.
Almost one in three (29%) brokers said their business clients were less confident, compared with one in five (19%) who were more confident.
The majority (52%) were unsure, and waiting to see how the Budget and future base rate cuts play out.
However, more than a fifth (22%) of commercial brokers reported funding demands had increased following the General Election, with a number of SMEs looking to get their funding in place ahead of the Budget.
Among those looking to borrow, property purchase was the primary reason, at 54%, up from 44% in the last quarter.
Growth and business expansion moved into second place, having been highlighted by a fifth (22%) of brokers, while debt refinancing dropped from being the main purpose of borrowing for 28% in Q2 of brokers to 21% this quarter.
The proportion of brokers reporting it is difficult to secure finance for their clients grew marginally to 32% from 31%, which itself was up by 8% on the previous survey.
Brokers suggested that high interest rates and stricter lending criteria were behind these increasing difficulties.
Nevertheless, the majority of brokers surveyed (68%) did not report issues in accessing funding for their clients.
David Castling, head of intermediary distribution at Atom bank, said: ”It is encouraging to see so many commercial brokers reporting growing client demand.
“However, the impending Budget has created a degree of uncertainty that has caused some businesses to delay their plans.
“Ideally, once the Budget is announced, this uncertainty will dissipate, enabling business owners to confidently pursue their ambitions.
“Accessibility remains a concern. The fact that nearly one in three brokers face challenges in securing funding for their clients is worrying.
“It emphasises the importance of brokers collaborating closely with lenders who have the flexibility and appetite required to deliver funds to the businesses who need it.”
