Delayed investments and rising bad debts concern SMEs
Rising levels of bad debt and delayed investment could signal the start of a downturn for the UK’s small businesses, new research claims.
According to the SME Confidence Tracker from Bibby Financial Services, the actions of SMEs in the second quarter could signal the start of an economic slowdown.
Bad debt – the total value of unpaid invoices written off by businesses – spiralled in the second quarter to reach more than £20,000, a jump of 70% on 12 months ago.
Levels of investment also dropped, with the average planned investment going from nearly £102,000 in the second quarter last year to around £66,000 last month.
Given that SME activity is closely linked the wider economy – more hiring and investment is often representative of a strong economy – the latest figures highlight concerns among many businesses.
Delayed investment decisions and bad debts suggest that supply chains in the UK are struggling to cope with the pressures they face.
The report suggests that another recession could be imminent, although BFS Global Chief Executive David Postings has said it is “still too early to call”.
Some 28% of businesses said that economic uncertainty has stopped them from investing, while 26% pointed to rising costs and 25% to a desire to develop company cash reserves.
Around one in five of those taking part in the study added that the potential impact of Brexit can also not be underestimated.
Postings suggests there is a “sense of nervousness and trepidation” among SMEs as they “don’t know what’s round the corner”.
Tackling bad debts is essential for ensuring business longevity and restructuring may provide the best solution – an options review can help to reveal the best route forwards.
Then again, businesses may wish to assess their alternative finance options to see if there are processes that could aid with their growth or stabilisation plans.
With winning new business, retaining staff and managing cash flow high on the list of concerns for SMEs, it suggests that many fear turbulent times may be looming; most are therefore looking to address issues sooner rather than later.
By Phil Smith