UK productivity gap continues as SMEs hold back investment
08 Jul 2019
The latest Voice of Small Business Index (SBI)1, published by the Federation of Small Businesses (FSB), for the second quarter of 2019 shows that SMEs are finding it difficult to expand, hire and raise productivity as political uncertainty leaves them increasingly constrained.
72% of SMEs are not planning to increase capital investment in their businesses over the coming quarter, the highest level since the same quarter in 2017. According to the Office for National Statistics (ONS), business investment fell for four straight quarters last year for the first time since the financial crash2.
The findings also show that more than a third (35 per cent) of businesses say access to right staff is a major barrier to growth.
FSB National Chairman Mike Cherry said: “It’s impossible for small business owners to invest for the future when we don’t know what the future holds.
“We urgently need to see both prime ministerial candidates spell out their plans for supporting small firms and securing a pro-business Brexit.
“Lifting productivity among the smaller firms that make-up 99 per cent of our business community is a must. But until we have the political certainty that enables us to take risks and innovate, achieving that goal will remain elusive."
The UK SBI confidence measure now stands at -8.8, down 22 points compared to the same period in 2018, marking a fourth consecutive negative reading.
The latest number of business owners describing new credit as “unaffordable” has hit four-year high, with one in seven (14 per cent) SMEs now applying for new credit.
Adding to this, fewer than one in five (15 per cent) successful credit applicants are using new finance to expand their firms, down 10 percentage points compared to the same period last year.
Mike Cherry continues: “With so much uncertainty afoot, caution among lenders is understandable. They seem happy enough to issue new credit in some cases but are upping premiums to cover themselves.
“Against this backdrop, it’s more critical than ever that the British Business Bank is properly equipped to build on its vital work in providing start-up loans and enabling equity investment in small firms. A sudden withdrawal of European Investment Fund support for small businesses without a suitable domestic replacement would be catastrophic.”
Beavis Morgan - Specialist advisers to UK SMEs
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We are on hand to assist you to remain profitable and increase your net worth.