Gathering pace of UK economy encourages UK SME growth

The SME Finance Monitor for the second quarter has revealed a 5% increase in UK small-and-medium sized enterprises taking advantage of external finance in the three months to the end of June.


According to the report from researcher BDRC continental, 44% of SMEs sought funding from a widening range of finance sources, up from 39% in the previous quarter.


Expanding range of options


Alternative products such as grants and invoice finance are now used by one in five firms as opposed to the more traditional avenues of a bank loan or overdraft. This figure is a rise from 15% in the first quarter.


It is now widely accepted that there is increasing optimism about the steadily improving economy, and the second quarter UK GDP growth of 0.6% saw the economy's three main sectors of services, construction and manufacturing all register a rise in output.


44% of the total of SMEs surveyed reported that they had grown in the past 12 months, up from 39% in the first quarter. Just over half said they expect to grow over the coming year but expect that this expansion will be driven by overseas rather than domestic markets.


Anthony Browne, chief executive of the British Bankers' Association (BBA), said: "It is encouraging that the number of small and medium size businesses using finance has started to pick up again."


"The survey shows that business confidence in the economy remains the biggest obstacle to growth for British businesses but hopefully this will start to improve if the economic indicators continue to get better.” he continued.


Varying ambitions of SMEs


According to the SME Finance Monitor, 75% of small companies still say they are "happy non-seekers of finance” and just 16% of those surveyed in the report said schemes such as the Bank of England’s Funding for Lending (FLS) would encourage them to apply for finance.


This represents a fall from 20% during the final quarter of 2012 when the question was asked previously. Many SMEs will frequently have to weigh up the prospect of whether a small investment now will save them from constructing a detailed business recovery plan at some point down the line.


Shiona Davies, director at BDRC Continental commented: "Whilst awareness of the Funding for Lending Scheme has also increased, knowledge of other schemes available to help and support SMEs to access finance remained flat, which may mean that some SMEs are not as well equipped as they could be to take advantage of future opportunities."


By Phil Smith


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