Investment dwindles as small firms face financial pressures
A rising number of small businesses are planning to cut their investment in the next three months, as new research reveals that late payments are taking their toll.
According to the Federation of Small Businesses, the proportion of firms planning to limit their investment is now at an 18‐month high.
Just shy of seven in ten firms revealed they are not planning to increase spending, while 14% explicitly said they intend to cut investment.
Meanwhile 71% of firms have said their operational costs increased in the last quarter, a jump of 10% from the same period in 2016.
Close to two thirds of businesses said they are not operating to full capacity either, which has placed further strain on already tight financial budgets.
It comes against a backdrop of falling UK business investment, as the total figure dropped to £46.1 billion between the final quarter of 2017 and the first three months of the current year.
When coupled with rising minimum wage outlays and auto‐enrolment contributions, rising business rates mean budgets are being stretched.
An estimated £14 billion is owed to small businesses in late payments for overdue invoices and this is ultimately impacting on their ability to invest.
FSB chairman Mike Cherry has described the late payment problem as a “threat to our economy” and pointed to the rising number of firms that are seeing their margins “squeezed”.
By not being able to invest, productivity suffers as firms cannot pour finances into training, technology and research.
For businesses facing financial difficulty, the key is to act quickly and to seek appropriate advice or an independent business review to assess the current state of affairs.
This should then allow for refinancing options to be considered, or turnaround management if it is required.
All of these factors can help to ensure the longevity of a business, while those with constant late payment problems are encouraged to alter their terms and to actively chase late payers for what they are owed.
By Phil Smith