New research suggests small firms are in ‘survival mode’

A handful of small firms in the UK are putting investment plans on hold as a result of fears and uncertainty over the economy, new research suggests.

More than a quarter of SMEs say they will not invest in the next 12 months and consider themselves as being in ‘survival mode’.

This is limiting their growth potential, according to the study from Hitachi Capital Invoice Finance, while nearly a fifth of firms have re-mortgaged property, despite the potential implications to the financial health of their businesses.

Nearly six in ten of the business owners questioned revealed that they had not sought sources of external finance in the last year, with around a third investing their own personal funds to aid their firm.

Meanwhile 41% said they were relying on existing overdraft facilities to enable growth, despite issues that can relate to clearing debt.

Around 60% of small business owners believe that they may have a tougher time accessing finance following Brexit too, according to the study.

A further concern for some bosses is a perceived over-reliance on one major client – 17% of owners sad that one large client was responsible for more than half of their business’ turnover.

This places pressure on these firms as they may face financial difficulties should that client decide to cease their working relationship – most SMEs suggested that their largest client accounted for around 26% of revenue, which they deem manageable.

While there are a range of alternative financial options available to assist firms that are facing difficulty, losing major clients when they account for large portions of business does bring into question the longevity of a firm’s business model.

In severe cases, when all other avenues are exhausted, this might ultimately lead to liquidation and the winding up of a company.

Further research from Beauhurst also noted a 20% drop in crowdfunding finance for SMEs in the third quarter of 2016 and suggests that investors are wary of smaller firms.

This could potentially place more pressure on small firms, although they will need to actively consider their options.

By Phil Smith

If you would like to have a free no obligation chat with one of our advisers please call us on 020 7186 1144.

View all Business Insights