SME finance demand down on Brexit uncertainty

SMALL- and medium-sized enterprises (SMEs) are putting off seeking funding due to ongoing Brexit-related economic uncertainty.

According to the latest SME Finance Monitor from research agency BVA BDRC, just four per cent of SMEs had applied for finance in 2018.

This is despite 78 per cent of the 150,000 businesses surveyed saying that they were making a profit, and 40 per cent reported growth over the course of the year.

Read more: SMEs look to alternative funders in case of no-deal Brexit

More than half (53 per cent) of SMEs told BVA BDRC that the future felt uncertain, and confirmed that they were taking a more cautious approach to their financing plans as a result.

However, among those SMEs which did apply for funding, eight in 10 were successful.

“There were no dramatic changes in attitude in 2018, but SMEs showed signs of caution in the face of an uncertain future,” said Shiona Davies, director at BVA BDRC.

“80 per cent of those who applied for finance were successful but demand for finance remained limited – a combination of confidence, attitudes to finance, the availability of other funding (e.g. trade credit) and other factors (such as concern about the political and economic climate).

“It is also difficult to say with certainty what the impact of this might be on future business performance – levels of profitability are currently stable, and more SMEs are planning to grow, but levels of innovation have declined over time and an increasing minority of SMEs say their business declined in size in the previous year.”

Read more: SMEs fear impact of Brexit on cashflow

The SME Finance Monitor also found that 49 per cent of SMEs planned to grow in the next 12 months, while 32 per cent said they would be “happy to borrow to help the business grow.”

However, caution and self-reliance were cited as the main reasons for not seeking external funding. In the fourth quarter of last year, 24 per cent of SMEs said that political uncertainty was behind their reticence, while 22 per cent blamed it on the current economic climate.

BVA BDRC pointed out that this represents an increase over time – in the first quarter of 2018, just 16 per cent cited political uncertainty as a barrier to funding, while another 16 per cent said that the economic climate was their main concern.

Read more: ArchOver warns of “funding crisis” as banks turn their back on SMEs