SMEs struggling to cope with higher business rates and levels of bad debts

How tough are small businesses findings things at the moment? Well, a new survey by Bibby Financial Services of 1,000 small and medium-sized businesses would suggest that things are, in fact, far tougher than many financial experts could have reasonably predicted. The survey discovered that bad debt, in particular, was proving to be problematic for SMEs: the study found that average levels of bad debt had increased by almost 70 percent in just one year. The only conclusion to be drawn from such dramatic increases is that all businesses are feeling the pinch.

How are SMEs coping with the current economic climate?

The Bibby survey conducted during May and June, 2017, found that the average level of debt written off as unrecoverable has risen considerably and now stands at £20,043. Asked about the major challenges SMEs face, survey respondents said the key challenges were winning new business, finding and retaining skilled staff, managing cash flow and budgeting for higher business rates.

When asked what the authorities could do to ease the burdens, 29 per cent of respondents called on the Government to take action to relive the pressures they were facing. However, any proactive Government action seems an unlikely prospect, as the £300 million discretionary business rates relief package promised by Chancellor, Philip Hammond, has yet to materialise.

What else did the Bibby SME survey discover?

Well, the research found a trend of declining investment among small businesses. The figures showed that average planned investment had fallen from £101,920 during the second fiscal quarter of 2016, to £65, 782 in June. Why is planned investment decreasing? Well, 28 per cent of respondents said it was down to the uncertain economic outlook in the UK. 20 per cent of SMEs said uncertainty caused by the EU Referendum was preventing them from investing in their businesses over the months ahead.  26 per cent cited rising business costs as the major disincentive, whilst 25 per cent of small business respondents said they would rather use the money saved to build up company cash reserves.

Why do financial experts believe SMEs are finding the going increasingly tough?

According to the Federation of Small Businesses, SMEs are struggling due to a combination of factors and an uncertain economic climate, and those issues are troubling FSB National Chairman, Mike Cherry:

‘Small business confidence is down for the first time since the EU referendum – this is due in no small part to surging operating costs, which are now at their highest in four years.’

‘Many firms are still reeling from April’s bruising business rates revaluation. To add insult to injury, we’ve had news of the latest holdup to the £300m hardship fund promised to the hardest-hit firms in March.’

David Postings, Global CEO at Bibby Financial Services, said:

‘SME activity is often a barometer of wider economic performance. When SMEs are taking on more work, hiring staff and investing in equipment and machinery, it is reflected in the performance of the wider UK economy.’

‘However, right now we are now seeing signs that businesses are delaying investment decisions. Furthermore, data showing rising bad debts among SMEs could indicate a build-up of pressure in supply chains throughout the country.’

‘It is possible that this is a sign that the UK is heading for a recession, but it’s still too early to call. We will know for sure over the coming months.’

If you are self-employed or own a small business and are struggling in the current economic climate, the speak to Steven Glicher accountants. Our accountants can help your business identify the funding you’ll need, find the most suitable sources of finance, and help you with cash-flow projections, budgets and trading forecasts. For further information, call Steven Glicher accountants on 0161 485 8007, or email

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