More SMEs planning for the future, but a third anticipate threats rather than opportunities ahead

  • Latest SME Finance Monitor reveals shift in focus in Q3 2020, with 42 per cent of SMEs looking ahead to the future. However, one in three SMEs see the future as presenting threats rather than opportunities to their business.
  • There were clear signs of improvement prior to the introduction of stricter restrictions across the UK, with the proportion of SMEs expecting to ?really struggle with revenue? halving from 60 per cent in Q2 to 30 per cent in Q3.
  • However challenging conditions persisted with reported growth in the last 12 months at the lowest level to date on the SME Finance Monitor at 25 per cent.

The latest independent SME Finance Monitor published today by BVA BDRC reveals that businesses are increasingly looking ahead to the future, with 42 per cent of SMEs saying their plans were future-focused in the third quarter of 2020, compared with 25 per cent who were still focused on the immediate impact of the pandemic.

However, with uncertainty around how COVID-19 restrictions might change and the end of the Brexit transition period on 31 December approaching, a third of SMEs (32 per cent) in Q3 said that the future represented threats, compared to a fifth (19 per cent) who saw opportunities for their business. From a sector perspective, Hospitality and Transport, along with Health, were more likely to see future threats rather than opportunities.

Prior to the stricter restrictions introduced in October and November, the SME Finance Monitor's findings show clear signs of an improvement in business outlook. In contrast to Q2, more SMEs were positive, with 40 per cent rating their mood as good, up from 25 per cent in the previous quarter. Meanwhile the proportion of SMEs expecting to really struggle with revenue in the coming months had halved from 60 per cent in Q2 to 30 per cent in Q3, with all sectors reporting a much-welcome boost to their incomes.

Despite a more positive environment in Q3, challenging conditions persisted, with three quarters of SMEs reporting being negatively impacted by COVID-19. This impact was felt most by smaller SMEs, a third of which described themselves as very negatively impacted. Reported growth in the last 12 months was the lowest level reported to date on the SME Finance Monitor at 25 per cent.

Improvements to the outlook for SMEs came as usage of government-backed lending schemes grew, with the overall proportion of businesses utilising finance increasing from 30 per cent in Q2 to 40 per cent in Q3, with around nine in 10 SMEs who applied able to secure COVID-related finance in Q3. The proportion of SMEs happy to borrow to grow was 34 percent, back in line with 2017, with access to finance much less likely to be perceived as a major barrier to their business going forward (8 per cent) than other factors such as the current economic climate (41 per cent).

Government-backed loans are just one part of the industry's plan to support businesses across the UK, with lenders providing a range of additional measures, including working capital extensions, overdraft extensions and capital repayment holidays. The latest COVID lending statistics published by HM Treasury show that the banking and finance industry has supported nearly 1.5 million businesses through the schemes to date.

Stephen Pegge, Managing Director of Commercial Finance at UK Finance, said:

The banking and finance industry is providing an unprecedented package of support to help businesses through these tough times, including supporting nearly 1.5 million businesses through government-backed lending schemes.

"Despite the considerable challenges which remain, it's encouraging to see that a growing number of businesses are now able to look ahead to the future and access the support they need to prepare, with nine in 10 SMEs who applied successfully securing finance.

"The industry continues to work closely with government, regulators and business groups to ensure SMEs have access to the best support, information and guidance. Through our Let's Talk Business campaign, we are encouraging all businesses to contact their finance providers now to discuss how best to prepare and consider any additional financing needs.

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