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Britain’s SMEs are facing having to pay costs £10,000 higher than last year just to survive, new research has claimed.
Liberis has credited small businesses across the country for their resilience so far, but with a £22 billion SME funding gap, the report rings alarm bells about trouble on the horizon.
With dwindling support measures from the government and other authorities, SMBs are now being forced to source additional funding themselves.
SMBs are spending too much to survive
The report highlights government-led Covid Business Interruption Loans and other initiatives designed to help businesses sustain themselves financially amid the uncertain economy that followed, yet bank accounts are quickly emptying.
In June 2020, the average SME bank account balance was £16,000. Three years later in July 2023, this had dropped to £2,000. These figures come from an analysis of the UK’s small business sector using Open Banking data.
Liberis Chief Risk Officer Alex Ivison said: “Since the onset of the COVID-19 pandemic in 2020, the UK economy has experienced one of the most significant inflationary challenges in four decades.”
Ivison added that the ongoing Cost of Living crisis has received plenty of coverage in recent months, but “the escalating Cost of Doing Business has received relatively sparse coverage.”
The report cites government data, which reveals that SMEs account for 99.9% of the business population. At the beginning of this year, there were 5.6 million UK private-sector businesses, 5.51 million of which had fewer than 50 employees.
Liberis also refers to a pre-pandemic report by the Bank of England, claiming that there is an SME funding gap of £22 billion in the UK. Furthermore, mainstream lenders are increasingly withdrawing credit to small businesses, making it harder for them to borrow money.
Looking ahead, it’s clear that a two-pronged approach is needed to tackle unnecessary expenses and increase revenue.