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SMEs rein in fund-raising amid growing pressures

chart and business finance
Small firms are assessing finance needs

Small business recovery is stalling in Scotland, with fewer SMEs intending to raise finance than the UK average, according to new research among the clients of accountants.

The survey of 3,500 SMEs reveals only 42% are actively looking to grow in the next six months, down from 50% in January. 

About a fifth (21%) have delayed or abandoned applying for finance in the past six months, compared with just 14% across the whole of the UK.

The data has emerged in the latest edition of the the Association of Chartered Certified Accountants) (ACCA UK) and Corporate Finance Network SME Tracker.

Small firms in Scotland appear to be less exposed to disruption arising from the conflict in Ukraine – 8% in Scotland, against a UK figure of 17%.

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Nevertheless, the continued geopolitical uncertainty, ongoing Covid impact, supply chain issues and spiralling cost increases are taking their toll.

Accountants cite a significant worsening of the mental health of small business clients since January, with almost a quarter (23%) now highlighting this, compared to 6% in January’s poll. 

A quarter of Scottish accountants indicated there had been increased interest in the R&D credit scheme from small firms over the last two years, compared with 40% across the UK. 

Only 50% of accountants agreed that raising awareness would help take up, perhaps suggesting more needs to be done to make R&D investment support relevant to more small businesses. 

Susan Love, strategic engagement lead for ACCA Scotland, said: “The caution of small firms in the face of huge uncertainty could result in lower investment by firms, creating knock-on problems for economic recovery.

“Now is the time to pull upon every lever of support, such as quickly reviewing schemes to support investment and innovation. While there were positive steps in the Chancellor’s statement last month, many small businesses are still looking for more help with immediate cost pressures, such as energy bills.”

She also urged small firms to consider the importance of seeking external advice to support their business through the current challenging phase.

With the Recovery Loan Scheme ending in June, Kirsty McGregor, founder of The Corporate Finance Network, said: “SMEs need to be better prepared for the future, to know their credit score and how to improve it and to be given alternative solutions to help them plan for growth.

“There’s an education and information gap from the government that needs to be bridged, so that effective decisions can be made.”

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