Jessica O'ConnorSMEs are increasingly facing financial pressure in the face of sustained price rises and the high cost of living, research from Shawbrook has revealed.
According to the research, almost eight in 10 (78%) of SMEs said they worried about inflation and the cost of living, an increase from 69% in 2024.
The rising cost of running a business was a primary concern for 76% of SMEs, with three-quarters (75%) of decision-makers listing economic uncertainty as a key worry.
While the rate of inflation has gradually decreased from its peak of 11.1% in October 2022, business costs remained high.
The cost of borrowing was another major worry for SMEs, with more than two-thirds (67%) expressing concern about interest rates, and over a quarter (27%) very concerned.
With inflation rising again, expectations suggest that rates may not decrease as quickly as originally anticipated.
Access to funding was also a growing challenge for SMEs, with over half (56%) expressing concerns about securing the right funding for their business.
Larger businesses (those with 100 to 249 employees) were more likely to seek funding in the next 12 months, with a quarter (26%) planning to apply for loans.
However, SMEs as a whole were typically hesitant to take on debt in the current climate, with less than a fifth (19%) planning to apply for a loan or new line of funding.
This caution regarding funding appeared at odds with many SMEs’ priorities for the next year.
Nearly half (47%) of SMEs were focused on managing costs.
Neil Rudge, chief banking officer, commercial at Shawbrook, said: “After a difficult few years, the challenges for SMEs are far from over.
“Outgoings have increased significantly, and with inflation rising again and additional costs such as the upcoming NIC hike, managing these expenses will remain critical.
“Finance can play a crucial role in helping businesses manage their cash flow.”
He added: “However, there is optimism. Three-quarters of SME owners are confident about their business prospects.
“For those in a position to pursue growth plans, working with a specialist finance partner who understands their business and can offer tailored solutions will be essential to supporting growth during these uncertain times.”
