Small businesses are struggling to match growth with consumer demand, while a quarter are worried they do not have the strength to weather financial shocks, according to a new survey.
HSBC’s research, reported by the PA News Agency, found small and medium enterprises (SMEs) are increasingly being held back by business and borrowing costs.
Over two-thirds of business owners said they could not grow their business enough to meet customer demand for goods and services in 2024, and expect the problem to persist through 2025.
HSBC surveyed some 1,000 business owners, all with less than 50 staff. More than half said they faced challenges this year from the rising costs of running their business, while 22 per cent struggled under higher interest rates.
It comes after Prime Minister Keir Starmer last week backed Labour’s prior pledge to make the UK the fastest growing economy in the G7, an target that would require the UK to have higher growth than the US, Canada, Italy, Japan, Germany and France.
British businesses have also raised concerns that increasing the rate of employer national insurance, and the national minimum wage, per the Autumn Budget, will bump up costs significantly.
Nearly a quarter of SMEs said they do not have the resilience to survive financial shocks, with just over 50 per cent having less than £50,000 in the bank. Around 28 per cent said they had no cash reserves at all.
HSBC’s UK head of business banking, Tom Wood, said it was “positive news that demand for SME goods and services remains strong, and trading conditions will become more favourable as inflationary pressures ease.”
However he warned SMEs must “build resilience whilst increasing profits” if they want to grow enough to hit higher levels of demand.