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Access to Finance Jeopardises Job Creation Bid by UK Small Businesses

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Almost half of small businesses across the UK (49%) are relying on securing finance to help them fulfil their growth plans for the year ahead.

After three consecutive quarters when small business outlook has remained unchanged (with 34% of business owners predicting growth), the new Business Barometer study from Hitachi Capital Business Finance suggests access to finance will be key in helping the small business sector build back and support economic growth into the New Year.

Job creation emerged as the most pressing issue where finance was needed. Significantly, at a time when some sectors are facing labour shortages, the new study reveals that for 30% of small businesses, plans to invest in job creation for skilled labour is dependent on the enterprise securing finance first. This pressure was most pronounced in the manufacturing sector (51%) and IT/ telecoms (34%). Regionally, small businesses in London were most likely to say they would need to secure funding before they could move forward with hiring plans (41%).

With three fifths of UK employment dependent on the small business sector , a freeze on hiring due to access to finance issues could have a profound impact on the UK’s economic recovery from Covid.

The quarterly Hitachi Capital poll of 1,211 small business owners also revealed that 25% of enterprises would struggle to launch new products and services without first securing finance. This comes at a time when many enterprises big and small have had to look for new ways to rebuild and recover and for many this has involved diversifying services and product lines. Small businesses in retail (46%), manufacturing (29%) and IT & telecoms (29%) were most likely to plans to innovate and diversify would be held back if they were unable to securing finance.

The Barometer results also highlight the important role finance plays in helping small businesses to reach new customers. More than one in five small businesses (24%) said that without access to finance they would not be able to move forward with new marketing and advertising campaigns. Furthermore, almost a third of small businesses (31%) who have said they already have a broad-based international offering across many countries (including and beyond the EU) said advertorial and marketing would be impossible without securing finance (compared to 22% of business with only UK based customers).

With many businesses planning to return to the workplace, the new Hitachi Capital survey reveals that one in five small businesses (22%) say they needed funding to invest in new vehicles as well as move to a better or bigger office location.

For the year ahead, securing finance will also help small businesses to: 

  • modernise the company’s IT and digital capabilities (19%);
  • make it easier for small companies to compete head-to-head with their larger competitors (19%);
  • invest in new machinery for production line (17%);
  • launch into new markets across the UK (17%);
  • and to improve the company’s website and brand (17%).

Joanna Morris, Head of Insight at Hitachi Capital Business Finance comments: 

“We are at a critical moment when it comes to supporting the small business community and their crucial contribution to the economy at large. Over the last three quarters, our Business Barometer study has seen small business confidence rise and stabilise. However, the research clearly shows that small businesses are in need of funding to rebuild after a challenging year. They have already begun to plan and prioritise what resources and investment they will need in order to grow into the beginning of 2021 – and without proper support some may struggle to find their feet again. At Hitachi Capital we are committed to supporting small businesses with the right financial solutions tailored to the companies’ specific needs, at the same time we provide supportive tools and resources to help businesses fulfil their true growth potential.”

Top 10 areas where small businesses need funding in order to grow

1. Increase headcount/ hire new people 30%
2. Launch new products/ services 25%
3. Run a marketing/ advertising campaign 24%
4. Invest in new vehicles 22%
5. Move to a better location/ bigger space 22%
6. Modernise IT capability/ purchase new IT equipment 19%
7. Pitch for major accounts/ compete with larger competitors 19%
8. Invest in new production lines/ machinery 17%
9. Launch into new market segments within the UK 17%
10. Invest in a new company brand/ website 17%

 

Small business growth predictions for the three months ahead:

A comparison over successive quarters (column percentages)

Q4

2021

Q3

2021

Q2

2021

Q1

2021

Q4

2020

 

Q3 2020

 

Q2

2020

 

Significant expansion 5% 6% 6% 4% 4% 4% 4%
Organic / modest growth 29% 29% 30% 22% 23% 23% 10%
No change 52% 49% 47% 45% 46% 43% 26%
Contract / scale down 9% 8% 9% 14% 15% 19% 31%
Struggle to survive 5% 8% 7% 13% 12% 11% 29%