1 in 5 (20%) UK SMEs are being hampered in their growth and finance ambitions by their levels of existing financial pressures, reveals a monthly SME Recovery Tracker from ACCA (the Association of Chartered Certified Accountants) and The Corporate Finance Network (CFN).

The survey, which polls accountancy professionals on the financial outlook of their SME clients, reveals that mounting pressures such as surging inflation, heightened supply chain issues, the energy crisis and complications gaining access to finance are piling up on UK SMEs, causing severe interruptions to their long-term ability to grow.

UK SMEs are fighting for their survival as they attempt to put measures in place to become more financially resilient in the face of supply chain disruptions and the challenges of late payments. In fact, in the next year, almost half (41.9%) of SMEs have already, or plan to increase checks on the credit status of their customers and around a third (32.6%) on their suppliers. Alongside this 40% of UK businesses are looking to secure more finance in the short term from mortgages and 23% from overdrafts and unsecured loans. In Wales, this rises to 59% and 39% respectively.

Despite the current pressures, including the concerns on financial viability of UK businesses, UK SMEs are still optimistic about their businesses opportunities for growth in the next year. Over two thirds of SMEs (67.4%) anticipate they will have more employees on the payroll in the next 12 months while accountants note they expect only 5% of businesses will not survive rising costs and rates over the next 12 months.

However, these aspirations are not matching up to SMEs' financial and resource reality. Worryingly only 22% of UK SMEs are utilising and updating a cashflow forecast routinely. Without keeping a close eye on money flow, SMEs are at risk of not meeting their existing financial obligations, which will hinder any future growth plans.

This growth is also at risk of being restricted due to a shortage of skills. Although over two thirds (69%) of UK SMEs have adopted a hybrid or remote working model since the pandemic, over half (52%) are struggling to recruit more staff at the required skill level. This number jumps to 69% in Wales.

Lloyd Powell, Head of ACCA Cymru/Wales, commented on the findings:

SMEs have already had a strained start to the year and urgently require certainty and further support to navigate the next few months. Earlier findings in January noted over a third of SMEs were feeling more anxious and stressed due to financial pressures and it is crucial there are measures in place to support business leaders to stop another increase.  Our latest findings have shown that in the face of late payments and continued supply chain disruptions, 42% of SMEs are having to put extra credit checks in place to ensure they are financially protected. In order to protect businesses the UK and Welsh governments need to consider the ongoing pressures and offer the right support to bolster the Welsh economy at a time of great uncertainty.

While there is news of a successor programme to the recovery loan scheme once it closes at the end of this month, it's clear that this will not be available immediately after. It’s therefore extremely important that SMEs are aware of the existing finance options available to them in the interim.

Kirsty McGregor, founder of The Corporate Finance Network, adds:

With an increasing rise in the cost of living, it is vital that alongside offering support for households, the government doesn’t leave small business owners behind. These findings have highlighted that 1 in 5 SMEs are planning to put growth on hold due to existing levels of financial commitments and other pressures which is alarming for the short and long term future of this vital sector of the economy.

While SMEs remain hopeful and the findings demonstrate an appetite for future growth, the onus rests on the government to support SMEs instead of creating more pressures for them to overcome.