Half of SMEs Expect Cashflow Increase, According to Paragon Bank

Small and medium-sized enterprises (SMEs) are increasingly positive about their own future, despite fears around the wider economy.

According to Opinium data analysed for Paragon Bank, 45 per cent of SMEs expect cashflow to improve over the next three months. Over the course of a year, this figure rises to 55 per cent.

Over a third of SMEs will use the increased cashflow to invest in their business, the data shows, with just ten per cent expecting to reduce spending. A third of businesses were also planning to recruit additional staff over the next six months.

Across sectors, over half of SMEs were confident in their own business despite the difficult environment in which many are operating, including high inflation and fears of a recession.

Confidence in the broader economy was less strong, with only 31 per cent of businesses taking a positive view on the UK economy.

Neh Thaker, Co-Founder of HedgeFlows, commented: “Empowering SMEs to drive investment and innovation is critical for the UK economy as it’ll help lead new solutions to global challenges, the development of emerging technologies and create millions of jobs across the country. Giving SMEs access to the right financial tools is an important part of this, enabling new investment opportunities overseas, for example, by mitigating foreign exchange risks and enhancing financial planning. Despite wavering economic confidence in recent times, taking the plunge and investing in new resources, technology and staff is vital for business growth.”

Laimonas Noreika, Co-Founder of HeavyFinance, comments: “It is great to see a confidence boost in UK SMEs even at a time of economic uncertainty. Key to this can be access to funding, enabling businesses to invest in important technologies including agri and climate technology which can help firms with carbon reduction policies through means such as investing in Article 9 funds. Being able to achieve the necessary funding or lending should be more accessible to SMEs to bolster confidence and facilitate businesses to help the economy to reach its full potential.”

John Phillipou, managing director of Paragon’s SME lending division, said: “No one should ever doubt the resilience and forward thinking of SMEs. After facing challenge after challenge, they are now ready to drive economic recovery throughout the UK.”

The data reinforces the notion that small businesses have not just withstood a hostile economic environment but have sought to expand too. Paragon’s research found that 49 per cent of SMEs sought loans over the last three months.

Recent data from fintech firm Iwoca revealed that the most common reason for lending to SMEs was to finance expansion.

However, concerns have been raised that the strong performance of SMEs might be hampered by proposed changes to banking regulations, which would make it more difficult to lend to the sector.

Regulators are considering proposals as part of the Basel 3.1 regulations which would remove existing incentives for SME lending. These proposals have come under fire from many in the industry who argue that it could reduce lending to the sector by as much as third.