UK SMEs Struggling To Find Adequate Funding To Boost Productivity

UK SMEs are struggling to find adequate funding to invest and boost their productivity, according to research by Close Brothers Group.

Just 41% of UK SMEs have been able to access capital through their chosen funding route, and even those able to secure some form of funding have faced challenges. Of those UK SMEs who received funding – whether via banks, personal loans or specialist lenders – 34% felt that it wasn’t enough for their investment plans. A further 24% felt that the type of funding they had used was too expensive. 

Access to sufficient capital is vital for businesses looking to grow and expand. Funding is needed for staff training, investing in new technologies, expanding product lines or renovating premises; all of which can help increase productivity levels, and subsequently a company’s bottom line. However, many SMEs are unsure how to deploy capital they have borrowed. 26% of those who secured finance were uncertain how best to use the funding they received. This would indicate many require additional support, ensuring the products and finance they are receiving from their lender is aligned to their business’ goals and strategy.

Close Brothers’ research also revealed that the difficulty in accessing finance was not limited to the UK. 16% of SMEs across the UK, Germany and France are unable to access enough capital at all, from any source, and 4% of SMEs were unsure where to access the finance they needed to invest in their business. German SMEs were better able to access funding than their UK peers, while French SMEs were less able to do so.  Just 33% of French SMEs have been able to access capital through their chosen funding route, compared to close to half (47%) of German SMEs.

A lack of specialist lending support is a contributing factor in SMEs’ funding issues in the UK – more so than abroad. 20% of UK SMEs said that the funding they had received was not suited to their individual business or sector. This was higher than the percentage of SMEs in France and Germany (15% and 12% respectively).

Close Brothers, the firm that conducted the research, is a leading merchant banking group, providing lending, deposit taking, wealth management services, and securities trading. The group employs 3,000 people, principally in the UK, and is one of the largest 250 companies listed on the London Stock Exchange. Close Brothers’ Banking division provides lending to small businesses and individuals, with an emphasis on specialist finance, and also offers deposit taking services to UK businesses and individuals. At July 2016 Close Brothers had a loan book of £6.4 billion, the majority of which is loans to SMEs.

Adrian Sainsbury, Banking Division Managing Director, Close Brothers commented on the findings and how they impact on SMEs.

 “Low productivity hinders economic growth and improving productivity is vital, particularly as the UK prepares to leave the EU. Given their importance to the economy, SMEs will be central to potential productivity gains.

“SMEs need access to the right finance and support to invest in training staff or adopting new technologies so increasing awareness of financial options is crucial.  Bespoke funding solutions which align to specific needs and growth plans are always preferable to a one-size-fits-all approach.”