Stagnating SMEs: 90% of Scottish SMEs aren’t seeking finance to grow in the next six months

SCOTLAND: Research from ACCA UK and The CFN reveals worrying financial trends from UK and Scottish SMEs in the approach to 2022

Analysis from ACCA UK (the Association of Chartered Certified Accountants) and The Corporate Finance Network (The CFN) has revealed the impact of ongoing economic uncertainty on Scottish SMEs, with few planning to hire new talent, or seek external finance to grow.

Data from the latest edition of the ACCA UK and CFN SME Recovery Tracker, gathered just as the Omicron wave was starting to hit Scotland and based on responses from accountants representing almost 1,500 clients in Scotland, reveals that a quarter (25%) of Scottish businesses have still not returned to pre-Covid levels of productivity or turnover.

Ongoing uncertainty and the Covid debt burden taken on by many SMEs may also be impacting on future plans, with the vast majority of Scottish SMEs (92.4%) not seeking finance to grow in the next six to 12 months, compared to the UK average of 81.7%.

There are further indicators of SME stagnation in Scotland as respondents report only 15.5% are looking to hire new talent, while just over a tenth (11.8%) expect to make redundancies next year, marginally more positive than the UK figure of 12.4%.

Whilst the number of SMEs expected to still be trading in 12 months’ time has dropped by nearly 10% between November and December for the UK as a whole (93% in Nov vs 83.8% in Dec), Scottish businesses seem to buck this trend, with over 91% expected to still be trading.

SMEs in Scotland were also the least likely to state they expected to require an overdraft facility, with just a quarter (25%) anticipating this, compared to 50% of those in Wales and 30% for the whole of the UK.

Interestingly, whilst around a fifth (21.4%) of UK SMEs have increased credit checks for potential customers and 30.7% have put tighter payment terms in place, in an effort to stabilise their internal working capital position over the past 12 months, Scottish businesses lag behind this average. Only one in twenty (4.5%) Scottish firms report increasing credit checks for potential customers, with one in five (18.8%) tightening their payment terms over the same period.

Susan Love, Strategic Engagement Lead, ACCA Scotland, commented on the findings: ‘Given the uncertain outlook it is perhaps unsurprising that the majority of businesses aren’t seeking finance to grow in 2022 but it is a worrying trend that presents a challenge to policy makers as Scotland looks to set out its roadmap for economic recovery. However, it’s encouraging that accountants report that they expect 91% of SMEs to remain in business over the next 12 months. However, as we head into a new phase of Covid-related restrictions, SMEs across Scotland will need additional support if those positive predictions are to be realised.’

Kirsty McGregor, founder of The Corporate Finance Network, adds: ‘Looking ahead, there are some major impacts coming in the new year, including business rates increases, an uplift in the national minimum wage, and the new health and social care levy introduction in April adding up to 2.5% to payroll costs, all of which will have a further negative impact on these struggling SMEs. As we head into another period of increased COVID-19 restrictions, I am concerned about the future of the UK SME economy and call on the Government to review their policies to provide longer-term support until this period of uncertainty is over.’

–Ends–

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Helen Thompson
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accaglobal.com

Notes to Editors
This edition of the ACCA UK and The CFN SME Recovery Tracker has sought views from accountants working in practices advising some 11,251 SME clients across the UK. The data for this poll closed on 15 December 2021.

About ACCA: ACCA is the Association of Chartered Certified Accountants. We’re a thriving global community of 233,000 members and 536,000 future members based in 178 countries and regions that upholds the highest professional and ethical values.

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ACCA and CA ANZ have formed a strategic alliance for the benefit of members and to help shape the future of the profession. Find out more about us at accaglobal.com

About The Corporate Finance Network: The Corporate Finance Network – www.thecfn.org.uk - The Corporate Finance Network consists of some of the most proactive and commercially astute regional, independent accountancy firms in the UK. They specialise in providing corporate finance advice for smaller transactions.  Kirsty McGregor can be contacted at info@TheCFN.org.uk

"Given the uncertain outlook it is perhaps unsurprising that the majority of businesses aren’t seeking finance to grow in 2022 but it is a worrying trend that presents a challenge to policy makers as Scotland looks to set out its roadmap for economic recovery. However, it’s encouraging that accountants report that they expect 91% of SMEs to remain in business over the next 12 months. However, as we head into a new phase of Covid-related restrictions, SMEs across Scotland will need additional support if those positive predictions are to be realised."

Susan Love, Strategic Engagement Lead - ACCA Scotland

"Looking ahead, there are some major impacts coming in the new year, including business rates increases, an uplift in the national minimum wage, and the new health and social care levy introduction in April adding up to 2.5% to payroll costs, all of which will have a further negative impact on these struggling SMEs. As we head into another period of increased COVID-19 restrictions, I am concerned about the future of the UK SME economy and call on the Government to review their policies to provide longer-term support until this period of uncertainty is over."

Kirsty McGregor, founder of The Corporate Finance Network