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Bank's insight released


The clear message from the 600 businesses responding to Wesleyan Bank’s 2021 SME tracker is that after the hiatus of the pandemic they are back and raring to go.

As the financial impact from coronavirus recedes and a successful vaccine programme continues, the entrepreneurial spirit of SMEs will be a significant driver in returning to growth. Today, UK SMEs employ 16.8 million people and contribute a turnover of £2.3 trillion to the UK economy – underlining their influence as important powerhouses to lead the recovery. Wesleyan Bank’s survey found businesses feeling optimistic about the future with 68% stating they are confident about their business prospects. Such optimism is built on solid foundations as, despite a challenging trading period, 59% said they had experienced growth during the last 12 months.

The bounce-back may already be on the horizon. 2021 first quarter figures released by the Office of National Statistics (ONS) show a 14% increase in new businesses registered2 - the highest level since recording started in 2017. Furthermore, the Bank of England is now forecasting growth of 7.25% during 2021, which would be the strongest since 1941, and up from the 5% growth previously forecast.

The findings from the SME Tracker also reveal that business leaders’ positivity is matched by their desire to become more environmentally conscious through increasing sustainability to meet the Government’s ‘net zero’ targets.

About the report

There were 600 respondents to Wesleyan Bank’s 2021 SME Tracker with an even split between male and female. Respondents were from a cross-section of product, manufacturing and service-based businesses with industries represented including construction; transport and distribution; manufacturing; engineering; property; retail; and professional services. In terms of age of the businesses, the sample reflected the entrepreneurial nature of SMEs with companies ranging from under five years old (47%) through to those established for more than 20 years (14%). The respondents were representative of the size of businesses within the sector with 19% having under 10 employees; 37% having 11 - 99; 26% having 100 - 249; and 19% having 250 - 1,000.

1 FSB – UK Small Business Statistics – Business population estimates for the UK and Regions in 2020 2 Office for National Statistics - Business demography, quarterly experimental statistics, UK: January to March 2021 3 Sky News – Bank of England forecasts strong COVID recovery with biggest economic bounce-back since WW2.

Keen to be green

As the government strives to cut carbon emissions in half by 2030 and reach ‘net zero’ by 2050 to reduce the UK’s environmental impact, Wesleyan Bank’s Tracker shows that SME owners are equally keen to be green.

Over two-thirds of respondents (68%) said they were “very likely” (25%) or “much more likely” (43%) to invest in green technology or energy than 12 months ago. 54% said they would do it to “improve efficiency”; and 46% feel that “it was the right thing to do”.

It is interesting that adopting a more sustainable mindset appears to have gained traction during a period in which businesses have been dealing with the fallout of the pandemic. Could this indicate the government’s strategy to highlight climate emergency and drawing greater awareness towards business’ environmental responsibilities are succeeding?

According to the survey, 31% already acknowledge that making a green investment would help them comply with legislation and 42% of distribution, transport and logistics companies in the survey perceive reducing emissions as ‘vital’.

During 2021 this movement is likely to gather momentum as campaigns build towards November and the UK’s hosting of the COP26 UN Climate Change Conference in Glasgow.

The survey’s positive responses around sustainability indicate that SME owners know that being greener can provide various business benefits. Citing the reasons for investment in green technology, five leading answers were:

Sustainability is an important part of the environmental agenda and almost three-quarters (73%) of the 600 SMEs surveyed see it as ’integral’ to their future business strategy. 

Attitudes to finance and relationships with lenders

A business’ relationship with its financial partner can be pivotal to its ability to invest in new equipment and swiftly take advantage of emerging market opportunities. Wesleyan Bank’s survey reveals that 79% of male respondents regard their business bank as “critical for survival”. In contrast 54% of female business leaders describe their relationship with their bank as being “unsupportive and inflexible”.

With 73% considering making an investment in the next 12 months, it is likely many businesses will have to determine how this is financed without putting undue pressure on their working capital or cash reserves. Surprisingly, the survey found that 62% of businesses had never or had only once used external funding to support their short, medium or long-term funding needs.

As high street lenders have become more risk averse due to uncertainties over the economy, more than a third (35%) of businesses have been turned down when applying for finance in the last 12 months.  This may be why 26% have turned to a family member; 19% friends; or 13% to private investors or shareholders to acquire finance. 22% and 18% respectively have sought funding support from a commercial broker and alternative finance provider.

Businesses planning to invest in new equipment and technology, or perhaps refurbish their existing premises, can spread the cost over a term of up to five years with an unsecured loan.  Tailored asset finance solutions from specialist commercial lenders enable businesses to pay for new investments over time to support their growth aspirations as well as take advantage of the available tax credits.

SMEs buoyant despite facing other business challenges

As we edge towards emerging from the pandemic, Wesleyan Bank’s 2021 SME Tracker demonstrates businesses have clearly turned their thoughts from survival to growth. However, the speed of recovery will hinge on their ability to obtain finance to buy new stock, purchase equipment and invest in technology. Driven largely by the use of Government loan schemes, banks have been deluged with applications for external financial support over the last 12 months. Demand for funding for the remainder 2021 and beyond is once again expected to soar, but it remains to be seen whether the bank’s appetite for lending will match the ambition of SMEs that are seen as pivotal in driving the UK’s economic resurgence.

Traditional high street banks are also seeing an unprecedented level of demand being placed on them. As a result, some are scaling back support for new lending and focussing on existing customers due to concentration concerns, even if those businesses can demonstrate they are creditworthy.

Thankfully, there is currently a thriving alternative finance market with flexible funding options that many businesses have yet to explore. By using finance, they can spread the cost of investment into predictable monthly instalments (usually over one to five years) to preserve vital working capital without compromising their existing banking lines with their day-to-day business bank. All things considered, the future is looking cautiously bright for British businesses as we stride out into the second half of the year.

To download the full SME Tracker 2021 report, visit www.wesleyan.co.uk/commercial

For more information on any of our products or to contact the team:

www.wesleyan.co.uk/commercial - Tel: 0800 980 9348 - bankcommercialsales@wesleyan.co.uk

This advertisment feature appeared in the July/August edition of Birmingham Business.