SMEs’ bad debt increases 70 per cent in a year

Bad debt among SMEs has increased significantly over the last year, soaring to more than £20,000 per business, according to a new report.

Figures from Bibby Financial Services showed that the average SME’s debt now stands at £20,403 – an increase of more than 70 per cent compared to just a year ago.

The research also showed a downward trend in SME investment, with average planned investment falling from £101,920 in the second quarter of 2016 to £65,782 in 2017.

“SME activity is often a barometer of wider economic performance,” said David Postings, global CEO at Bibby Financial Services, commenting on the findings.

“When SMEs are taking on more work, hiring staff and investing in equipment and machinery, it is reflected in the performance of the wider UK economy.

“However, right now we are now seeing signs that businesses are delaying investment decisions. Furthermore, data showing rising bad debts amongst SMEs could indicate a build-up of pressure in supply chains throughout the country.

“It is possible that this is a sign that the UK is heading for a recession, but it’s still too early to call. We will know for sure over the coming months.”

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28 per cent of the SMEs surveyed said the UK’s uncertain economic outlook was holding back investment, while 26 per cent were hit by rising costs, 25 per cent wanted to build up their cash reserves and 20 per cent said uncertainty caused by Brexit was an issue.

“In the wake of two general elections and a referendum in little over two years, not only is there voter fatigue, but there is a real sense of nervousness and trepidation amongst SMEs,” Postings said. “Businesses don’t know what’s round the corner and this is having a negative multiplier effect on supply chains around the country.

“What we need now is clear direction from the government on our negotiations with the EU and clarity over its commitment to regional growth strategies such as the Northern Powerhouse and Midlands Engine, which are vital to help create a balanced economy.

“The period when parliament returns following the summer recess could be key as it will determine whether the government has the ability to survive and provide direction. If not, another election may be required.”

For more from the report, see the Bibby Financial Services website.

Photo from flynt / 123RF Stock Photo

SME Publications/ SME XPO 2024