9th April, 2008

SMES PUSH FORWARD WITH GROWTH PLANS

UK SMEs are remaining defiant in the face of the current economic turmoil and will not rein back expansion plans for the remainder of 2008.

A new survey by the Asset Based Finance Association (ABFA) found that 74% of companies are refusing to put growth ambitions on hold. In fact, around half expect to increase their borrowing in 2008 with 67% either confident or very confident they will secure the additional funding to support their plans.

The research supports the recent Government's Annual Small Business Survey which found that 66% of SMEs were aiming to grow their business over the next two to three years. Both reports will be welcomed by the Business and Enterprise Secretary John Hutton who outlined the Government's commitment to helping small business grow in the new Enterprise white paper during the Budget.

However, the news was not all rosy. Despite their optimism, over 40% of SMEs surveyed said that the interest rate cut to 5.25% in February has had little impact on their business. One third said it had had no impact at all and called for it to be dropped further to 5% when the Bank of England makes its rate announcements on 10th April.

What's more, when asked about current financial concerns, 37% stated their relationship was at risk from having to chase payments. Again this echoes the findings of the Small Business Survey which has highlighted the growing problem of late payments in this country.

Maurice Craft, chair of the Invoice Finance Group which is part of the ABFA, said: "The majority of the results from the survey are very encouraging and I'm pleased that SMEs are planning to go ahead with expansion this year. It was also interesting to note that a significant proportion believes that media reports about a recession are over-hyped.

"However, there are still barriers to expansion which need to be addressed if UK SMEs are going to fulfil their potential. Of particular interest are the companies that cite managing late payers and their cash flow function as a hindrance to growth. There are options available to companies such as factoring or invoice discounting which takes the burden away from chasing late payers and gives the guarantee of invoices being paid quickly, allowing the company directors to concentrate of growing the business."

The survey, which was conducted at the Institute of Directors finance for SMEs seminar, also revealed that 63% of SMEs said they 'get by' in financial matters and use external sources to fill in the gaps, while 26% claimed to know more than their accountant. Just over one in ten companies called for more free resources from the government to improve their financial literacy.

Notes:

• 59 per cent believed media reports about the UK heading into a recession were over hyped
• The survey was conducted at an IoD conference, which was attended by 180 companies from across the UK to investigate issues such as cash flow and credit management, raising capital, funding expansion and accelerating growth
• The Annual Small Business Survey is undertaken by The Department of Business and Enterprise Regulatory Reform. It was released in February 2008 and can be found at http://www.berr.gov.uk/bbf/enterprise-smes/research-and-statistics/research-evaluation/business-surveys/page38370.html
• The Government's 10 year strategy 'Enterprise: Unlocking the UK's Talent' states that the "UK's long term prosperity lies in unlocking the talent of enterprise for people from all sections of society and in our small businesses, helping them to grow."

About the Invoice Finance Group
The Invoice Finance Group is a committee of the Asset Based Finance Association representing independent organisations that provide factoring and invoice discounting.

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