A new report has painted a stark picture of the financial challenges currently facing the UK’s 5.5 million small and medium-sized businesses.
The SME State of the Nation Roundtable report was commissioned by ex-Dragon and Small Business Sunday creator, Theo Paphitis. It aimed to highlight the biggest opportunities and challenges for businesses at the moment, as well as emerging trends.
The report found that 72% of surveyed businesses felt their business was “merely surviving rather than thriving”. These figures come as we close out what’s been a tough year for many business owners, with early fears of a recession then compounded by rising interest rates and the high cost of living.
So what’s the state of play for small and medium-sized businesses?
Rising costs have had a significant impact on cash flow, leading to over a third (36%) of business owners taking salary reductions to keep their business afloat.
When it comes to planning ahead, it’s clear that a lot of business owners are concentrating on the here and now. It’s hard to plan ahead during times of economic instability, but long-term planning has also become something of a luxury amid high costs. The report found that fewer than 30% of SMEs have cash in the bank or in hand to be able to keep their businesses afloat for more than six months.
Seeking external business finance and support has its obstacles too. Applying for finance can feel dated and labyrinthine at times – it’s no surprise that 90% of SMEs think the process for gaining access to finance needs to adapt to the new world.
Theo Paphitis described the report as “eye opening”, and added that the challenges and opportunities that SMEs encounter “impact us all”. He said:
“This report has illuminated just how much strain [SMEs] are under – whether that be the result of across-the-board cost rises, unnecessary red tape arising from Brexit, an inability to access finance or a lack of confidence amongst entrepreneurs arising from the prevailing macroeconomic situation.”
The introduction of advanced, user-friendly tools like ChatGPT have made AI more accessible, even for business owners who wouldn’t consider themselves digitally savvy. An impressive 43% of surveyed SMEs are already employing some kind of AI in their businesses.
There’s palpable excitement about the potential of AI to help SMEs be more competitive too. The report found that 60% of SMEs are excited about how AI can be used to level the playing field between them and larger organisations.
Theo Paphitis shared his thoughts on the importance of AI:
“Whilst it is clear just how much strain SMEs are under, it’s also clear that in times of chaos there is also opportunity. This study has demonstrated that the advent of AI provides an unparalleled opportunity to level the playing field between SMEs and their larger counterparts, ultimately fostering development and empowering small businesses to think big!”.
Read more in the full SME State of the Nation Roundtable report or share your thoughts with the small business community by posting on our forums.
The SME State of the Nation Roundtable report was commissioned by ex-Dragon and Small Business Sunday creator, Theo Paphitis. It aimed to highlight the biggest opportunities and challenges for businesses at the moment, as well as emerging trends.
The report found that 72% of surveyed businesses felt their business was “merely surviving rather than thriving”. These figures come as we close out what’s been a tough year for many business owners, with early fears of a recession then compounded by rising interest rates and the high cost of living.
So what’s the state of play for small and medium-sized businesses?
Rising costs have hit nearly every business
The State of the Nation report found that a huge 96% of SMEs have experienced rising costs in 2023. When these costs hit, a lot of businesses were already struggling; almost half (46%) reported a decline in turnover during the previous year.Rising costs have had a significant impact on cash flow, leading to over a third (36%) of business owners taking salary reductions to keep their business afloat.
When it comes to planning ahead, it’s clear that a lot of business owners are concentrating on the here and now. It’s hard to plan ahead during times of economic instability, but long-term planning has also become something of a luxury amid high costs. The report found that fewer than 30% of SMEs have cash in the bank or in hand to be able to keep their businesses afloat for more than six months.
Seeking external business finance and support has its obstacles too. Applying for finance can feel dated and labyrinthine at times – it’s no surprise that 90% of SMEs think the process for gaining access to finance needs to adapt to the new world.
Theo Paphitis described the report as “eye opening”, and added that the challenges and opportunities that SMEs encounter “impact us all”. He said:
“This report has illuminated just how much strain [SMEs] are under – whether that be the result of across-the-board cost rises, unnecessary red tape arising from Brexit, an inability to access finance or a lack of confidence amongst entrepreneurs arising from the prevailing macroeconomic situation.”
Artificial intelligence is a bright spot
It’s not all doom and gloom, however. While over half (58%) of SMEs have refrained from investing in their businesses directly in the last 12 months as a result of macroeconomic instability, artificial intelligence (AI) is the exception.The introduction of advanced, user-friendly tools like ChatGPT have made AI more accessible, even for business owners who wouldn’t consider themselves digitally savvy. An impressive 43% of surveyed SMEs are already employing some kind of AI in their businesses.
There’s palpable excitement about the potential of AI to help SMEs be more competitive too. The report found that 60% of SMEs are excited about how AI can be used to level the playing field between them and larger organisations.
Theo Paphitis shared his thoughts on the importance of AI:
“Whilst it is clear just how much strain SMEs are under, it’s also clear that in times of chaos there is also opportunity. This study has demonstrated that the advent of AI provides an unparalleled opportunity to level the playing field between SMEs and their larger counterparts, ultimately fostering development and empowering small businesses to think big!”.
Read more in the full SME State of the Nation Roundtable report or share your thoughts with the small business community by posting on our forums.
