As the owner of a small to medium-sized business, you’ll be used to dealing with and working to mitigate countless different challenges.
So what’s topping the list for SME owners this year, and what issues should you be keeping a close eye on in the coming months?
According to research from Shawbrook 2024, inflation is – unsurprisingly – the biggest issue among SMEs in 2024, with 70 percent admitting they are concerned about rising costs.
Meanwhile, 69 per cent said they are worried about general economic uncertainty, while 67 per cent cited rising interest rates as an ongoing concern.
In addition, 54 per cent said paying off debt to balance the books was a big worry for them over the coming months, while 50 per cent of respondents flagged up energy bills as a key issue.
The economic context
It’s no surprise to see that inflation is the main worry among SME owners right now, despite the fact that the rate of price increases has come down significantly over the last year or so.
But that doesn’t mean prices have fallen too, and inflation actually remained unchanged in January 2024 from the previous month, staying stuck at four per cent. That’s twice the Bank of England’s target of two per cent.
So while the days of double-digit inflation – thankfully – appear to be behind us, the latest figures are a sobering reminder that the issue of rising costs is by no means resolved just yet.
SMEs are also operating in an environment of low growth.
During the final three months of 2023, the UK economy shrank by 0.3 per cent. That followed a contraction of 0.1 per cent in the previous quarter, which means the UK fell into a technical recession in the second half of last year.
Interest rates have also remained unchanged in the last few months, with the Bank of England recently keeping them on hold at 5.25 per cent – a 15-year high.
Policymakers at the Bank had been hiking interest rates in a bid to tackle soaring costs, but even though inflation is now much lower than it was a year ago, there’s no indication just yet of the cost of borrowing coming back down.
What do SMEs want to do next?
Despite the prevailing sense of economic uncertainty and minimal growth, many SMEs still remain ambitious and keen to expand their operations.
According to the Shawbrook study, 41 per cent want to grow and hire new staff over the next year.
Meanwhile, 42 per cent have an eye on upskilling existing members of staff, and 32 per cent plan to strengthen their leadership teams.
Many are even looking overseas in order to grow their business, with nearly one in five SME bosses saying they’re considering an international expansion over the next 12 months.
Furthermore, 16 per cent are looking at the option of acquiring a new company to drive growth.
In the face of fairly gloomy economic conditions, these figures are extremely positive, especially as SMEs are often described as the backbone of the economy and a key driver of growth.
Get professional advice
If you’re among those seeking to transform your business despite tough economic and financial headwinds, it could be well worth seeking specialist advice.
Independent financial planners can guide you on how to manage your business’s finances, and work with you to develop bespoke strategies that reflect your specific goals, circumstances and priorities.
A specialist in this field can also help you navigate the complex world of business finance and give you much-needed confidence, reassurance and peace of mind as you make decisions that shape the long-term future of your business.
If you have any questions on managing your business’s finances, please don’t hesitate to get in touch with us and we’ll be happy to speak with you.