Novuna Business Finance has recently released two reports shedding light on critical aspects of small and medium-sized enterprises (SMEs). The first report, its Business Barometer study, delves into the growth prospects for SMEs.

Meanwhile, the second report underscores the imperative for clarity among small businesses concerning the Government’s forthcoming stance on sustainability, especially with the UK General Election potentially on the horizon later this year. 

This second report, titled Small Business Perspective on Sustainability – The Mandate for Support from a New UK Government, delves into the ramifications of recent policy reversals by the UK Government on crucial green initiatives. These include delays in phasing out petrol and diesel cars and shifts in renewable energy commitments. The document also examines small businesses’ concerns, ranging from limited access to grants and funding for green projects to a perceived lack of prioritisation of environmental issues by major UK political parties.

Alejandro Gonzalez, editor of Leasing Life, spoke with Joanna Morris, Head of Insight at Novuna Business Finance. The conversation delved into various aspects, including small businesses’ growth outlook, sustainability concerns, and the crucial role of government leadership in fostering sustainability initiatives. 

Alejandro Gonzalez (AG): What kind of research has Novuna conducted recently to give you insights into the UK SME market? 

Joanna Morris (JM): The main findings from our research highlight the critical importance of aligning small business goals and aspirations with sustainability objectives. Through our Business Barometer survey, conducted quarterly for the past decade, we’ve gained insights from 1,200 small businesses across various sectors and regions in the UK. This ongoing research allows us to understand their growth outlook, concerns, and wider business challenges. 

Additionally, we’ve recently commissioned further research focusing specifically on sustainability aspects within the small business sector. Our aim is to delve deeper into what drives small businesses towards sustainability and how we, as a finance company, can support their journey. Our strategic ambition is to become more sustainable ourselves, aligning with government targets such as the SDGs and Net Zero goals. Therefore, our research is not only about understanding small business needs but also about shaping our services to meet their sustainability aspirations, which will ultimately benefit both our customers and the environment.

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AG: What growth concerns are specifically troubling SMEs?

JM: The findings from our growth outlook research reveal the remarkable resilience of small businesses in the UK over the past decade. Despite facing challenges such as Brexit, changes in government, and the COVID-19 pandemic, small businesses continue to demonstrate their determination to grow and succeed. This resilience is evident in their unwavering commitment to their businesses, even in the face of adversity. 

One key focus area highlighted in our report is the importance of improving cash flow, which is essential for the overall strength of small businesses. Addressing issues such as late payments from larger companies can significantly enhance cash flow and support small businesses’ growth aspirations. Additionally, investing in new equipment remains a priority for many small businesses, as it contributes to their expansion and development.

AG: What was the primary focus of your research regarding SMEs and sustainability?

JM: Our recent research on sustainability underscores the need for greater support and leadership from political parties. Despite climate change being a prominent issue in political agendas, there is a notable absence of focus on small businesses in their sustainability pledges. Our findings indicate that small businesses are seeking guidance, financial incentives, and tax benefits to help them become more sustainable. By addressing these needs, political parties can empower small businesses to integrate sustainability into their growth strategies effectively.

AG: Which type of financial assistance do SMEs prioritise?

JM: The report highlighted a significant demand for financial support among SMEs, with 38% expressing a strong desire for a tax system that incentivises green initiatives while penalising businesses that fail to adopt sustainable practices. Additionally, SMEs are calling for larger grants to offset clean energy costs and reductions in business rates for environmentally friendly businesses. This indicates a clear expectation for government intervention to encourage sustainability through various incentives and tax breaks. Moreover, SMEs are seeking support in reducing business travel, with requests for tax breaks on businesses that limit travel and incentives for transitioning to more sustainable modes of transportation, such as electric or hydrogen-powered vehicles. Despite these clear demands from SMEs, it’s notable that none of the political parties have addressed specific measures to support small businesses in their sustainability pledges. This underscores the need for greater focus and support for the broader business community in the UK, beyond just the larger corporations.

AG: What regional disparities did the report uncover?

JM: The report revealed significant geographical differences in the sustainability priorities of businesses across the UK. Surprisingly, the Northwest showed a particular interest in sustainable farming initiatives, while Wales, despite its agricultural prominence, expressed a broader need for increased investment in the economy as a whole. Conversely, the Midlands highlighted concerns about single-use plastic waste, a topic typically associated with urban areas like London. These findings underscore the diverse range of sustainability issues that capture the attention of businesses in different regions. Despite the unexpected nature of some of these priorities, they serve as catalysts for businesses to embark on their sustainability journey, encouraging them to explore other avenues for positive change.

AG: What differences exist among industries in terms of sustainability priorities?

JM: When examining industry sectors, our research delved into the specific priorities and needs unique to each sector. For instance, in manufacturing, there’s a strong emphasis on government funding for emerging technologies and implementing measures to prevent environmental harm and human rights abuses in supply chains. Similarly, the agricultural and hospitality sectors are focused on initiatives to enhance animal welfare and invest in sustainable farming practices. Meanwhile, the construction industry is keen on expanding onshore and offshore wind capacity to facilitate the delivery of clean electricity for their projects. These sector-specific findings align with the expected priorities within each industry, reflecting their distinct challenges and objectives.

AG: How essential is government leadership for driving small business sustainability efforts?

JM: Small businesses, due to their size and limited resources, heavily rely on clear directives and adequate support to navigate the path towards sustainability effectively. Without robust guidance and assistance tailored to their needs, progress towards sustainability goals is likely to be impeded. Smaller businesses lack the financial reserves and dedicated personnel to independently drive sustainable initiatives. The absence of governmental support and direction may result in a delay in their sustainability efforts. Furthermore, the current focus on larger corporations as key influencers further underscores the need for a shift in attention towards supporting small businesses in their sustainability endeavours. Despite the lack of clarity from the government, small businesses exhibit resilience and a steadfast commitment to sustainability. However, without explicit support and direction, their journey towards achieving net zero emissions may face significant challenges.

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