The latest research from Close Brothers Asset Finance and Leasing has shed light on the impact that mounting costs via inflation are having on businesses in the UK.

The lender’s recent survey of 911 UK SMEs found that despite the multiple pressures facing business owners, the appetite for borrowing to invest in growth is the strongest it’s been since Close Brothers started surveying business owners, with two-thirds of respondents answering ‘yes’ to the question ‘does your business plan to seek funding for business investment in the next 12 months’.

While investment intent is strong, some 40% of firms have missed a business opportunity in the last 12 months due to a lack of available finance. In addition, confidence in the economy has cooled, with 54% of UK SMEs concerned about further economic slow-down. 

Impact of inflation

According to the research, two-thirds of businesses have been negatively impacted by rising inflation, and only a third feel the Bank of England’s target of 2% is realistic in today’s high-inflation business environment. 

A further 46% don’t feel raising interest rates is the right thing to do to help curb inflation (34% ‘yes’; 20% ‘unsure’).

While businesses have been asked not to raise wages, over half (55%) will be doing just that as they try to help their employees keep up with rising costs.

In addition, over three-quarters of firms plan to pass additional costs onto customers (27% ‘fully’; 49% ‘partially’) while the remaining 23% have chosen to absorb the costs, which will, in turn, have an impact on their cash flow. Over four in ten (42%) admitted the increased cost of doing business has caused them cashflow issues.

“Businesses have, for some time now, borne the brunt of both rising costs and inflation along with supply chain problems that have made it difficult to plan – both finances and stock – while trying to meet customer demands, said Neil Davies, CEO of Close Brothers’ Commercial Division“But it’s encouraging to see that firms are still keen to invest despite all the challenges they are facing.”

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