With inflation easing, the UK may be on the verge of a significant SME boom, as business owners and leaders are ready to invest an estimated £2.4 trillion over the next two years, provided they can overcome current funding challenges.

Research from UK specialist lender Together reveals that 65% of SMEs are eager to invest at least £100,000 into their businesses. However, a lack of credit availability is stifling these ambitions, with serious implications for future economic growth.

The study highlights that 27% of UK SME owners and leaders feel that insufficient investment incentives from local and national governments are hindering business growth. Additionally, 17% of SMEs lack confidence in pursuing investment goals over the next two years due to stricter lending criteria and increased caution from mainstream banks (23%), as well as a lack of understanding of their funding needs (21%).

This research comes as Prime Minister Rishi Sunak calls for a General Election on 4 July. SME leaders are urgently looking to a new government for support and policy changes to unlock maximum growth potential. Enhanced support for SMEs could significantly boost the UK economy. According to the latest government data, there were an estimated 5.5 million SME businesses in 2023, contributing 53% of UK private sector turnover—a figure that could increase with better support and a responsive administration.

Despite recent improvements, inflation and borrowing costs remain critical concerns for SME voters as election day approaches, directly affecting the economy and overall business confidence.

The research indicates that political parties need clear plans to nurture SME growth. Despite the demand for support and investment, tougher lending criteria from mainstream banks continue to be a barrier for over half of SME loan applicants. As a result, 55% of SMEs are turning to alternative finance sources to meet their business objectives.

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Top investment priorities for SMEs include scaling up production (31%), increasing headcount (34%) within the next 12 months, and investing in additional property to support business expansion (27%).

An increasingly popular solution is bridging finance, designed to provide quick cash injections. About 14% of UK SMEs have used bridging or short-term loans to support growth. These loans allow business leaders to invest quickly and seize opportunities, such as expanding operations or acquiring properties.

Ryan Etchells, Chief Commercial Officer at Together, said: “The UK’s 5.5 million small and mid-sized business owners are eager to realise their investment and growth plans over the next two years. On 4 July, the party that communicates the most appealing pro-growth policies to support SMEs and UK entrepreneurship will win voters’ minds. Stabilising energy, labour, and running costs is crucial, as is understanding the specific financial needs of the sector."

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