Half of small businesses either paused, delayed or cancelled business investment in 2022, due to economic conditions.
And the proportion of small and medium-sized enterprises (SMEs) expecting to immediately increase investment in the business has dropped from a peak of one in three in the last three months of 2021 to close to cone in five in the second quarter of 2022.
The scale of businesses sitting on their hands when it comes to business investment is bad news for the economy, as lack of investment is seen as the main reason for Britain’s stagnant productivity. If nothing else, better technology increases business output.
Small business lender Funding Circle polled 550 of its clients for its research, conducted by consultancy Oxford Economics.
A separate poll by Nucleus Commercial Financeanother small business lender, has found that around a quarter of SMEs are delaying planned investment in technology, 14 per cent are delaying investment in staff training, while 16 per cent are shelving any growth ambitions completely.
Even more worryingly, 5 per cent of UK SMEs – equivalent to 275,000 businesses – told Nucleus Commercial Finance they face winding up their businesses this year.
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Stockpiling investment cash
Funding Circle also found that small businesses are hanging onto cash, again due to economic uncertainty, with many still stockpiling reserves built up during the pandemic.
About a third of SMEs held £10,000 or more in credit balances in the third quarter of 2022, up from fewer than one in four before the pandemic and near record highs.
Lisa Jacobs, chief executive of Funding Circle, told The Times that a significant proportion of companies took emergency pandemic funding “almost as an insurance policy, but they’re sitting on it, they’re not feeling the confidence to invest”.
On average, UK SMEs have seen their business costs rise by 15 per cent in the past 12 months, with a similar rise expected over the coming year as well.