Latest research by alternative lender Capify finds North West business confidence stronger than national average
Despite improvement, nearly half of businesses are worried about cash reserves
Business confidence in the North West’s SME community has increased in the second quarter of 2023 and now sits about the national average. According to new research from alternative finance provider Capify, business confidence in the North West has risen as a result of improved trading performances over the first half of the year.
Released this week, Capify’s SME Business Confidence Survey revealed that 40% of SME owners in the region reported an increase in turnover between April and June, whilst just under one in three saw their profits increase in the same period.
The overwhelming majority – 80% – of North West SME owners expect turnover to grow over the coming year, with 53% expecting profits to grow over the same period. This improved confidence in operating conditions, means that 47% of firms are planning business expansion over the next 12 months.
The survey, which canvasses the insights of hundreds of SME business owners from across the UK on areas of current business performance, trading forecast, and investment intentions, uses the data to produce an overall confidence score between -10 (very unconfident) and +20 (highly confident). The confidence score for businesses in North West now sits at now sits at -4.67, compared to a national average of 0.65.
Cash crisis
Alongside this improvement in the region’s business confidence, the survey also revealed that continuing inflationary pressure is placing a significant strain on SME owners’ cash reserves, with 47% of respondents reporting they were concerned about the level of cash in their bank accounts.
Concerns around cash reserves are undoubtedly accentuated by issues related to cash collection. Nearly one in four owners (24%) stated that they were worried about unpaid invoices, and the survey found that the average amount of money owed to SMEs in outstanding invoices was £46k.
Challenges prevail
Consistent with previous survey findings, cash flow challenges and cash reserves continue to present significant issues for respondents. Just under 20% of owners cite cash flow as the primary reason preventing them from expanding their business, whilst just over a third of respondents express ongoing concerns about cash flow.
Even with cost-cutting measures – 80% of UK SMEs have cut their spend in response to inflationary pressures – one third of all respondents have required external funding help with cash flow issues and depleted working capital reserves.
Turning a corner
John Rozenbroek, COO/CFO at Capify, said: “Today’s survey findings underline the vibrancy and resilience that exists in the North West’s SME community. As a Manchester-based business ourselves, we know how important a role SMEs play in the regional economy. But The Confidence Survey findings also reflect what we see and hear every day – that SMEs are struggling to keep ahead of the challenges caused by this extended period of inflation and the impact it has on market dynamics”.
“If cash is king, then cash flow is the kingmaker. Seeing how many businesses are worried about the double whammy of increased production prices and unpaid invoices reinforces the importance of active cash flow management”.
“Cash is the great enabler for SMEs, but cash flow issues and depleting working capital can put the brakes on even the most optimistic of businesses.”
Sources of finance
There continues to be concern around the availability of bank finance to support these cash flow requirements. On a national level, only 30% of respondents were extremely confident of being able to use their existing banking partners to fund any short-term needs.
“We know that SMEs are finding it harder than ever to find finance solutions that work for them”, says Rozenbroek. “As bank’s tighten their lending criteria and assess their risk profiles, there are many owners who will feel less confident about their ability to secure finance. Our survey gives us the insights we need to address the uniquely challenging climate that SMEs are operating in.”
