Bad debt levels soar by 61pc for UK SMEs
The average bad debt among small and medium-sized enterprises (SMEs) in the UK has jumped 61 per cent, from £10,329 in spring 2022 to £16,641 today, according to research by Bibby Financial Services (BFS).
The study found that 27 per cent of UK SMEs are struggling with bad debt, equating to 1.5 million businesses, meaning access to finance is now critical to the UK’s economic recovery, BFS said.
The latest figures from the Insolvency Service show insolvencies in February 2023 jumped 17 per cent when compared with the same time last year, and the data from BFS’s latest SME Confidence Tracker “reinforces the fragility of Britain’s 5.5 million SMEs”, according to the company.
The company found that almost half (47 per cent) of businesses surveyed have seen at least one business customer cease to trade in the past six months alone, and a quarter (25 per cent) have seen three or more customers become insolvent.
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“Rising insolvencies are causing huge ripple effects throughout supply chains across the country, leading to greater levels of bad debt for small and medium sized businesses,” said Derek Ryan, UK managing director of BFS.
“Combined with the rising cost of borrowing, this presents a significant and very real threat to the survival of many SMEs today. It’s more important than ever that businesses shore-up their credit control processes and look for ways to protect themselves against insolvency in their supply chains.”
The BFS survey found that the current environment is making it harder for businesses to access the finance they need to continue operating, let alone grow.
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Three in five (59 per cent) surveyed said it’s harder to secure a loan today than during the pandemic and more than one in 10 (11 per cent) said they had struggled to secure finance for their business in the past six months.
Meanwhile, nearly four in 10 (39 per cent) were worried they wouldn’t be able to pay back loans if interest rates continued to rise.
“More than ever, SMEs need to be able to access the funding they need to operate from a variety of sources,” said Ryan. “We would encourage the government to relaunch the Bank Referral Scheme to boost SME funding at this pivotal time in the UK’s economic recovery.”
The study is based on a poll of 500 UK SME owners and decision makers across the manufacturing, construction, wholesale, transport and services sectors. Research was conducted by independent specialists, Critical Research, between 31 January and 6 February 2023.
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