Despite the wider economic uncertainty that persists across a wide range of industries, optimism among the country’s SMEs appears to be soaring.
This is likely to continue in the near-term too, with 36% of SMEs expecting their income to rise over the course of the next 12 months (as opposed to 24% who believe it will decline). Some 12% are even forecasting double-digit growth in terms of revenue, as the recovery from Covid-19 continues at pace.
But is there need for caution, and what does the lending landscape look like from the perspective of SMEs in the UK?
The Lending Landscape for SMEs
The SME sector has struggled with a significant funding gap for years now, with this having increased incrementally over the course of the last decade or so.
This was estimated to be in the region of £56 billion in the summer of 2021, which persists despite the role that online and peer-to-peer lenders have played in making finance more accessible to start-up ventures.
The prevalence of Covid-related loans in the UK marketplace (which totalled a staggering £80 billion over the course of the pandemic) has impacted directly on private sector lending, with large banking institutions changing their role from direct lending to the administration of government support schemes nationwide.
2020 and its series of restrictions and lockdowns, dominates anything that had preceded it (see Figure 1 below). Whilst Big Banks retained their association, their role changed from direct lending to helping to administer the UK Government support schemes alongside the British Business Bank.
This has arguably impacted on the demand for online and peer-to-peer loans, although competitive smaller loans aimed at providing short-term cash injections continued to experience high demand through 2020 and the first-half of 2021.
SMEs are Optimistic, but remain cautious too
While SMEs are clearly looking forward to increased revenues through 2022, there remains a significant note of caution among entrepreneurs.
This is partially being driven by the fast-changing lending landscape, while ongoing concerns about coronavirus variants and associated restrictions are also proving impactful.
To this end, a study conducted by Purbeck Personal Guarantee found that some 53% of SMEs remain cautiously optimistic in the UK, with 22% describing themselves as “very optimistic”.
However, an impressive 36% of small and medium-sized firms are planning for growth in 2022, with this representing more than a third and hinting that businesses may be preparing for a prosperous year ahead despite the continuing uncertainty.
Most importantly, at least half of SMEs are aiming to keep their ventures on an even keel next year, while just 1% are considering closing their business (down from 46% during 2020).
So, much of the gloom that engulfed 2020 has now lifted, with the resilience and adaptability of businesses playing a pivotal role in driving this trend.