Only a third of small and medium-sized enterprises (SMEs) across the globe believe their ability to access finance is “good” and those that think access to funding is poor cite lengthy documentation and high interest rates as key factors for this, according to new data.
The Global Business Monitor from Bibby Financial Services (BFS) and trade credit insurer Euler Hermes surveyed 2,300 businesses across 13 regions. The research found that access to finance for SMEs is largely insufficient. In terms of global growth threats, SMEs say the ongoing trade war between the US and China, and Brexit dominate.
Threats to global economic growth (%)
The relentless trade troubles between the US and China took the top spot for threats to global growth with 42% of SME firms believing it to be the biggest concern. Brexit took the runner-up spot (35%) and rising raw material costs (23%) was named as the third largest threat. Exposure to each threat varies by market, with Ireland and the UK citing Brexit as the biggest danger to growth, while SMEs in regions farther afield such as Asia highlighted the US and China skirmishes as more alarming.
Nearly four out of 10 British SMEs expect the UK economy to worsen over the next year with only Czech Republic (40%) and Hong Kong (41%) firms having a gloomier national outlook. Despite the despondent view, 90% of small Czech companies still plan to invest in 2019. But they face their own set of challenges; 51% say government regulation is a struggle at present and nearly half believe local government policy needs work. As for Hong Kong firms, rising costs and cashflow problems are behind their pessimistic stance.
More broadly, 85% of SMEs across the globe plan to invest in their business. The US (92%) and Czech Republic (90%) are the most likely to invest, while those in the UK are least likely, again due to Brexit woes. With confusion building on what a British trading environment outside of the EU might look like, firms are reluctant to plough capital and resources into an unknown national strategy; instead investment so far has been used to offset no-deal Brexit risks.
SMEs who have sufficient access to finance (%)
The findings also delve into projected small business growth over the next 12 months, analysing which of the firms plan to apply for finance, and whether or not they think current access to finance is sufficient.
The data reveals 43% of SMEs in the US say access to finance is good, while only 21% and 20% of SMEs in Ireland and Slovakia respectively say they have sufficient access to capital. The documentation process (48%) and high interest rate (40%) are the most significant barriers to accessing finance.
Eastern European firms are looking to apply for finance in the next 12 months: one-quarter of Polish SMEs, 20% of Czech and 19% of Slovakian small businesses say they will seek financial support. In terms of business performance, nearly two thirds of SMEs (64%) in the US project their sales to increase, followed by the Netherlands (56%) and Poland (53%).
The Global Business Monitor findings follow the results of Santander’s Trade Barometer, which was published earlier this month. It found that businesses are putting in place a variety of strategies to mitigate the impact of a no-deal Brexit on the UK economy.
Based on responses from over 1,000 firms all with a minimum turnover of £1mn, the research concluded that over a third are unprepared for a no-deal Brexit but that many have mitigation strategies ready to be deployed. The barometer reveals that trade deals with the US, China and Australia are the most sought-after post-Brexit tie-ups, all perceived as countries with the strongest potential in the coming years.