Small businesses in London are ready to invest around £500,000 each in what could be part of a massive wave of investment over the next two years, which has the potential to kick start growth.
But the survey into the sector that reached these findings – carried out by Together, the specialist lender to small-and-medium sized enterprises (SMEs) – warned of barriers in the way to such much-needed funding rippling through the UK and drew attention to the importance of support from government whoever wins the election. .
Unlocking the funding depends on overcoming deterrents to investment, including tight lending criteria at mainstream banks. And there are calls for fresh government support, which SMEs are looking for as the political campaign unfolds.
In the meantime, Together found that securing loans at high street banks is a problem for “well over half of SME loan applicants”.
Ryan Etchells, chief commercial officer at the firm, which provides the so-called “bridging finance” that can help SMEs in particular, pointed to the election as a potential catalyst for change.
He said: “The UK’s 5.5 million small and mid-sized business owners are champing at the bit to realise their investment and growth plans over the next two years.”
The study found that nationally, around 65% of SMEs are keen to put at least £100,000 into their businesses in the next two years. In the capital city, the figure rises to £500,000.
And the analysis in the study also reveals the sheer scale of what could be at stake. With almost 6 million SMEs nationwide, if every one of them was to invest in line with the pent-up demand, the stimulus could amount to a staggering £2 trillion. While that is beyond unlikely, it seems clear that billions of pounds could be unlocked if the right balance is found, enough to help the UK find the sustained and robust growth that has proved so elusive since the 2008 financial crisis, that began with what as known was the credit crunch.
Now inflation is heading back toward the Bank of England’s 2% target and the first rate cut since the pandemic expected this summer, mainstream lending conditions are also expected to get easier.
But in the meantime, bridging finance is proving popular. Together’s loan book is worth £7 billion and it has lent out around £100 million a month throughout 2024.
Its survey found that in London the top five priorities for pent-up investment among SMEs are staff costs, for a third of respondents; Property, for just under a third; followed by scaling up production and, higher spending on raw materials and plants and machinery.
Over a fifth of the SMEs that took part in the capital said deeper caution at mainstream banks was holding back investment.
The economy has been front-and-centre in the election campaign, with parties clashing over ways to lift growth rates, which have sputtered around the flatline either side of a brief and shallow recession which ended this year.
SMEs could be a vital route to a stronger showing for the UK.
Together said small business leaders were looking “urgently” for fresh government support from government for “policy change to unlock maximum growth potential.”
Etchells added: “This July 4th, the party who can communicate the most appealing pro-growth policies to liberate and support independent SMEs and UK entrepreneurship will win the minds of voters.”
