Small and medium-sized enterprises (SMEs) across the UK are eager to invest, with 87% planning to do so this year, according to new research from independent funder Bibby Financial Services (BFS). However, uncertainty surrounding the upcoming Spring Statement on 26th March is prompting many to hold off on key spending decisions.
The latest BFS Q1 2025 SME Confidence Tracker, which surveyed 1,000 UK SMEs, reveals a strong sense of optimism, with two-thirds (66%) of businesses expecting sales growth in the next six months. Yet, nearly half (48%) are postponing capital expenditure until after the Chancellor’s speech, and 63% say they would be more inclined to invest if interest rates were lower.
Cautious optimism amid economic uncertainty
The lingering effects of previous policy changes continue to shape business sentiment. The Autumn Budget dampened investment intentions, with over half (52%) of SMEs indicating they are less likely to invest in the short term due to increased employer National Insurance contributions. Additionally, the proportion of businesses with no investment plans has risen to 13%, up from 8% in Q3 2024.
The role of external finance in business growth
The data highlights a significant contrast in investment attitudes between businesses that rely on external finance and those that are self-funded. Among SMEs using external finance, only 6% have no plans to invest, compared to 14% of self-funded businesses. Furthermore, businesses without external finance are more vulnerable to bad debt, with an average of £45,000 written off in the past year, compared to £25,000 for those leveraging external funding sources.
Derek Ryan, UK Managing Director at BFS, commented: “UK businesses are demonstrating a clear appetite for investment, but many are taking a cautious approach in the lead-up to the Spring Statement. Business leaders are seeking stability, particularly after the changes to National Insurance contributions last October. Without greater clarity and reassurance, the Government’s ambitions for economic growth could be undermined.”
Ryan added: “Our SME Confidence Tracker underscores the crucial role of accessible finance in business growth. The Chancellor’s upcoming plans have the potential to unlock investment and drive economic expansion. Stability and access to finance remain key factors in ensuring SMEs can thrive in the current economic climate.”
With the Spring Statement just around the corner, all eyes are on the Government’s next steps. After a challenging Autumn Budget, business leaders are hopeful for policies that will provide the certainty they need to move forward with confidence.
