According to BFS's Q3 2024 SME Confidence Tracker, which surveyed 1,000 UK businesses, there's a renewed sense of optimism among SMEs, with 68% expecting sales to increase in the next six months – up 7% from the last survey in March 2024.

The rebound in business confidence, attributed to the recent General Election, stabilising inflation, and a decline in interest rates, is expected to drive more business investment. More than half of SME leaders (52%) are now more inclined to make major investments post-election, and 63% feel more confident about capital expenditure due to lower interest rates.

However, amidst speculation of potential capital gains and inheritance tax hikes in the upcoming Autumn Budget, a significant 87% of SME leaders are calling for better tax incentives as a priority for the new Government. Additionally, 81% are advocating for access to low-interest financing to support business expansion and job creation.

Derek Ryan, UK Managing Director at Bibby Financial Services, commented: “After a difficult four years, SMEs are finally feeling more confident to invest and grow. However, the Prime Minister’s warning of a “painful” Budget could undermine this confidence. That would be hugely disappointing, especially given the new Government’s election mandate included a plan for small business. The Prime Minister and the Chancellor must ensure that UK SMEs remain front and centre of the plan for economic growth.”

Access to finance remains a crucial piece of the growth puzzle for SMEs. Despite an uptick in commercial finance approvals in Q1 2024, as reported by trade body UK Finance, navigating the funding landscape continues to be challenging for many small businesses. Nearly half (49%) of SMEs find the external finance environment complex and fragmented, and 80% express a desire for the Government to provide better educational resources tailored to smaller enterprises. While consumers have access to free online resources like Martin Lewis’ MoneySavingExpert to aid in financial decisions, 65% of SME leaders wish there was a similar platform specifically for businesses.

The Labour Party’s business strategy, released in June 2024, includes plans to enhance access to finance by reforming the British Business Bank and the Bank Referral Scheme, which directs SMEs denied funding by mainstream banks to alternative sources. However, research indicates that the current Bank Referral Scheme is underutilised. Only 18% of SMEs have taken advantage of it, and a significant 33% are unaware of its existence.

Derek Ryan continued: “The Government said it would support small businesses and the devil is in the detail. Access to finance continues to be a critical issue to address, and there are some clear areas to focus on. Firstly, it needs to provide educational resources tailored for SMEs, and importantly, it should make reviewing the Bank Referral Scheme a priority so it can deliver the economic value it was designed to generate. This should include input from a wider array of SME funders and commercial finance brokers – providing SMEs with greater agency over how they finance their businesses, to allow them to thrive and grow.”

Sandeep Dhillon, CEO of SME recruitment marketplace, Talmix, added: “Continuing economic uncertainty has seen cautious investors increasingly withdrawing funding from UK SMEs – notably in the tech sector. But SMEs play a key role in the Government’s ambitions for the UK to become a world leader in technology and innovation. So, to avoid a mass investment exodus, it’s more important than ever for the Chancellor in her upcoming Autumn Budget to provide much needed clarity. Investors and small businesses alike deserve fore-warning, transparency and support on potential business tax rises, such as Capital Gains Tax, and access to R&D credits.”