More than one in three UK SMEs have increased prices over the past year in response to mounting economic pressures, while over a fifth have implemented a hiring freeze, according to new research from Paragon Bank.
The survey of 1,000 SME leaders and decision-makers was commissioned by FTSE 250 lender Paragon to understand the sector’s key concerns, business pressures and policy priorities ahead of the Autumn Budget, amid speculation of measures such as tax rises and cost-cutting.
Findings reveal that global economic uncertainty has impacted two-thirds (66%) of SMEs over the past year, with other significant challenges including supply chain disruption (62%), late payments (59%), trade tariffs (58%) and increased post-Brexit administration (57%).
Additionally, 47% of SMEs cited rising operational costs as one of the biggest challenges facing their business, along with employment costs (36%) and skills shortages (27%). Access to finance (29%) was also highlighted, with traditional high street lenders often underserving small and mid-size businesses in comparison to bigger players – an issue which specialist lenders like Paragon are working to address.
In addition to increasing prices (36%) and hiring freezes (22%), SMEs are taking steps to adapt and protect cash flow. Strategies include adopting new technologies or automation to drive efficiencies (30%), scaling back planned investments (28%) and, in some cases, making redundancies (16%).
Despite these headwinds, SMEs continue to demonstrate resilience and adaptability. Over a quarter (27%) are exploring new markets or customer segments, while 24% are investing in staff training to strengthen capability.
Looking ahead to the Autumn Budget, SMEs are calling for Government action to ease employment taxes and costs - their top policy priority - followed by business tax reform (36%), business rates (35%), innovation and investment incentives (30%), skills and training (27%) and access to finance (26%).
Phil Hughes, Deputy Managing Director of Paragon SME Lending, said: “SMEs play a vital role in the UK economy and their ability to invest and grow will be shaped by the decisions the Chancellor announces on 26 November. With many SMEs scaling back investments and finding it difficult to secure finance from traditional lenders, Paragon is working to bridge the gap and help small and mid-size businesses thrive – but finance is only part of the solution.
“We recognise these are challenging times, but SMEs shouldn’t be the ones paying the price. With tighter margins, SMEs often bear the brunt of restrictive economic policy - the rise of Employer National Insurance Contributions, implemented in the previous Budget, impacted 73% of SMEs, for example.
“The Chancellor has an opportunity to implement measures that are balanced, fair and could help level the playing field between smaller businesses and larger corporates. SMEs employ 60% of our national workforce - supporting them is essential to safeguarding the resilience and competitiveness of the wider UK economy.”
