Around half (46%) of SMEs in the retail and wholesale sector do not plan to invest at all over the next 12 months and are in ‘survival mode’, according to research published today (November 15) by finance provider, Hitachi Capital Invoice Finance.
The firm’s inaugural SME Resilience Index reveals that business growth and investment is being put under threat by a cautious attitude towards external finance. Of the businesses surveyed in the retail and wholesale sector, 58 per cent had not sought any external finance in the past year and almost half (48%) rely on an overdraft facility and/or a traditional bank loan.
Almost a third (29%) of the retailers and wholesalers surveyed had invested their own money in the business to help fund operations over the past year.
More than half of respondents in the sector (60 per cent) were also concerned that the UK’s decision to leave the EU by summer 2019 could impede their access to finance in the future.
For many businesses, the preservation of working capital is still a major concern, one third (33%) of respondents in the retail and wholesale sector said late payment was happening on a regular basis.
Andy Dodd, managing director at Hitachi Capital Invoice Finance, commented: “Although business confidence has taken a hit following the Brexit vote, retailers must not allow caution to stall growth opportunities. During times of economic turbulence, cash is king, and disruption to working capital is causing many to resort to a hand-to-mouth existence. Such short-term thinking, however, can cause significant financial instability, and for most, ceasing investment activity is not the answer.
“Astonishingly, for many, personal and business finances remain unnecessarily intertwined. Rather than endangering their personal finances, business owners in the sector should take time to examine external funding options such as cash flow finance and other alternative finance options such as peer-to-peer lending. Exploring these avenues is essential if businesses are to access the funds they need to invest in skilled staff and capital, as well as pursuing new contract opportunities.”
Another area of concern highlighted in the report is retailers’ exposure to risk and an overreliance on individual clients. For almost a quarter (23%) of SMEs in the sector, a single, large client is responsible for between 30-50% of business turnover.
Dodd added: “The loss of a key customer poses a serious risk. To achieve true stability and increase resilience, retailers must concentrate on diversifying their client roster and unlocking the working capital required to focus on new business generation.”
Access more insight from the research, and what it means for small businesses in a range of sectors and across different regions, by visiting the Hitachi Capital Invoice Finance SME Resilience Index, here.