Improving economic conditions drive multi billion pound SME investment

11th August 2015

• SMEs believe economy is in better shape than pre-recession
• Investment intentions are growing - £108bn to be invested in next 12 months
• Equipment and premises among top investment priorities

The UK’s small and medium-sized businesses believe the economy is in better shape today than before the recession, with investment levels growing as a result, according to new research by Clydesdale and Yorkshire Banks.

The new survey reveals SMEs intend to invest, on average, nine per cent of their annual turnover back into their business and the UK economy in the next 12 months. This has increased since October last year when the average investment figure was six per cent of turnover.

Nearly half (47%) of all SMEs believe the UK economy is in better condition today than it was before the recession in 2008-2009.

This faith in the economy could drive investment by UK SMEs totalling £108 billion in the next 12 months. According to the latest UK Government statistics, there are 5.2 million SMEs in the UK with a combined annual turnover of £1.2 trillion*.

The leading focus for SMEs is to invest in new equipment, with nearly a third (32 per cent) saying it is the top priority. This is followed by investment in new premises or improvements to existing premises, with 14 per cent saying that will be their priority.

Findings across the UK are broadly similar, with the North East, East of England, London and the South East most confident with investment levels expected to be slightly above the UK average at 11 per cent. Industry-wise, food and drink businesses challenge the UK trends with an average investment of 13 per cent of annual turnover.

The main reasons cited by SMEs for investing at the moment are the opportunities created in the domestic marketplace (27 per cent) and the improved economic conditions (22 per cent). Almost one in ten (nine per cent) feel conditions for exporting have improved.

Paul Shephard, Director, Business and Private Banking at Clydesdale and Yorkshire Banks, said: “We know from official figures that the UK economy is healthier in terms of production, job creation and export levels. Our nation of small and medium sized businesses is a good barometer to understand how well the economy is performing and our research shows SMEs are sufficiently confident in the economy to be increasing the level of investment in their businesses.

“When businesses are looking to invest it’s important that they have access to appropriate expertise and a wide range of financing options. Our relationship managers seek to develop a genuine understanding of each business they work with and as a result can be much more creative in how they support business owners.

“Our lending initiatives, that have been specifically designed to support SMEs, include providing capital free periods and 100% funding for premises and, together with our size, provide us with the agility and flexibility to continue bringing a genuine challenge in the SME market.”

Last September Clydesdale and Yorkshire Banks introduced a series of lending initiatives for new and existing customers designed to support the growth of small and medium sized businesses. These include:

• Extending the repayment term of existing loan facilities for appropriate customers. This will help to improve cash flow by reducing monthly loan repayments and allow for re-investment in their business
• Re-advancing loans, allowing appropriate business customers’ access to draw repayments they have already made on a loan for re-investment within their business.
• Funding to allow businesses to buy their trading premises, and depending on the circumstances, this could be up to 100% of the premises value
• Capital free periods – we will consider Capital “free” periods up to 5 years for customers in certain situations, such as where they are investing in their business

Earlier this year Clydesdale and Yorkshire Banks became the first to partner with the British Business Bank on its ENABLE Guarantee programme. Up to £125m of new lending by Clydesdale and Yorkshire Banks, will help more small businesses achieve their growth ambitions.