UK SMEs face growth constraints due to cash flow pressures

Research commissioned by eCapital UK reveals that cash flow constraints are significantly impacting small and medium-sized enterprises (SMEs) across the country. The survey of 500 financial decision-makers found that 39% of SMEs were prevented from pursuing growth opportunities in the last 12 months due to restricted cash flow, while 15% reported that severe pressures are threatening their business survival.

Late payments from customers were identified as the primary cause of these pressures for 55% of affected businesses. Other significant factors include rising operating costs such as energy (42%) and increased wage costs or employer taxes (35%). The study noted that 93% of SMEs have accepted unfavorable payment terms to secure work.

To manage liquidity, 85% of businesses used a loan, overdraft, or credit facility in the past year. However, many are turning to less sustainable methods, including credit cards (37%) and short-term loans (29%), while only 14% have a structured working capital solution in place. Mark Finn, Chief Revenue Officer of eCapital, stated that these pressures cause businesses to hold back from hiring and investment, making cash flow management a broader issue for economic growth.