As the economy starts to bounce back after the pandemic, Hitachi Capital Business Finance finds that over a quarter of small businesses in the UK have said they would struggle to expand their headcount and hire new people without the help of finance or borrowing money over the next 12 months.
At a time when small businesses are doing what they can to mitigate the impacts of the Coronavirus, Hitachi Capital Business Finance Business Barometer asked a nationally representative sample size of 1,306 small firms whether they would be able to grow without the help of finance over the next year. Over one in two (53%) said they would not be able to expand or grow their business without additional support – a figure that rose to 76% for small business who said they were already contracting and scaling down.
Struggling to expand
As restrictions ease and businesses begin to reopen their doors for the summer, the study found that the biggest hurdle for UK small businesses unable to borrow money was the ability to increase their headcount and hire new people (27%). This was a particular issue for a third of small younger businesses (34%) as well as 30% of organisations that employ between two and nine people. A further 16% said that without the help of finance they would be unable to invest in existing staff training programmes.
The need for money to modernise the business
After concerns for expanding their teams, Hitachi Capital Business Finance found that small firms in the UK felt they would have a hard time modernising their organisations this year without the help of finance. A quarter of small business owners (25%) said they would not be able to expand the business by launching new products and services without additional support. More than one in five (23%) said they would need more money to compete with larger competitors, whilst 21% said they would not be able to modernise their enterprise by purchasing new IT equipment or run a marketing/ advertising campaign (21%) without an injection of finance in the next year.
% Of small firms who would be unable to expand in the following areas without additional support
Increase headcount/ hire new people
Launch new products/ services
Compete with larger competitors
Modernise IT capability/ purchase new IT equipment
Run a marketing/ advertising campaign
Move to a better location/ bigger space
Invest in new vehicles
Invest in new production lines/ machinery
Invest in a new company brand/ website
Launch into new market segments within the UK
Invest in staff training programmes
Launch into new markets outside the UK
Pitch for major accounts
Pay suppliers on time
Pay our tax bills
Concerns for sectors
In particular the hospitality and leisure sector – who are already having a hard time recruiting after lockdown – said that without additional financial support they would struggle increasing their headcount (33%) and investing in staff training programmes (27%). Whilst almost half of small firms (47%) in the manufacturing sector said that without borrowing money they would be unable to invest in new machinery and a further 30% said that without help they would not be able to move to a better location or bigger space in the next 12 months.
Joanna Morris, Head of Insight at Hitachi Capital Business Finance comments:
“Whilst we have seen a lot of optimistic news in the headlines of small businesses getting back on their feet and of the economy ramping up again it is important to remember the way the pandemic decimated so many small organisations in the UK over the past 15 months. Small firms need more help than just a bit of sunshine to truly rebuild their businesses in the new era. In light of recent reports of a national labour shortage it is crucial that UK SMEs are given the support they need to recruit the best people possible in order to expand and grow over the next 12 months.”
“If small businesses in Britain are able to get the financial help they need over the next year, they will have the potential to grow and build back better than before. At Hitachi Capital Business Finance we believe in the potential of small British businesses and we strive to give small firms the best possible support to help them develop and navigate this tumultuous time.”
The research was conducted by YouGov among a representative sample of 1,306 small business decision makers in April 2021 spanning industry sectors.