Only About Half Of UK Smes ‘Are Actually Profitable’ - TS Partners

Posted by Liz Seyi on August 5th, 2022

With the last year or so having seen the widespread removal of coronavirus restrictions, many small-to-medium-sized enterprises (SMEs) in the UK might have reasonably hoped that 2022 would be a year of sterling recovery for their businesses.

And to a large extent, that has proved to be the case for some firms. But for many, escalating pressures – such as ever-increasing costs and challenges with cashflow – have proved a major and continuing headache. 

Increasing business confidence, but also undeniable tests being faced by many firms 

An insight into recent sentiment among those running SMEs up and down the country has been provided by the results of an annual confidence tracker survey. As reported by Business Matters, the findings paint a picture of small businesses having to deal with a difficult operational environment. 

The poll in question, which quizzed 500 UK SME owners and decision makers, discovered that 82% of respondents now felt more confident about their prospects this year, which was six percentage points up on the situation in 2021. Furthermore, over the past six months, 56% of firms have reported rising sales. 

But while there is undoubtedly optimism among SMEs in the UK, the report also drew attention to the persistent uncertainty impacting on such businesses. It seems that profitability is on a knife-edge for many of the survey’s participants, with four in 10 of them claiming to be “just about breaking even” – the equivalent of around 2.1 million of the country’s SMEs. 

The research also found that only half of such businesses described themselves as profitable – another worrying indication that many firms are still focusing on ensuring their survival from one day to the next, instead of planning ahead for growth. 

SMEs express concern over various factors impacting on their operations 

So, what are these small-to-medium-sized enterprises principally worried about? Those seem to differ from one industry to the next, the survey discovering that those in the manufacturing sector, for example, are especially concerned about inflation, as well as staff costs and how much they are being forced to pay for raw materials such as steel. 

Meanwhile, construction and wholesale-sector SMEs fretted about the impacts of conflict in Europe above all else. Then, there are the transport businesses that cited cashflow, Brexit, and personnel shortages as their biggest fears, as well as a lack of lorry drivers and the consequences of red tape for cross-border trade. 

More than a quarter of all the businesses polled said they were concerned about cashflow. Nearly a fifth of respondents indicated that they had a greater need for cashflow support now than they did prior to the COVID-19 outbreak, while 9% claimed they didn’t even have the cashflow they required in order to operate on a day-to-day basis. 

And with so many firms in “just about breaking even” mode right now, it is absolutely understandable why cashflow worries have been so intense for SMEs.  

Unsurprisingly in light of the aforementioned data, over a quarter (28%) of businesses – the equivalent of approximately 1.5 million firms in the UK – said they had suffered from bad debt over the previous 12 months, whereby sums have been written off as a consequence of customer non-payment or protracted default. 

This is much higher than the situation last year, when 20% of SMEs reported bad debt, and the report states that in the space of the past year alone, SMEs have written off an average of £10,329. 

For targeted and comprehensive business, tax, and accounting help, choose TS Partners 

Are findings like the above scarily relatable for your own small-to-medium-sized business in the UK? If so, our team here at TS Partners could be of assistance, with our wide range of business support, tax, and cloud accounting services in Plymouth, Wellington, and Newton Abbot. 

To have that crucial conversation with us about how we could aid your firm’s efforts to survive and thrive, please don’t wait any longer to enquire to us via phone or email. 


Like it? Share it!

Liz Seyi

About the Author

Liz Seyi
Joined: August 13th, 2019
Articles Posted: 714

More by this author