UK small and medium-sized enterprises are missing out on an estimated £54 billion in revenue due to a lack of confidence in accessing external finance, according to new research from broker-lender Portman Finance Group. The report, titled The Cost of Misconfidence, surveyed 2,000 businesses across the country and found that 30% of companies have missed a growth opportunity because they could not secure the funding they needed. Affected firms estimate an average revenue loss of more than £73,000, which extrapolates to a massive drag on the wider economy, equivalent to around 2% of annual UK GDP.
Among those that considered taking out external finance, four in ten either proceeded with only part of the funding they originally sought or did not proceed at all. A lack of trust in lenders is a major factor. More than half of the surveyed businesses do not have complete or high trust in high street banks for business finance advice, with trust even lower in finance brokers, challenger banks, and venture capitalists. Over one in five cited a lack of trust in lenders as the primary reason for not taking on external finance.
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The market itself is causing confusion. More than half of SMEs say the business finance market is confusing, while two-thirds say they would be more likely to borrow if they better understood their options. Fear of rejection also plays a role, with one in five SMEs reporting that the possibility of being turned down discouraged them from applying in the first place. Geopolitical conflict has delayed decisions for nearly eight in ten businesses, and high interest rates are cited by nearly half as the primary reason for not proceeding or fully proceeding with a loan application. Many of these companies are simply not wanting to risk their financial stability.
“UK SMEs are highly ambitious and understand the role that finance can play in helping them realise these ambitions, but too many are putting investment plans on hold because the market feels confusing, untrustworthy, and have a fear of debt altogether,” said Alex Read, Founder and Chief Executive Officer at Portman Finance Group. “This is having a very real impact on the UK economy. Behind the £54 billion figure are thousands of businesses delaying expansion, postponing investment in technology, holding back recruitment or deciding against buying new equipment, all of which drives business and economic growth which is much needed in the UK, and high on the political agenda.”
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The research suggests that lenders need to shift their approach. Read added that this is not about encouraging businesses to borrow more, but helping them make more informed decisions. The industry is called on to do more to educate SMEs and help businesses understand which options are right for them. A more consultative approach is needed—one that involves understanding what a business is trying to achieve, explaining the options available, and being honest about what is and isn’t suitable. If that confidence gap can be closed, there is a real opportunity to unlock investment and provide a major boost to the UK economy.
