It is useful to know what your business owner clients are thinking about at the moment.

More small and medium sized (SME) businesses are reporting growth amid plans to invest in their firms, however the headwinds of rising costs and inflation are key concerns.

• The latest research from Shawbrook Bank shows that far more UK SMEs saw growth in 2024 versus the year prior, jumping from 46% to 71%.  

• Additionally, In the next 12 months, nearly half (48%) plan to upskill their staff, 25% plan to hire new employees, and 22% are planning to upgrade premises.

Yet elsewhere the research shows SMEs are under pressure.  

• Nearly 80% of SME owners are concerned about inflation and the cost of living, a rise from 69% in 2024.

• SMEs are particularly concerned about the rising cost of running their business (76%), with three quarters (75%) of decision makers listing economic uncertainty a key worry.  

While the rate of inflation has slowly reduced since its peak of 11.1% in October 2022, costs for businesses remain high. The national insurance contribution hike is a key concern.

• More than half (56%) have concerns over access to the right funding for their business, with the cost of borrowing weighing on SMEs’ minds.

• More than two thirds (67%) say they are concerned about interest rates, and over a quarter (27%) say they are very concerned.  

With inflation rising, expectations are that rates may not be reduced as quickly as had been originally predicted or hoped for.  

• Larger businesses (those with 100-249 employees) were more likely to have plans to seek funding in the next 12 months, with a quarter (26%) planning to apply for loans.  

• SMEs overall, however, were typically hesitant to take on debt in the current climate with less than a fifth (19%) overall planning to apply for a loan or new line of funding.  

• This reticence to seek funding could be seen as at odds with many SMEs priorities for the next year with nearly half (47%) of SMEs saying that managing costs was their biggest priority for the next year.  

Financing options that help SMEs to manage cash-flow, such as invoice financing or asset based lending, can be helpful for SMEs looking to smooth out their external costs.  

Neil Rudge, chief banking officer for commercial at Shawbrook said: “After a challenging few years, SMEs still face significant pressure as outgoings continue to rise.  

“With inflation projected to increase again later in 2025 and additional costs like the upcoming NIC increase on the horizon, managing cash flow will be crucial. Finance can play a key role in helping businesses navigate these pressures.​”

For those in a position to pursue growth, Rudge said working with specialist banks can also help, as they tend to go beyond the standard offerings.

“With tailored solutions and a more personal approach, the support can be more flexible and responsive than traditional financial institutions,” he said.

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