sme finance monitor - bva bdrc€¦ · the sme finance monitor q2 2018 2 this survey was...
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SME Finance
Monitor
Key highlights Q2 2018
An independent report by
BVA BDRC, September 2018
Over 140,000 SME interviews have been conducted
since the survey started in Q2 2011, across 29 waves
of interviewing.
The report and supporting data is made available to
all interested parties as a basis for decision making
and strategy setting. It is used by Government, the
Bank of England, the banks, trade bodies and
academics.
Data can also be analysed by sector, region and
demographics – and over time
The SME Finance Monitor Q2 2018
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This survey was commissioned to provide a robust and respected independent source of information on the demand
for, and availability of, finance for SMEs in the UK.
Find out more at www.sme-finance-monitor.co.uk
The study covers:
•Borrowing events in the past 12 months
•The appetite for new/renewed facilities
•The outcome of applications made
•Reasons for not borrowing
•Future plans, including demand for future finance
•Awareness of Taskforce, and other initiatives such as the
Business Growth Fund
SMEs are not a homogenous group –
smaller SMEs in particular can behave very
differently from their larger peers.
49% 47% 45% 43% 45% 47%
2013 2014 2015 2016 2017 H1 2018
81%
64%
55%
44%
50-249 emps
10-49 emps
1-9 emps
0 emps
All SMEs
67%
59%
54%
46%
8 in 10 SMEs are profitable, 4 in 10 have grown and almost half plan to grow. The larger the SME, the more likely these events
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% predicting growth in next 12 months
Q91 all SMEs
• Since 2015, a stable 8 in 10 SMEs reported making a profit (78%-87% by size of SME)
• A stable 4 in 10 SMEs have grown (39% - 64% by size of SME)
• The proportion planning to grow has improved somewhat since 2016 to 47% currently (44%-81% by
size of SME)
Looking at growth another way, a quarter of SMEs say the business has developed quite a bit in the last 3 years, while 1 in 10 has retrenched to the core business
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NEW: Way business has changed in last 3 years H1 18
11% 10% 7% 6%
65% 62%
54% 55%
24% 28% 38% 39%
0 Emp 1-9 emp 10-49 emp 50-249 emp
Q88
Base : H1 18 All respondents excl Starts 8092 1328/2521/2852/1391
11%
63%
26%
All SMEs
Developed quite a bit, doing new things
Recognisably the same business
Retrenched to focus on core business
SMEs that have developed their business are more likely to have been innovative (44%), to be
planning to grow (63%) and planning any growth activities (57%)
55% 55% 54% 54% 55% 57% 54%
10% 13%
16% 17% 14% 16% 14%
40% 38% 37% 37% 36% 34% 32%
12% 11% 9%
Since 2012, fewer SMEs of all sizes have innovated, with fewer new products/services developed and fewer improved business processes
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Annual time series: Business management
Q84
Base : All SMEs H1 2018 9000
International
Plan
2012 2013 2014 2015 2016
In 2012, 40% of SMEs innovated, ranging by size from 36% with 0 employees to 70% with 50-239
employees. Since then the proportion has declined, to 32% in H1 and 28-55% by size of SME
2017
Innovate
Mentors
H1 18
Any innovation 2012 H1 2018
All 40% 32%
0 employees 36% 28%
1-9 employees 49% 39%
10-49 emps 60% 48%
50-249 emps 70% 55%
Innovation 2012 H1 2018
New product 17% 14%
Improved process 35% 27%
44% 41% 37% 37% 37% 38% 34%
2012 2013 2014 2015 2016 2017 H1 2018
34% of SMEs use external finance. Most (23%) only use core forms of finance (loans, overdrafts and credit cards)
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Annual time series: Currently using external finance
Q15 all SMEs
50-249 emps
10-49 emps
1-9 emps
0 emps
All SMEs
Overall use of external finance is driven by the behaviour of 0 employee SMEs.
Their use of external finance fell from 38% in 2012 to 32% in 2014 and has been
stable since (32% Q2 18). Fewer than 1% of SMEs reported using crowd
funding/peer to peer lending or single invoice finance
76%
54%
39%
31%
74%
70%
58%
38%
Use of finance for the 3
months to August 2018 is
39%, back to previous levels
44% 41% 37% 37% 37% 38% 34%
34% 40%
43% 47% 47% 47% 49%
2012 2013 2014 2015 2016 2017 H1 2018
Half of SMEs met the definition of a Permanent non-borrower, with no apparent appetite for finance, ranging from 51% of 0 employee SMEs to 21% of those with 50-249 employees
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Annual time series: Currently using external finance and Permanent non-borrowers
Q15 all SMEs
• 51% of 0 employee SMEs are PNBs
• 42% of SMEs with 1-9 employees
• 31% of SMEs with 10-49 employees
• 21% of SMEs with 50-249 employees
Permanent non-
borrowers
SMEs using
external finance
PNBs are:
• As likely to be profitable or hold £10k+ of credit balances
• Less likely to plan to grow or to be innovative
A minority of SMEs had applied for new/renewed finance and the proportion has declined over time
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Annual time series: Type 1 applications for new or renewed funds
Q26
Base : All respondents / NEW DEFINITION Q1 2018 Q31/51
50-249 emps 10-49 emps
1-9 emps
0 emps
All SMEs
Using the new questions, 4% of SMEs reported a Type 1 borrowing event, with
relatively little variation by size of SME. 2% made an application as the result of
having a need for funding and a further 2% had another new/renewed
application in the last 12 months
4%
7%
5%
3%
19% 19%
16%
9%
11% 8% 8% 7% 5% 5% 4%
2012 2013 2014 2015 2016 2017 H1 2018
Applications were typically to the main bank and for a loan or overdraft. 85% of applications were successful
9 All Type 1a/b applications - 694
All Type1a/b applications reported in H1 2018
12%
4%
2% 11%
72%
All applications
85% total
Offered but declined
No facility
Offered what wanted and took it
Have facility after issues
Different product from provider
• 67% applied to their main bank
• 17% to another existing provider
• 7% to a new provider
• 4% to an online platform
• 5% elsewhere
• 30% applied for a bank overdraft
• 30% for a bank loan
• 8% for leasing
• 7% for a commercial mortgage
• 6% for a credit card
Demand issues: Very few SMEs had been “Would-be seekers” who had wanted to apply for finance but felt something had stopped them.
10 Pastfin
Base : All respondents
Annual time series: Borrowing profile in 12 months prior to interview
Event in:
Would-be seekers are typically either discouraged from applying, or put off by the process
of borrowing. A quarter of Happy non-seekers are using finance, but haven’t wanted to
apply for any (more) in the last year
Had any event Would be seekers Happy non-seekers
68% 77% 79% 80% 84% 83% 83%
10% 6% 5% 3% 2% 2% 2%
23% 17% 16% 17% 13% 15% 15%
2012 2013 2014 2015 2016 2017 H1 18*
16% 17% 20% 24% 22% 25% 22%
10% 10% 14%
17% 14%
18% 15%
32% 33% 38%
41% 41% 44%
41%
66% 66% 68% 70% 72% 73% 73%
77% 80% 82% 81% 82%
90% 91%
Demand issues: SMEs have other ways of accessing funds – through credit balances, trade credit and injections of personal funds
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Annual time series: £10k or more of credit balances held over time
Q117 Base: All respondents excl DK H1 2018 4743
50-249 emps
10-49 emps
1-9 emps
0 emps
All SMEs
22% of SMEs hold £10k or more of credit balances, 36% receive
trade credit and 28% reported an injection of personal funds
2012 2013 2014 2015 2016 2017 H1 2018
36% of SMEs receive trade credit:
• 31% of 0 employee SMEs
• 48% of 1-9 employees SMEs
• 63% of 10-49 employee SMEs
• 73% of 50-249 employee SMEs
31% of SMEs said that their need for
external finance was reduced by either
trade credit and/or £10k+ of credit
balances (25%- 67% by size of SME)
52% 54% 40% 40% 40% 37% 30% 30%
27% 19%
11% 11% 10% 6%
8% 3%
Plan on what
can afford
Accept slower
growth
Cost of credit
discourage
Future uncertain
so cautious
Never think to
use more
finance
Prepared to
take risks to
succeed
Difficult for us
to get finance
Happy to use
finance to grow
Demand issues: Attitudinally, SMEs are twice as likely to make plans based on what they can afford (79%) as they are to be happy to borrow to help the business grow (33%)
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All attitudes to finance H1 2018 - % agree
Q96 all SMEs
16% of SMEs were happy to use finance to grow but thought it might be difficult for them to
get finance. There was little variation by size, but amongst Would-be seekers, 37% agreed
with both statements
79% 33% 38% 43% 50% 51% 51% 73%
Demand issues: 3 in 10 SMEs (31%) rated one or more of these Top 3 factors as ‘major obstacles’ in H1 2018, up from 22% in 2016
Time series: % Rating each a major obstacle for next 12 months
Political uncertainty Legislation/regulations Economic climate
Q93
Base : All SMEs 13
All three issues were mentioned more individually in H1 2018 than in 2016 with
net mentions of any of the three increasing from 22% to 31%.
13% 13% 12% 11% 10%
15%
18%
34%
27%
17%
13% 12% 14% 15%
10% 10%
14% 16%
2012 2013 2014 2015 2016 2017 H1 2018
14% of SMEs trade internationally. These SMEs are more likely to be innovative and growing, but also have concerns and their appetite for finance has declined
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International SMEs are more ambitious and more likely to be innovative. Since the
referendum, they have become more concerned about the economy and political
uncertainty, and their appetite for finance has declined from 21% in 2016 to 12%
Characteristics of international SMEs H1 2018
Various
Base : All SMEs H1 2018
41% 47%
32%
9% 15% 16%
55% 60%
55%
12% 20% 22%
Have grown Plan to grow Innovation Plan to apply Economic climate Political uncertainty
All SMEs International SMEs
Access to finance has become increasingly a demand rather than a supply issue. There is no
single “silver bullet” to explain it, but credit balances, a self-reliant attitude and low awareness of
some financial products could all be playing a part
SME Finance Monitor - Key findings
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SME performance and sentiment has not changed dramatically overall since 2016, albeit there
are some signs of concern, especially for international SMEs
Finance applications are typically to the main bank and for a “traditional” product . Most resulted
in a facility.
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security.
• Adherence to the standard is independently audited once per year.
• Where subcontractors are used by BDRC, they are assessed to ensure any outsourced parts of the research are conducted
in adherence to ISO 20252 and 27001.
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Quality Standards and Other Details
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