Regional analysis shows positive outlook – with some local challenges

BDRC Continental ( has published the Annual Report from the SME Finance Monitor with regional analysis of the UK’s SMEs. Based on 20,055 interviews in 2014, the report is the most comprehensive study of its kind, providing not only insight into the use of and appetite for external finance, but a “SME progress report” ranging from import and export activity, to profitability, plans for the future, attitude to debt and the economy and even the age of business owner. A detailed trend report is available for each region:

The report highlights instances in 2014 where individual region scores are significantly different from those that might have been expected, considering the profile of SMEs in that region (by size, sector etc.), although this does not necessarily mean that it is the region they are located in that is causing that difference.

Key findings and regional differences:

Use of and attitude to external finance

Money GBP 1 (PD)• Just over one third (37%) of all SMEs used one or more sources of external finance, down from 44% in 2012. Those in the North/North East were more likely to use external finance and those in the North West and East Anglia less likely.

• Overall 43% of SMEs in 2014 met the definition of a Permanent non-borrower – SMEs who appear to have no interest in external finance for their business. With one third (34%) of SMEs meeting this definition in 2012, the proportion of PNBs is increasing over time.

• In 2014, SMEs in Wales, N Ireland, North/North East, the South West and London were more likely to be PNBs.

Business profitability

• 78% of SMEs reported a profit* in 2014. This proportion has been increasing steadily over recent years and is up from 69% in 2012.

• SMEs in Scotland, N Ireland and London were less likely to be profitable. SMEs in the East Midlands were more likely to be so.

Worse than Average (WTA) risk rating

• 45% of SMEs had a worse than average external risk rating, and this figure has been declining since the middle of 2013.

• SMEs in Yorkshire/Humberside, the North West, London and the South East were more likely to have a WTA risk rating. SMEs in N Ireland and East Anglia were less likely to.

Doing business internationally, exporting and importing

• 16% of SMEs were international businesses, up from 10% in 2012, with SMEs in
N Ireland, the South West, the South East and London more likely to be international.

• In 2014, 10% of all SMEs exported. SMEs in Scotland, Yorkshire/Humberside and the North West were less likely to be exporting goods and services.

• In the same year 11% imported, with SMEs in N Ireland, the South West and London more likely to be engaged in this activity.

Business planning

• We’ve seen in previous SME Finance Monitor reports that business planning is a key success factor for SMEs who apply for external finance.

• In 2014 54% of all SMEs had a business plan and/or produced regular management accounts. This has changed very little over recent years.

• However SMEs in the West Midlands, East Anglia, the South West, the South East and London were less likely to have this form of business planning in place.

Business owner’s age profile

• The majority of business owners (85%) were aged between 31 and 65. 6% were aged 18-30 and 8% were aged 65+.

• The South East is the region where business owners were more likely to be under 30, while Scotland was more likely to have SMEs with proprietors of retirement age (65+).

Planning to grow

• Looking forward, 47% of SMEs interviewed in 2014 planned to grow in the coming 12 months, little changed from 49% a year earlier.

• SMEs in the North West and London were more likely to be planning to expand and those in Wales less likely.

Future appetite for finance

• In 2014 13% of SMEs planned to apply for new/renewed finance in the three months after interview. This has changed little over time.

• SMEs in the North/North East and London were more likely to be planning to apply for external finance, and those in North West less likely.

Plans to pay down debt

• In the second half of 2014, seven in 10 (71%) SMEs agreed their aim was to repay existing debt and then remain debt free. However, SMEs in the West Midlands, East Anglia and London were less likely to be in this mind-set. SMEs in Wales were more likely to agree.

The economic climate

• Over time “the current economic climate” has been the factor most likely to be rated as a major obstacle to SMEs. The proportion citing it is declining over time, with 17% rating it a major obstacle in 2014, down from 34% in 2012.

• SMEs in Wales, N Ireland, Yorkshire/Humberside and East Anglia were more likely to rate the economic climate a barrier to their business.

Shiona Davies, Director at BDRC Continental says:

We’ve been reporting on SMEs through the Finance Monitor since 2011 and have carried out over 80,000 interviews in that time. In this latest Annual Report it is encouraging to see positive signs that point to the good health of many of the country’s SMEs. From profitability to future plans to grow, from paying down debt to improved risk ratings, there’s a real sense that SMEs are moving forward.

“The regional analysis here highlights that there are local differences in performance and attitude, and in some cases challenges, but with such robust and reliable information from the research, hopefully this report provides an indication of where further help, support and advice is best directed.

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