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Resilient SMEs weathering cost-of-living but cashflow remains critical as clouds gather
- Latest data from TSB’s 140,000-plus SME customers shows total savings and current account balances holding firm year-on-year1.
- Firms yet to dip into overdrafts, but outgoing and incoming payments are both increasing, pointing to the importance of cashflow for SMEs as Government launches prompt payments review.
- Research from Small Business Britain2 and TSB shows challenges coming into focus, with four fifths of small businesses worried about recession.
- TSB is providing extensive support to business banking customers including 30 months of free business banking3 for new customers and three months’ free access to digital payment tool Revenu for all customers to ease pressure.
New data released by TSB compiled from over 140,000 business banking accounts suggests the cost-of-living crisis and nascent recession in the UK hasn’t yet fully kicked in for small businesses.
The data indicates that SME deposits have remained flat year-on-year at £2.8bn, though they are not increasing in line with inflation.
So far, SMEs have not been turning to overdrafts to cover the rising cost-of-living. Since the start of the year the total overdraft balance for SMEs has remained stable as has the utilisation rate at just above 24 per cent.
Yet there are clear signs of the impact of the economic environment on businesses and the importance of cashflow for SMEs. Both payments out, and income into, business accounts have risen, suggesting that firms are facing higher costs (resulting in higher debits) but have managed to pass these on to customers through higher prices (resulting in higher credits).
This comes at a time when the Government has issued its ‘Prompt payment and cash flow review’ to combat late payments and ensure small businesses are supported in the right way.
Adeel Hyder, Head of Business Banking at TSB said:
“SMEs have shown great resilience so far, but that may become tougher for many as they find it difficult to pass on costs.
“In preparation for harder times to come, we’re supporting all our business customers to protect their cashflow with tools to help them ensure that they get paid quickly and efficiently”.
Emerging research from Small Business Britain, due to be published in full in January, indicates that SMEs are indeed beginning to feel the wider economic pain. Preliminary findings suggest 13 per cent of SMEs are not very confident their business will survive and 83% of small businesses are concerned about the impact of recession on the performance of their business.Small Business Britain founder Michelle Ovens CBE, said:“It is clear that businesses are feeling the pain, but in the main pressing on with their indefatigable entrepreneurial spirit despite considerable challenges.
“However, deposits not keeping up with inflation and the looming spectre of recession are having a downward impact on confidence and will inevitably lead to reduced growth for small businesses if something does not change soon.
“Business and government have a key role to play here ensuring that cash continues to flow into the smallest of businesses. Prompt payment has never been more critical and although the review announced in the last week into this is a welcome step, it needs to turn into meaningful widespread action rapidly in order to head off an even bigger crisis in the small business sector."
Liz Barclay the Small Business Commissioner, said:“It’s not just small suppliers that benefit when bigger customers pay quickly. The small supplier has a better chance of staying in business so you don’t have the cost and effort of finding a new one. Small suppliers stay loyal to good payers rather than switching business to their competition.
“Good people want to work for ethical businesses which is important given the skills shortages firms are struggling with, and investors want to invest in ethical firms. Treating suppliers fairly and paying fast is a win, win for your reputation and your bottom line”. #PayDontDelay
To help its business banking customers weather challenges to come, TSB will provide SMEs with the following: - Three months of free access to its Revenu app4 which allows firms to be paid by SMS, WhatsApp, email and QR codes and has been proven to enable 78 per cent of bills to be paid within 48 hours5.
- TSB’s partnership with Square6 means a TSB Business banking customer can choose an exclusive money-saving offer from:
- A free Square Reader and no processing fees on the first £1,000 of sales
- Or no fees on the first £5,000 of sales
- Or 30% off a Square Terminal and £1,000 of free processing
- TSB is also offering new business banking customers 30 months free day-to-day business banking.
TSB has pledged to pay all its suppliers within 10 days as part of its Do What Matters Plan launched in 2020. As a result of its commitment, TSB has been awarded the Good Business Pays 2022 Fast Payer Award for the second year in a row.
Notes to editors
- TSB data is current as of November 2022
- Preliminary research by Small Business Britain, due to be published in full in January.
- TSB is providing new business banking customers with 30 months free business banking. More information can be found here: Business Banking Services | 30 Months Free Offer | TSB Bank
- More information about access to Revenu can be found here: Revenu powered by BankiFi | TSB Bank
- Data provided by Revenu and is current as of November 2022.
- More information about Square can be found here: Square & TSB partnership | Business Banking | TSB Bank
- TSB has pledged to pay all suppliers within 10 days as part of its Do What Matters Plan launched in 2020. In 2021 TSB paid 97% of its small and medium suppliers in an average of 7 days. Over the year to date at the end of October, TSB has paid 95.8% of its small/medium suppliers in under 4 days.
- TSB has been awarded the Good Business Pays 2022 Fast Payer Award for the second year in a row. More information can be found here: Fast Payer Awards 2022 - Good Business Pays
The information contained in this press release is intended solely for journalists and should not be used by consumers to make financial decisions.
