SMEs are worried about political uncertainty - accountants, take heed

As the UK gears up for a general election, small and medium-sized enterprises (SMEs) are expressing heightened concern over political uncertainty.

According to recent research conducted by Shawbrook, over half of SME decision makers are apprehensive about the potential change of government.

This uncertainty, coupled with rising costs and other economic pressures, poses significant challenges for SMEs. Accountants, with their expertise in financial planning and risk management, are in a pivotal position to guide SMEs through these turbulent times.

“By July 5th, we will have a definitive outcome that will shape the direction of our government for the next four years,” says Neil Rudge, head of enterprise at Shawbrook.

“Naturally, this period of transition can cause some apprehension within the business community. Incoming administrations often usher in new policies, regulations, and tax structures, which can disrupt established business plans and make future forecasting challenging, particularly for SMEs.”

The Impact of Political Uncertainty

Shawbrook’s research highlights that 51% of SME decision makers are worried about the potential change of government, while 50% are concerned about political uncertainty in general. This apprehension is understandable, as new administrations often bring changes in policies, regulations, and tax structures that can disrupt established business plans.

Accountants can play a crucial role in helping SMEs prepare for these changes by staying informed about potential policy shifts and advising clients on proactive measures to mitigate risks. This includes scenario planning, reviewing business continuity plans, and ensuring that financial strategies are adaptable to a range of political outcomes.

“It’s important that political parties prioritise the dissemination of clear and detailed information regarding potential policies that may impact SMEs. Ambiguity in such matters can significantly hinder businesses’ ability to prepare for potential changes,” says Rudge.

Rising Costs and Economic Pressures

Rising costs also remain a predominant worry for SMEs, with 73% of respondents citing it as a major issue, up from 68% last year. This increase reflects the mounting pressure faced by SMEs amidst ongoing economic volatility.

Accountants can assist SMEs in managing these rising costs through effective budgeting, cost control measures, and financial forecasting. By identifying areas where expenses can be reduced and optimizing cash flow management, accountants can help SMEs maintain profitability even in challenging economic conditions.

Additional Concerns for SMEs

Beyond political uncertainty and rising costs, SMEs are also concerned about the cost of living, economic uncertainty, interest rates, and supply chain disruptions.

Shawbrook’s research indicates that 69% of SME decision makers are worried about the cost of living, 66% about economic uncertainty, 67% about interest rates, and 57% about supply chain disruptions. Accountants can support SMEs by providing strategic advice on managing these challenges.

This includes helping businesses navigate interest rate fluctuations, diversify supply chains to mitigate disruptions, and plan for potential economic downturns.

Positive Signs and Opportunities

Despite the challenges, there are positive signs on the horizon. Shawbrook notes an increase in funding applications, reflecting cautious optimism among SMEs. Additionally, falling inflation and the anticipation of an interest rate reduction suggest potential improvements in the economic landscape.

“We are encouraged by the cautious optimism already evident amongst SMEs, reflected in the recent increase in funding applications. This positive sentiment, coupled with falling inflation and the anticipation of an interest rate reduction, suggests a potentially interesting second half of the year for the economy,” says Rudge.

Accountants can help SMEs leverage these opportunities by advising on funding options, investment opportunities, and strategic growth initiatives.

By staying abreast of economic trends and providing forward-looking financial guidance, accountants can help SMEs position themselves for success in the latter half of the year.