With high interest rates, the increasing cost of goods and a poor growth forecast, 2023 has been a challenging year for the UK’s businesses. New research from Nucleus Commercial Finance has revealed that business confidence amongst SMEs is stalling, resting at an average of 40.1 out of a possible 100.

The survey of 1500 SMEs found that this lack of confidence is being fed by a range of concerns, with inflation (a worry for 44% of respondents), rising operational costs (40%), and cashflow (36%) being the most significant causes of unease.

Other areas of concern included employee retention (28%), talent acquisition (24%), concerns around supply chain issues (19%) and access to emerging technology (14%).

With each of these issues impacting the running costs of SMEs, businesses are being forced into a range of strategies to mitigate the additional expenses they are facing. For more than half (53%) of SMEs, passing on snowballing costs to customers through price increases has been the only option. While almost a third (28%) of SMEs have turned to AI to reduce running costs, 21% have reduced their operating hours, and 16% have reduced the number of employees working for their business. A further 14% have reduced the range of products or services they offer customers.


When investigating how economic concerns impact operational performance for SMEs, NCF asked UK businesses whether they were still utilising remote working. The answer was a fairly even split, with 53% of SMEs continuing with a remote or hybrid workforce, and 47% of businesses having returned to an office-based operational infrastructure. However, where a work-from-home strategy was still being implemented, 79% of SMEs admitted encouraging employees to continue working remotely to save their firm money in office and utility costs.

Chirag Shah, founder and CEO at Nucleus Commercial Finance, comments: ‘It’s no secret that the UK economy has been struggling since the pandemic, and for SMEs this has meant a range of concerns. From rising costs and difficulties securing funding to staff shortages and slow or floundering growth, it can be challenging to know how to address these issues.

‘But while there are clear economic, social, and environmental reasons behind many of the problems that SMEs are facing, some of them can be tackled through access to data and access to funding. With access to the right data, you can gain vital insights into your business for informed decision-making. At NCF, we provide SMEs with a free data-insights platform that provides real-time analysis and commentary on various important metrics, including turnover, gross margin and profit and loss. This can help across the board, from recruitment and employee retention to product development. We have also just announced a further £200m in funding from NatWest for business loans for UK SMEs.

Understanding what your customers want and how your business functions can help to ensure that your funds – and other resources – always go to where they can make the most significant positive impact. And while this is beneficial at any time, it becomes essential during economic stress.’