Christmas is not the season for lenders to be restrictive on lending, according to new research. As we count down to a peak trading period, the percentage of small business owners that say they would have to abandon growth plans if they were unable to secure funding has reached a six-year high (57%). The research from Novuna Business Finance reveals this has risen from 53% last quarter and 51% this time last year.

The findings are from the Business Barometer by Novuna Business Finance, a study that has tracked small business outlook each quarter for the last decade. As 2023 draws to a close and enterprises continue to grapple with fuel prices, supply chain costs and higher interest rates, the representative poll of 1,107 business owners suggests that a growing number of small businesses are reliant on finance in order to move forward with a range of initiatives that would power growth.

Across five industry sectors – manufacturing, leisure, IT, medical services and media - the percentage of small businesses saying their growth planning would be curtailed if they were unable to get funding stood at a six-year high. Significantly, across all these sectors, reliance on funding to power growth initiatives was significantly higher than was the case during the first year of the pandemic. In addition, for small business owners in the construction (60%) and retail (61%) sectors, reliance on funding was at its highest level since Q2 2020.

The growth initiatives small business owners were most likely to put on hold in the months ahead if they were unable to secure finance included:

• Job creation and hiring - 29%, hitting a two-year peak.
• Launching new products and services - 29%, hitting an 18-month high and a rise from 25% six-months ago.
• Running a marketing or advertising campaign - 25%, a 12-month peak (up from 21%).
• Moving to a bigger premises - 22%, hitting an 18-month high.
• Modernising IT capabilities / buying new equipment - 21%, up from 18% six-months ago.
• Investing in new production lines and machinery - 19%, up from 14% six-months ago.

Regionally, while the percentage of enterprises reliant on finance rose this year in the North East (61%), North West (58%), East Midlands (61%), and South West (58%) – the Novuna research also revealed that in London and the South East there have been steady year-on-year increases in the percentage of small business owners that say they would have to put growth initiatives on hold if they were unable to secure funding.

Jo Morris (pictured), Head of Insight at Novuna Business Finance commented: “At this time of year, a lot of focus is placed on the importance of Christmas trading to small businesses and their growth prospects. In truth, access to funding is becoming the key determinant for growth. For much of 2023, our research has shown that small business growth forecasts have remained flat, as many enterprises anticipate and react to a period of prolonged economic uncertainty.

“Despite this context, small business owners have worked hard to adapt and look for new ways to secure growth. For a record number, access to finance and funding is essential to help these enterprises to fulfil their true potential. With an asset portfolio of more than £1.6bn, Novuna Business Finance is committed to supporting established enterprises that are working on strategies to transform and grow to fulfil their potential, despite the enormously challenging context. We provide business asset finance to small businesses across the UK. This includes hire purchase, finance lease solutions, stocking and block discounting provided through brokers, vendor organisations, manufacturers and direct to the business community.”