Political uncertainty and rising raw material costs are causing increasing concern among SMEs throughout the world, according to new research.
The Global Business Monitor study from Bibby Financial Services, in partnership with trade credit insurance provider Euler Hermes, surveyed more than 2,300 SMEs in 13 countries across Asia, Europe and North America.
It found two-fifths of businesses (42%) believe rising costs and overheads are their greatest challenge. Government regulation (36%) and cashflow (32%) were also cited in the top three concerns in 2019.
When asked for the top three threats to global economic growth in 2019, political uncertainty in the U.S. (42%), Brexit (35%) and rising raw material costs (23%) featured most frequently.
Despite concerns about the knock-on effects of global uncertainty, almost half of companies say they believe their business performance will improve in the next 12 months.
David Postings, global chief executive at Bibby Financial Services, said: “SMEs around the world are becoming accustomed to global uncertainty and many are taking matters into their hands, investing in capability and expansion.
“However, the impacts of geopolitical events, such as the US and China trade war and Brexit, are already impacting costs significantly. This cost inflation is contagious due to the interconnected supply chains in which small businesses operate.
“Ultimately, smaller businesses will need to pass on these costs to customers, but in the short-term – at least – this situation has a hugely detrimental impact on cashflow levels.”
The report found that overall, one-third of SMEs feel the availability of finance is excellent or good, but one-in-five have been rejected for external finance, with SMEs in France (37%), and the Czech Republic (33%) experiencing the highest levels of rejection.
Of those that have been rejected for external finance, the main reason cited was poor credit rating/history (31%).
Ludovic Subran, global chief economist, Euler Hermes, added: “As the risks of a recession rise and global GDP is expected to grow at its slowest pace in 2020 since 2009, it is all the more important that SMEs have virtuous payment loops to avoid going bust.
“Global insolvencies are expected to rise by 8% in 2020 for the fourth consecutive year, and one in four bankruptcies for SMEs comes from a non-payment.”
Bibby Financial Services provides financial services to more than 10,500 businesses worldwide, with services including invoice finance and asset finance.
