UK SMEs are experiencing increased levels of financial stress, according to a new report. The latest research collated for the Red Flag Alert, an online business bureau measuring the financial health of British SMEs, signifies that firms are indeed struggling.

Across the board, there was a 40% rise in finance-related distress recorded by small and medium businesses over the past year. This included a 34% increase in owners suffering with ‘significant’ financial stress.

These worrying results mark the third consecutive quarter where there has been evidence of further deterioration. However, while there has been an overall increase, the levels of ‘critical’ stress have actually fallen by 9% in 12 months.

With SMEs already worrying about the prospect of increased interest rates and political change ahead of the General Election, this research does not look good for the UK economy.

Diverse funding providers needed for small businesses

Despite the negative connotations of the figures, Julie Palmer, Partner at Begbies Traynor, the professional consultancy service that runs the Red Flag Alert, pointed out how SMEs are more optimistic than ever and are expected to fuel job creation in the coming year.

Yet, she stressed that there are a number of issues contributing to the current stress levels. She said: “Access to funding is still a major issue for a huge number of UK SMEs. Although traditional bank finance is now widely available for those firms fortunate enough to comply with mainstream lending criteria, it remains a different story for businesses in complex or challenged circumstances.

“Our latest Red Flag findings once again underline the critical importance for current government initiatives to increase the diversity of funding providers and to better signpost alternative business finance.”