Only half of SMEs in Wales have a rainy-day fund to deal with surging prices and interest rate rises, report finds

Only half of SME companies in Wales had a contingency fund in place before of the inflation spike earlier this year, a report has found.

A UK-wide survey of 1,000 senior decision makers by Cynergy Bank found that higher energy and finance costs created serious cashflow challenges— with only 47% in Wales having cash buffers in place prior to July 2022 when prices began to soar.

The research also found that 2 in 5 (41%) had no contingency fund in place.

Most bosses were somewhat slow to protect their businesses from rising borrowing costs, with only 1 in 5 (20%) fixing their mortgage or rent in the early stages of the Bank of England’s hiking cycle.

The findings come as Cynergy Bank launches its new Business Saver Account with a variable 3.35% AER interest rate.

Sharon Maguire, Chief Product Officer at Cynergy Bank, comments: “There has been a sea change in attitudes towards crisis planning. Cost pressures over the past year has led to businesses reassessing their risk profiles, and in addition to cost savings SMEs are urgently looking for solutions to help them build resilience in their businesses.

 “Innovative finance solutions like our new Business Saver account can help businesses build up their rainy-day funds, whilst offering the flexibility to manage and access their money as they adapt to meet future challenges.”

But while rising inflation and interest rates have eaten into financial firepower, they have also accelerated the pace of change and innovation within businesses.

The majority of respondents (96%) said that the cost-of-living crisis had caused them to make significant changes to their business operations.

SMEs say they are now budgeting more smartly with about a third (37%) of those impacted by soaring overheads saying they have shopped around on suppliers. A smaller number (33%) had switched materials, while 11% had resorted to using poorer quality goods and 1 in 4 (25%) said they have rearranged working patterns to save on energy bills. Increasingly, the majority of businesses (53%) said that tech and innovation had played a “huge” part in their response to cost pressures, including circumventing traditional sales channels and innovating how their offering is sold.