41% of UK SMEs believe their business may be in financial difficulties in a year’s time, while 3% expect their business to wind down, according to new research.

Meanwhile, 16.5% of SMEs believe they will fail to meet their debt obligations over the next 12 months.

The research was commissioned by the Business Banking Resolution Service (BBRS), an independent and free service established to resolve disputes between SMEs and their banks. It asked 522 senior business decision makers at UK companies with an annual turnover of between £5 million and £15 million, about the challenges they believe their businesses are likely to face in the year ahead.

The research reveals that a significant proportion of SME leaders harbour concerns about the financial pressures posed by the current economic environment.

The BBRS asked SME leaders about the greatest challenges for their business over the next 12 months and identified the main concern as rising wage costs, cited by more than a third (36%). This was closely followed by increases in non-wage business costs (32%), staff retention and recruitment (31%) and rising interest rates and increased borrowing (28%).

Such concerns are likely to be heightened by a more specific pressure, when an individual’s personal finances are linked to their business, with the research finding that 3 in 10 (30%) of SME leaders have acted as a personal guarantor for a loan that the business has taken out.

The BBRS found that SMEs’ concerns extend to a broader range of financial risks and pressures connected to their business banking needs. When asked about their concerns for the year ahead, 60% of SMEs cited the impact of borrowing costs, followed closely by bank transaction fees, which 55% are concerned about.

Bank fraud and security issues are the other significant concerns raised by SMEs, highlighted by 54%. These fears appear heightened by past experience, with 22% of SMEs saying they have been a victim of fraud over the past five years. These concerns clearly persist as, looking ahead, a similar proportion (21%) believe bank fraud is the issue their business is most at risk of in the next year.

Despite the wider financial and economic pressures, SME banking satisfaction rates are high. 86% of SMEs say they are satisfied by their business banking service, compared to just 10% who are neutral, and only 3% of SMEs say they are dissatisfied. Of the SMEs that have made a banking complaint, 24% have not been resolved, but the large majority of those unresolved complaints are about minor issues.

Dirk Paterson, customer director at the BBRS, said: “There is a tough year ahead for small businesses and we expect to see a modest rise in complaints, despite high levels of satisfaction with banks.  As the research shows, we expect the majority of complaints will be resolved between both parties directly. Where SMEs are unable to resolve their complaint with their bank they should get in touch with the BBRS to see if we can help.”

The BBRS is urging SMEs with business banking complaints relating to incidents that have taken place on or after 1 April 2019 to get in touch to assess their eligibility for its services.

To date, substantially more than £1M of financial awards have been made to SMEs as a result of BBRS intervention. In addition to monetary awards, a significant number of non-financial awards have been issued following BBRS intervention, including rearranging lending terms and conditions, discharges from personal guarantees and debt recovery rearrangements.

The Scheme is open to SMEs with turnover up to £10m per annum, total assets up to £7.5m and, importantly, which are not eligible to take their complaint to the Financial Ombudsman Service. SMEs have until 31 December 2023 to register for the Scheme and can check their eligibility online at: https://thebbrs.org/make-a-complaint/