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New Research Shows $42 Trillion Locked in Global Supply Chains Stymies SME Growth

by February 21, 2024
February 21, 2024
New Research Shows $42 Trillion Locked in Global Supply Chains Stymies SME Growth

The latest Prism SME Barometer reveals UK’s small and medium-sized businesses face a massive $42 trillion in working capital trapped in global supply chains. This capital constraint severely limits SMEs’ ability to expand internationally.

It shows access to capital ranks among the top barriers to SME participation in global trade. Over 30% of SMEs surveyed said accessing export finance is a major hurdle.

“The mismatch between domestic and cross-border capital can block SMEs from securing credit for overseas ventures,” said Ali Ansari, Managing Director at Taulia. “SMEs carry higher financial risk in cross-border deals, so they fight for leftover capital after multinationals take the lion’s share.”

Ansari explained how poor financial infrastructure in some regions makes SME lending cost-prohibitive. “When you factor in exchange rate volatility and reliance on a few international financial hubs, costs get too high for most SMEs,” he said.

Supply chain finance (SCF) is gaining popularity as a solution. SCF lets suppliers receive early payment on invoices through third-party financiers. Buyers approve invoices and upload data to the SCF platform. Suppliers select invoices for accelerated payment, receiving funds upfront with a small fee deducted. The buyer pays the financier on the original due date.

“Financing costs are far lower with SCF because they are based only on the buyer’s creditworthiness,” Ansari said. “For SME suppliers, rates can be 90% less than factoring and other financing options.”

The report shows 71% of SMEs expect major benefits from supply chain digitisation in five years. Another 28% aim to capture higher margins through data-driven customer insights.

William Bain, Head of Trade Policy at the British Chambers of Commerce (BCC), said recent declines in UK trade underline bottlenecks in global supply. “Transport costs, exchange rate swings, uncertainty and rules of origin issues hamper UK exporters,” he says.

The BCC found most firms struggle trading with the EU post-Brexit. Slow adoption of digital customs processes adds friction. “Boosting exports requires convincing more SMEs to trade internationally,” said Liam Smyth, Managing Director at ChamberCustoms.

With tight capital constraining SME growth, unlocking trillions in supply chain inefficiencies is critical. Solutions like SCF and digitisation provide paths to free up working capital and enable SMEs to access the global marketplace.

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New Research Shows $42 Trillion Locked in Global Supply Chains Stymies SME Growth

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