A quarter of brokers think a recession is coming: Metro

Amid growing concerns that a recession is ‘very likely’ this year (according to AMP’s chief economist Shane Oliver), Metro undertook a survey to ask brokers for their thoughts on what the new financial year (FY24) had in store for the economy and their clients.

While the Metro survey revealed that 90 per cent of brokers believe the number of struggling businesses will either stay the same or increase in FY24, brokers were still fairly optimistic about the economic environment.

Only a quarter of respondents believed a recession was on the horizon and 90 per cent believed that the worst of the supply chain issues impacting SMEs had passed.

In fact, nearly half (45 per cent) of these brokers believed that supply chain issues would actually improve this year, according to Metro.

Despite rising concerns for mortgage borrowers being unable to service loans and nearly all brokers having a ‘mortgage prisoner’ client, two-thirds (65 per cent) of broker respondents said they had not seen an increase in prime asset finance borrowers being turned away for the loan amount they are seeking.

Moreover, 93 per cent of brokers said they expect borrowers to buy the same amount of assets, or less, in the next financial year, compared to FY23.

Speaking of the findings, Metro chief executive Phillip Crossman said: “Our brokers specialise in developing close relationships with their customers, so they know how tough it is for smaller businesses at the moment. That said, the silver lining is a shared view that supply chain issues will continue to improve throughout the year.

“The prime SME sector in Australia is made up of resilient borrowers, which are adaptable to market conditions. The assets they finance are income producing assets, not discretionary items, and therefore payment is prioritised to enable the borrower to continue their operations.”

48% of small businesses concerned about financial future

Despite optimism from finance brokers, a recent study from accounting software company Xero found that 48 per cent of small-business owners were concerned about their business’s financial future.

According to the Money Matters: Navigating the impact of economic conditions on the cash flow of Australian small and medium-sized businesses survey, 60 per cent of SMEs don’t feel confident about their ability to absorb financial shock.

Fourteen per cent of SMEs said they were experiencing “significant” cash flow challenges, with nearly a third (29 per cent) of small businesses checking their cash flow position daily.

Inflationary impacts were considered a major hurdle by small businesses, with 57 per cent of respondents revealing that it has impacted cash flow management over the past six months.

The reports came after ScotPac’s SME Growth Index 1Q23 report highlighted that smaller small- to medium-sized enterprises (SMEs) with annual revenue of up to $5 million were three times more likely to rely on personal finance facilities, such as credit cards, in order to manage increasing business costs when compared to larger SMEs.

[Related: Nearly all brokers have mortgage prisoner clients: Broker Pulse]