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10% of SMEs fear collapse within three months

The number of SMEs predicting they could close has doubled from 5 per cent to 10 per cent in just three months.

Over the past two years, the proportion of small business owners fearing collapse has been consistent at around 4-5 per cent for seven quarters. That figure has doubled for Q3 2018, according to research by Hitachi Capital Business Finance.

Retail is the sector most fearful of collapse in terms of the proportion of small businesses that think they will struggle to survive in the next three months. Seventeen per cent were afraid for the future in Q3 compared with 12 per cent in Q2. This follows bleak industry predictions last weekend that 10,000 retail stores will shut this year, half of which will be independents.

Eight of the industry sectors tracked by Hitachi Capital saw a quarterly rise in the proportion of businesses fearing for their livelihoods.

And small businesses predicting growth for the next three months has hit its lowest level for more than one year.

Hitachi Capital said protracted uncertainty and political infighting around Brexit is creating an economic ripple that could cause lasting damage to the small business sector – “the engine room of the British economy, ventures which need certainty, support and access to funding to grow,” the small business financier said.

SMEs in the North East believe themselves to be most at risk, with a startling 20 per cent fearing for their survival in Q3 compared with just 3 per cent in Q2.

Wales is also spooked, with 14 per cent of SMEs afraid of going under compared with 7 per cent in the previous quarter.

Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, said: “For the past year, our research has shown that the small business community has seen political and economic change as an opportunity. Many have looked to expand into markets beyond the UK and create jobs in the communities where they do business. Our latest findings, though, suggest the protracted nature of Brexit negotiations may now be taking its toll.”

Hitachi Capital Business Barometer surveys 1,201 small businesses across the UK each quarter.

Source: SME Web

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Business lenders need greater regulation and transparency for SMEs to thrive

The number of business lenders in the UK have exploded since 2008, but business lenders are not regulated and there is a lack of transparency about their offers, says Jennifer Tankard, Chief Executive, Responsible Finance.

There are reasons to be cheerful about the UK’s small business sector. Small business confidence has hit a one year high, despite slow economic growth in quarter 1 of 2018 and small business profits are also up, according to the latest FSB Voice of Small Business Index.  This is in spite of the fact that access to finance remains a challenge. The Index reports that the proportion of small businesses successful in their credit applications was down.

The issue of access to finance for small businesses remains a perennial problem.  Is it that small businesses are reluctant to borrow, given current economic turbulence?  That some may lack ambition to grow beyond their current size and market? Or is there insufficient supply of appropriate products on affordable terms?

One thing that we cannot dispute is the growing number of organisations providing small business finance and the range of products on offer. The number of business lenders in the UK have exploded since 2008, many of which are highly innovative and specialise in specific types of financing, such as working capital, asset finance, invoice finance, trade finance, property finance and merchant finance.  Trying to navigate through this choice to reach the right product on the right terms is time consuming and difficult for business owners who are more likely to be run by creative entrepreneurs rather than finance experts.

Too much choice is not often seen as a problem in a capitalist economy.  But business lenders are not regulated and there is a lack of transparency about their offers.  This means that businesses may end up with finance products that they don’t understand, are more expensive than they thought and have conditions attached which may turn a minor cash flow problem into a full scale viability crisis.

Businesses don’t develop sophisticated in-house finance functions until they are into million pound turnovers.  For the vast majority of SMEs and micro-enterprises it’s the owner and directors dealing with funding, not a qualified finance director.  This means the people reviewing and agreeing loans are actually consumers not finance professionals. But these consumers are offered no protection at all.

Lending to SMEs often requires personal guarantees so the business owner is personally liable as much as they are with a consumer loan. Because of this, inappropriate lending to small businesses can prove catastrophic.  Not only can it result in the loss of a business and jobs but the consumer (director or owner) is personally liable and affected too.  In extreme cases business loss can also result in the loss of the family home, marital breakdown and suicide.

Because the market is unregulated, lenders do not have to show the cost of borrowing in any particular way, such as a clear up front statement of the APR and additional fees.  This means the borrower is unable to determine the total cost of the loan and compare it with alternatives.

Lenders do not have to undertake an assessment of affordability resulting in small business owners, many of whom are optimists, taking on more finance than they can manage and afford to repay.

And there is no transparency of when fees and charges will apply.  For example, one alternative business lender has charged 15% of monthly repayments as a “missed payment fee” and others charge “default interest rates” of 300%.  Clearly there is no shared understanding of what is reasonable when businesses do run into difficulties.

So how do we maintain a competitive business lending sector while ensuring small businesses, critical players in economic growth, job creation and employment, get the finance they need? We believe that all business lenders should undertake proper affordability checks around income and expenditure, based on both the strength of the business and the circumstances of the owner / director, if the lender is seeking personal guarantees.

Lenders should clearly display the cost of credit by reporting the total cost of borrowing on representative examples of APR, charges on arrears and missed payments in a prescribed manner that allows borrowers to more easily compare across lenders. Loan contracts and information explaining the detail of these should mirror consumer lending contracts.  And small business owners / directors should get similar support to consumers in building financial capability skills as they have similar needs.

The responsible finance business lending sector knows that it is feasible for business lenders to introduce these steps, because responsible finance providers already do so. We believe these measures are the key to business success and sustainability as well as to local economic growth, which in many parts of the UK is dependent on the stability of the small business community.

Creating a level playing field for business lending with more transparency and a focus on supporting borrower choice rather than maximising the number of lenders in the sector is good for productivity and good for the economy.  It is now time for the business tail to start wagging the finance dog.

Source: Politics Home

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Business Loans: Is Having Bad Credit the End of the Road?

Running any business—small, medium, or big—is never easy. Besides all the dedication, passion, and hard work you’ll need to put in every moment, you should have constant access to capital or funds to grow your business successfully.

Bank loans are one of the most common financing sources for businesses around the world. In fact, banks in Europe have provided loans to the tune of about 1.4 trillion euros to small and medium enterprises. But, this doesn’t mean that every loan application from a bank gets approved.

In the United Kingdom alone, the rejection rate for business loan applications varied between 33% and 19% from 2013 to 2016. According to the Federal Reserve’s 2016 Small Business Credit Survey, less than half the number of loan applicants received the financing amount they sought. The rest got lesser than what they wanted or nothing at all.

Getting a Small Business Loan

Most of these loan applications were rejected because of the borrower’s poor credit. In truth, bad credit can be your downfall if you’re looking for a traditional bank loan. But, it doesn’t necessarily mean it’s the end of the road for you as a borrower.
From finding alternate lending sources to boosting your creditworthiness, a little groundwork can go a long way in increasing your chances of approval. Read on to see how you can go about applying for a business loan if you have bad credit:

Building Personal Credit

A good place to start when you’re looking for a business loan is building your personal credit score. Ensure you’re making all payments on time and keep a tab of how much you owe.
If you’re in debt, tackle the bigger payments first. You could try the snowballing method, a balance transfer card, or even a loan to consolidate your debt into more manageable payments.

Making a Business Credit Profile

A separate business credit profile is advantageous to have, especially when your personal credit is bad. It gives credibility and improves your chances when you need financing.
It also works much the same way as your personal credit score if there’s ever a need to rebuild it. Just make sure all your payments are made on time.

Creating a Strategy

For a business to be successful, creating an effective business strategy is highly important. From developing a vision statement to identifying strategic objectives, you’ll need to know where you’re headed and what you need to do to make it big.
You could also try your chances at enhancing your creditworthiness. All you need is a letter of reference from your personal or business contacts.

Preparing the Required Documentation

Getting the right documents in order is another important step to applying for a business loan. Along with the letter of reference, it’s important that you keep your personal information, resume, bank statements, and business plan handy.
You should also have your income tax returns, debt schedule, loan application history, and other legal documents in place.

Finding the Right Lender

Traditional bank loans aren’t the be all and end all of business financing. You could try direct lenders like equity firms and investment banks or peer-to-peer lenders. You could also try term loans, equipment loans, invoice financing, microloans, or merchant cash advances.

The advantage of seeking alternate financing is that you get comparatively lesser approval criteria and quicker funds disbursement. On the flip side, you may have to deal with higher interest rates and personal guarantees.

To stand the best chance of finding a business loan that works perfectly for you, you’ll need to compare multiple offers. In addition, remember to factor in loan costs, repayment period, eligibility criteria, and the lender’s reputation before you take the next step of application.
So, don’t lose heart if your bad credit score is stopping you from getting your business off the ground or taking it to the next stage. Following the steps above will help you work around your credit situation and get the required financial assistance.

Source: FinSMEs

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Scots’ SMEs turns to crowdfunding after ‘systemic’ bank failures

Entrepreneurs and small businesses are turning their backs on scandal-hit traditional banks and are using risky, unregulated online crowdfunding platforms in growing numbers to raise capital, an MP has warned.

Issuing a call for more regulation of crowdfunding and better protection of small businesses from predatory banking practices, East Lothian MP Martin Whitfield warned banks “are so close to losing the confidence of people, full stop”. Mr Whitfield warned that distrust and bureaucracy is leading to small business lending being choked off in the decade since the financial crash, contributing to run-down high streets and depressed economic growth outside of major cities.

In a Westminster Hall debate today, the Labour MP and members of the All-Party Parliamentary Group on Fair Business Banking will call for an independent, low cost tribunals system similar to employment tribunals that clients can turn to when they believe they have been mistreated by their banks. It follows recent scandals over the way banks have treated business customers, including claims that RBS’ Global Restructuring Group exploited 12,000 of its own customers.

The GRG allegations are the subject of a Financial Conduct Authority probe, and the bank has set up a £400m compensation scheme. Two former Bank of Scotland staff were also convicted last year over their role in a £1bn criminal scheme at its business turnaround unit.

Lending to small businesses has continued to fall since the financial crash, and many are now wary of even approaching their bank. A British Chambers of Commerce survey last month revealed that 63 per cent of small firms with fewer than ten employees have never sought finance, compared to just 39 per cent of companies with more than 50 employees.

A report from the Fair Business Banking APPG published on Wednesday concluded that there was a “systemic failure” in regulation of business banking.

“Entrepreneurs are not automatically looking to the banks, because entrepreneurs view is that the banks are going to treat them badly, so they’re increasingly looking at alternative finance,” Mr Whitfield said.

“One of the things small businesses say is, ‘look, we’re spending all our time trying to gain access to finance, when actually what we should be doing is improving the business and making it grow’.

“High street banks, working on the classic banking model, are so close to losing the confidence of people, full stop.”

Mr Whitfield claimed that with the biggest high street banks slashing their branch networks, “the whole idea of going to speak to your local bank manager about a loan – it just does not exist anymore.

“The demands that the banks are putting on to drive their profit are driving our entrepreneurs away, so they’re turning to crowdfunding 
and other means, but the problem is that regulation is lacking in that area, so there’s the potential for people to be exploited.”

As well as a tribunal system for bank clients, MPs are demanding a cross-government inquiry into banking regulation and additional funding for investigation of financial crime. “One of the problems is that the police forces don’t have the expertise to do it,” he said.

Source: Scotsman

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Three ways to improve your chances of getting an SME loan

Lenders have a set perceptive on what a healthy business is, and they only ever lend to those that are healthy. Businesses that can’t show a capability to repay are rejected, and businesses that do not submit an accurate application are too. If you are thinking about applying for an SME loan for your business, there are three main ways to improve your chances of being approved.

  1. Submit an accurate application

It sounds so, so obvious, yet you’d be surprised by how many applications lenders receive that do not contain accurate information (around two in five). The information you supply in your application will be used to determine its legitimacy. You’ll include the names, dates of birth and home addresses for all business owners and your company registration number. If these details are inaccurate, the loan application will be refused, and you will have to start over again.

It makes sense to take your time with your application. Write down all answers to information requests and double-check their accuracy. By ensuring you submit an accurate application, you allow a lender to decide whether or not to approve your application based on your business’s health and what you plan to do with the money.

  1. Maintain and show business profitability

Lenders want to see capability of repayment with SME loans. The best way to show this is by maintaining profitability in your business. Profitability is important because it shows your business model works. It also gives the lender a rough estimate of the cash in your business. These details are very helpful and particularly so with lenders who review applications in person. Lenders who use automated systems will reject a business out of hand if it’s loss-making.

Can’t show business profitability? Another sign of a healthy business is activity. If your business has an active balance sheet and can accommodate the cost of loan repayments, a lender may approve the application if they are satisfied with capability of repayment. Also, if you can’t show profitability, you can offer the lender security in the form of an asset to get a loan. This is called a secured loan.

  1. Approach independent lenders – not banks

High-street banks do not typically offer the most competitive business loans. And, in many instances, they don’t have specialised products for SMEs.

A quick comparison between a leading high-street bank (HSBC) and a leading independent lender (Nationwide Corporate Finance) for an SME loan reveals a difference in representative APR of 3.8% in favour of the independent lender. That’s an enormous difference that equates to hundreds of pounds over a single year.

Another important point is high-street banks put applications through a computerised system. If they pass that test, they get a human review. Independent lenders do not usually have computerised systems and review applications in person right off the bat. This makes for a fairer, more personal application process and a higher chance of approval.

Source: SME Web

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Why small businesses need to unlock funding for growth

According to Bloomberg, 80% of businesses fail within the first five years and of the 20% still standing, 80% of those statistically will fail in a further five years. We often see start-ups winning rounds of funding, but growth seems to slow down once they reach the development capital stage, as business owners struggle to raise capital to fund business growth in today’s tough market.

Access to funds for small businesses and start-ups is a true catalyst for growth and success. Supporting growth of SMEs is essential for the economy of the country in the pursuit of innovation and progress. Particularly in the run-up to and post Brexit, according to government figures, SMEs combined turnover constitutes almost half (47%) of private sector turnover in the UK, reaching an annual total of £1.8 trillion – making funding crucial.

Many entrepreneurs and small businesses are completely unaware of the sources of cash as well as other less conventional funding methods available to them. For small businesses to be successful, it is important that they apply for right type of funding at the right time, as speed of funding has been identified as integral to achieving this growth. Despite this, many small business owners are yet to take advantage of the funding available to them.

Unlike larger companies that have a whole department dedicated to finance, most small businesses won’t have such resource, meaning owners will need to add fundraising to their list of skills. This often leaves many small business owners unsure of which funding they are eligible for or where they should even apply for the funds they want.

There are a huge number of options available to small businesses in the UK, from Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS), very advanced crowdfunding and angel networks, low rates of corporate tax, R&D tax credits and entrepreneur’s relief in the UK. While having so many options is great, this adds yet another layer of confusion in terms of understanding which is best for your individual business needs and objectives.

This is why I have briefly outlined the advantages of different types of free cash sources and equity available to UK small business to help understand the best option to help fund growth:

  • The UK is one of the best places in the world for equity funding. Tax incentives such as SEIS and EIS are the government’s tax incentives to UK income tax payers to try to level the playing field between the relatively high risks of investing in the shares of unlisted small companies.
  • Often forgotten are R&D tax credits. The government are keen on paying out on R&D tax credits if there is substantial proof of research, development and innovation.
  • Crowdfunding, which also offers an excellent route to raising the capital. As the crowd will help sense-check ideas before you spend money, the marketing of shares will raise your company’s profile and it helps achieve a higher valuation with a crowd of shareholders than with a single financial investor.
  • Angel networks, which are a more sophisticated version of the crowdfunding platforms – angels start at about £25k upwards.
  • There is a comprehensive list of what funds are currently available, many new ones open and many closed. My latest book, “Reboot Your Business” details the 140 different funds available for UK-based SMEs.

Many small businesses struggle to find the funding they need to grow. It is important that they are equipped with the knowledge and tools to succeed. As the level of competition in the market increases and as Brexit looms, funding options have never been as important as they are now.

Source: SME Web

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65% of UK SMEs expect strong growth as Brexit fears subside

Almost two-thirds of SME owners are forecasting a bright future with 65% anticipating growth of up to 40% over the next two years, according to specialist commercial finance provider Wesleyan Bank’s annual survey of UK small and medium sized businesses.

The ‘SME Heroes or Zeros 2018’ report reveals that 54% are feeling ‘more confident’ about their firm’s prospects one year on and just 11% are ‘concerned’ about the potential impact of Brexit. Despite an uncertain UK economy, the findings highlight a significant shift in defiance from business owners. 50% are adamant that Britain’s exit from the European Union will not dictate their firm’s strategy compared to 28% in 2017.

 Paul Slapa, Head of Direct Sales at Wesleyan Bank, says, “The UK’s economic outlook is often clouded by negativity, but this research highlights that SMEs are performing strongly and have built solid foundations to prosper, both pre and post Brexit. Unless there is a material impact on their business today, there is no reason why SMEs should put on hold their investment plans to sustain and maximise growth.

“By leveraging external financial support from specialist lenders, SMEs can benefit from flexible funding solutions to spread the cost of purchasing new equipment and technologies to gain a faster return on investment.”

Businesses are increasingly exploring alternative finance options rather than relying on traditional borrowing methods such as overdrafts, savings and credit cards to facilitate growth. Almost double (59%) the number of UK SMEs have used external funding on at least one occasion against only 30% in the same survey in 2016 with 27% stating that they now ‘regularly’ turn to external finance, up from 20% two years ago.

Attitudes to finance differ according to age and gender. Business owners aged 45 and above are three times more likely to have ‘never’ sought external funding in contrast to only a fifth of those aged between 18 and 29. In addition, female business owners (28%) are less likely to have utilised external finance than men (40%).

Paul Slapa comments, “With greater access to funding and lower interest rates, more SMEs are considering alternative finance as a growth accelerator and have a wider understanding of how it can benefit their business. Business owners should talk to their day-to-day bank but also compare which providers can support their firm at every stage of its lifecycle, with a range of tailored finance solutions.”

Source: London Loves Business

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A Quarter of Small Businesses Would Cut Staff if They Couldn’t Access New Finance

According to new research commissioned by ground-breaking financial utility, Saxo Payments Banking Circle, SMEs are facing potentially fatal challenges in accessing finance to support the growth of their business.

“Since the financial crisis began in 2008, mainstream banks have been less willing to lend, particularly to smaller enterprises and this has forced SMEs into an unfair fight for the finance they need to compete effectively,” explained Anders la Cour, co-founder and Chief Executive Officer of Saxo Payments Banking Circle. “Our research found that lack of access to additional finance would force 25% of SMEs to let employees go. Nearly a third (30%) would have to reduce prices to encourage sales and increase cashflow, and 39% would be unable to buy the equipment the business needs.”

Over 500 financial decision makers and directors in SMEs that have an online presence responded to the research commissioned by Saxo Payments Banking Circle. Almost all (92.5%) have accessed business finance within the past five years, but many have experienced difficulties in borrowing from their usual bank.

Interest rates and fees were the biggest concern, with 58% saying they would consider finance from a non-bank if it offered lower interest rates. 44% would do so for lower arrangement fees. 25% would be attracted to a non-bank by simple online account management.

The reason for SMEs going into battle for finance varies, but buying equipment was the most common reason why they needed extra cash – for 52.9% of SMEs. Purchasing inventory came in second place (34.5%), followed by expanding into new markets for 27.5%.

The most common type of finance used was a one to three year loan, taken out specifically for the purpose. The second most common type of finance was an overdraft. And, whilst likely to be more expensive than other finance facilities, 60% of SMEs with 10-49 employees said they had relied on their overdraft within the past five years. Without that essential facility they would have had to take drastic steps to cut costs.

Ability to access finance quickly is essential for small businesses working in a fast-paced market and trying to compete effectively. However, the Banking Circle research painted a worrying picture of the length of time firms wait to get their hands on the cash their business needs. Just 3% managed to get the finance arranged within a week. 33.3% took 1-2 weeks and 36.3% waited 3-4 weeks for the finance to be arrange. 2.1% of SMEs waited up to six months for their finance – a small percentage, but representing almost 120,000 businesses across the UK.

“SMEs play a vital role in the global economy, and anything holding them back from their potential could have a severe and far-reaching impact”, continued Anders la Cour. “The business landscape is changing, and traditional lenders are not able to keep up and meet the needs of SMEs. Only financial institutions willing to adapt to new market conditions, working with third-party providers in an ecosystem model, will remain competitive and successful in the digital age.”

Source: Bobs Guide

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SME Owners Need a Year’s Financial Buffer to Feel Safe: Despite Existing Debts

Nearly a third (28%) of small business owners don’t feel financially confident unless they have a buffer big enough to cover running costs for a year, according to new research* from merchant services provider Paymentsense (https://www.paymentsense.co.uk). The study found that despite this, more than four in 10 small business owners (41%) admit to having no such buffer in place, meaning as many as 2.3m UK small businesses may have no financial backup plan.

This ‘financial confidence gap’ between what business owners need to feel secure, and what they actually have, comes after the British Business Bank published a report revealing that small business confidence and demand for finance are declining.

The government-owned development agency found the proportion of businesses confident of loan approval fell recently from 58% to 43%. The report also highlighted that lending was flat to small businesses in 2017.** These findings arrive at a time of uncertainty over European trade negotiation outcomes, and reports of an expected medium-term interest rate increase.

For those businesses that do have something in reserve, Paymentsense found that the most popular backup is cash savings – held by nearly six in 10 (59%) of prepared businesses. A third (34%) said their buffer included property and nearly a quarter listed an overdraft (23%). Plant and machinery featured for a fifth (20%), with 17% using business credit cards.

Michael Foote, who founded UK price comparison site Quote Goat (https://www.quotegoat.com) in 2015, said: “As a small business owner, feeling financially secure has always been one of my top priorities. For me, this means ensuring I have a cash buffer that covers company costs for at least half a year, to safeguard against potential cash flow problems.

“Initially it was difficult to build and meant taking the bare minimum out of the business whilst it grew. However, it’s let me focus my efforts elsewhere in the business, enabling Quote Goat to successfully compete against larger competitors in the industry.”

The Paymentsense study also found that almost two thirds (61%) of SME owners are in debt, with monthly repayments averaging almost £3,600 (£3,589). What’s more, over half (55%) admit to deliberately paying suppliers and partners late to ease cash flow problems. More than a fifth (21%) said they do this at least once a month.

Guy Moreve, head of marketing at Paymentsense, comments: “We know that feeling financially confident is critical for small business owners. Aside from helping you sleep at night, it enables accurate long-term fiscal planning for growth rather than just survival. Having a buffer is just part of the picture. Cash flow monitoring and proactive credit control are also essential. However, we’d caution against routinely delaying invoices to partners and suppliers, as it risks damaging important business relationships.

Working with over 60,000 small businesses across the UK, we understand their financial anxieties. Despite recent drops in the rate of inflation, a future increase may lead consumers to become more cautious with their purchases, and would make existing business loans more expensive to manage for SMEs. With this in mind, having a buffer makes great business sense. Actively setting aside a little each month will help balance slower trading periods, and unforeseen expenses. Even something as simple as a weekly cash flow report can provide insights that will enable you avoid future problems.”

The most popular financial buffer

Cash Savings 59%
Property 34%
Overdraft 23%
Plant / machinery / equipment 20%
Business Credit Cards 17%
Asset-based lending / factoring/ invoice finance 16%
Bank Loans 14%
Stocks and investments 13%
Help from family and friends 8%
Government funding scheme 8%

Source: Payments Journal

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Will Brexit be good or bad for Britain’s small firms?

It’s always been tough for small and medium sized British firms to find enough money to enable them to grow into world-beaters. But since 1994, the Enterprise Investment Scheme has given generous tax incentives to investors to encourage them to put money into small unlisted companies, either directly or through a fund. This scheme has been very successful in helping the UK’s technology sector.

To see how Brexit might affect it, and small companies in general, we’ve turned to Mark Brownridge, director-general of the Enterprise Investment Scheme Association, the trade body for member firms.

The evidence for Brexit’s impact on small firms paints “a confusing picture” admits Brownridge. On the one hand “the majority of SMEs are by their nature small and growing and don’t have significant import and export supply chains”, which suggests that “leaving the EU isn’t a major concern”. Most firms are taking the view that “without clarity in terms of a trade deal, the best option is to keep calm and carry on”.

Still, it’s undeniable that smaller companies will feel the pain from any economic slowdown: research by the British Business Bank suggests that only 5% of SMEs expect that they will benefit as a result of Brexit.

There are obvious concerns about the labour market

One major area of concern is how Brexit will affect the labour market, both in terms of EU workers already in the UK and of future migration. Brownridge points to research by Deloitte that suggested that “as many as 47% of skilled EU workers in Britain could leave the country as a result of the fallout from Brexit”. Even if large numbers of people don’t leave, SMEs are particularly worried about “the lack of skilled labour coming in from the EU to provide them with the technical skills and workforce they require to drive their business forward as there is a lack of technically skilled people in the UK”.

This shortage of skilled workers is a big problem for all British companies. Brownridge points to a study carried out by the Open University, which found that “nine in ten companies had struggled to hire workers with the required skills in the past”. So it’s not surprising that Brownridge would like to seem an immigration policy that is as close to free movement of travel across borders as possible. At the very least, the government “could do more to address the situation”.

At the moment the UK is one of the world’s major technology hubs, “with around a fifth of technology leaders naming the UK as the most promising global market for technology breakthroughs, behind only US and China. London’s “vibrant tech scene” attracted $3.4bn in venture capital investment – four times as much as Paris, the next largest European city. But there is little room for complacency, says Brownridge, as “there is no doubt that a number of major European cities are jockeying for position as the finance capital of Europe, and London has a fight on his hands”.

But it’s not all doom and gloom

Still, it’s not all doom and gloom, as there are some clear benefits to Brexit. After all, “many of the negative aspects of the EIS scheme are actually imposed by EU state aid rules”. For example, at the moment, “companies are having to delay much needed fundraising” thanks to “rule changes included in the 2015 and 2016 Finance Acts, most of which were intended to secure EU state aid approval”. Once Britain leaves the EU, we will be able to “take back control of the state aid rulebook and rationalise rules relating to granting of EIS relief to small firms”.

But even in this case, it is unfair to put the blame solely on Brussels, says Brownridge: “There is scope to reduce the uncertainty and complexity within the current EU state aid framework if HMRC were to adopt a more pragmatic approach to its interpretation of the existing legislation”, says Brownridge. HMRC “must be given the resources it needs to process applications more quickly”.

All in all, Brownridge remains optimistic as “the government seems keen to build an entrepreneurial spirit and make the UK a hub for small businesses and we certainly believe that EIS and SEIS can play a significant part in creating that environment”. While “funding has been an issue for SMEs for a number of years now” the evidence suggests that “that cash has flown in from abroad over the past year”.

Source: Money Week