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UK SMEs overcome Brexit fears to seek investment for growth

The growth and funding ambitions of SMEs have strengthened during 2019 despite the uncertainty caused by Brexit negotiations.

According to a new report from asset-based lender Independent Growth Finance (IGF), almost three quarters (73%) of small businesses expect to see their revenues climb in the next 12 months, compared to 69% at the start of the year.

Of those seeking to raise funds to support growth, the average amount has also increased by 22%, or £250,000.

Three-quarters of businesses are looking to secure funds in the next 12 months. On average, they are seeking £1.4 million.

Most of this spending is earmarked for innovation with investment being poured into technology (45%) and product development (27%).

The survey found that 85% of respondents were open to switching their funding provider in exchange for more flexibility (35%), sector-specific expertise (32%) and 48-hour decision-making (26%).

John Onslow (pictured), chief executive officer of Independent Growth Finance, said: “It’s incredibly encouraging to see so many SMEs focused on the future. Making decisions that are best for them and their employees in an unpredictable landscape. This includes a greater willingness to switch funding providers to get the flexible funding they need, when they need it. We’re not surprised that our research shows three of the top five funding sources are alternative finance.”

Written by Miles Rogerson

Source: Asset Finance International

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UK SMEs predict 25 per cent sales growth for next financial year

A cross-sector cohort of UK SMEs predict an average 25% sales increase for the next financial year, new industry research reveals.

The research, conducted by SME working capital specialist Skipton Business Finance (SBF), collates the perspectives of almost 1,000 business leaders from SMEs across the UK.

The businesses were also interviewed about whether they can see themselves hiring more staff with over a third of SMEs (35.39%) saying a confident ‘Yes’, and a further 43.62% replying ‘possibly’.

A cross-section of SME sectors was represented in the research including manufacturing & construction, haulage & transport, printing & media, recruitment, maintenance & repair, and food & drink. When grouped into individual sectors the data still reaches a similar 25% average for each sector.

Greg Bell, managing director for Skipton Business Finance said, “We’re shocked and surprised by these results. When we conducted the research, we were expecting to find a modest average of 5-10% but 25% is truly amazing. This is despite SMEs having to face the uncertainties of Brexit and SME confidence hitting a seven year low as recorded by the Federation of Small Businesses (FSB).

“If there is one thing that we can take away from this survey is how the UK’s SME industries continue to be persistent and resilient even in uncertain times.

“We can all agree that this will definitely be a challenging year for us all and statistics like the FSB’s confidence rating prove this. But these statistics show that business leaders can see a silver lining in these foggy times.”

Many SMEs commented in the survey on the uncertainties of Brexit affecting their business while many others commented that having a working capital solution helped to make growth easier.

Bell added,“It’s more important than ever that in times of uncertainty someone can provide SMEs with reliable solutions.

“As cash flow is the life blood of any business, we believe that focusing and improving on this can be a real-life saver for many businesses. In today’s fragile economy businesses that are still looking to expand and grow need the certainty of robust cash flow to fund their aspirations. Invoice finance provides this assurance and allows the management to focus on their business.

“At Skipton Business Finance, we try to do whatever we can to help make that growth possible. When clients have a facility with us, we never provide a traditional one-size-fits-all package but a tailored facility with their own relationship manager who can help adapt their facility through challenges or times of growth.”

A subsidiary of Skipton Building Society, SBF is a leading independent factoring and invoice discounting provider, offering a range of working capital solutions for businesses with annual sales ranging from new-start to £30m.

BY CHARLIE WATTS JOURNALIST

Source: London Loves Business

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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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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

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Ways Brexit will affect UK SMEs

We are just under a year away from the official date for Brexit. Though we would hope that the incumbent UK government can agree some form of deal that will allow the UK to continue to trade while matters are dealt with, there is significant uncertainty across the country on the impact of Brexit and understandable anxiety has led to scaremongering. While there has been a focus on how this will affect large corporations there is not as much evidence of how this will affect UK SMEs, long considered the backbone of the UK economy.

There are 5.7m SMEs in the UK which account for over 99% of private sector firms and 60% of total UK private sector employment. SMEs also account for 73% of all net private sector job creation in the UK, creating about 2m jobs since 2010.

Of course it is not possible to predict the exact impact of the final decisions before they are made and know how they will play out over the next 12 months and beyond, but there are ways to ensure that your business is in the strongest position possible.

This blog explores key themes that may impact your business and things to keep an eye on, as well as practical tips to manage predicted challenges. Be prepared. Take advice. Keep up to date.

Ways that Brexit will affect UK SME businesses  

  1. Staff Employment

Businesses may already be experiencing challenges in the labour market with their staff uncertain of what their position will be post Brexit. A recent study by the Association of Professional Staffing Companies (APSCo) found that companies were finding it increasingly difficult to fill roles, with vacancies in finance and banking up 12% and engineering and construction openings rising by 10%.

Businesses will need to review their workforce continually to ensure that they can meet new changes head on. Companies which rely heavily on European workers need to ensure they have appropriate plans in place going forward to ensure their staffing needs are met.

It is never too late to start preparing. With apprenticeships very much in the spotlight for the government and media, take advantage of the new non-levy and levy contributions system and the new employer-led apprenticeships. Partnering with your local college or training provider could ensure the stability of your future workforce and guarantee trained employees for years to come. 

  1. Tariff and Trade Requirements

The UK government is currently still in discussions with Europe regarding a trade agreement post-Brexit, so at present it is still uncertain what the future landscape will look like. Until such time that we have a clearer picture on a future trade agreement, UK businesses need to remain aware of how any increases in tariffs might affect their businesses.

Businesses should ensure that their current pricing structure is robust enough to absorb any future tariff increases. Create models and test different scenarios to arm yourself with the reality of how these fluctuations may impact your business.  It is never an ideal scenario but you may need to review and increase prices in order to remain competitive. 

  1. Brand Names & Trade Marks

Like various other matters, specifically legal, there is uncertainty around how trademarks and brand names will be protected once Britain leaves the EU. Will a EU registered trademark continue to be valid in the UK? If your business has a registered EU trademark they will ensure that you are aware of the necessary measures to be put into place post-Brexit. Whether that be conversions, new registrations or some other form of system businesses should prepare, to ensure that they can protect their intellectual property.

With this type of issue it is impossible to guess, but make sure you follow any updates closely and take advice. Discuss any concerns with your lawyers – they may even have set up specialist teams working on the impact of Brexit and changes to international law who will be able to keep you update and make sure there are no unwelcome surprises. 

  1. Supply Chain Issues

What is certain post Brexit is that the administration and associated costs of importing goods into the UK will rise. VAT and duty deferment for example will become much more complex. Pan-European companies who currently benefit from economies of scale will lose these post Brexit so UK businesses could find themselves being charged more for the services that they currently use. Whilst we await certainty on these changes spend the time forging stronger relationships with your customers and suppliers. The better you get along with the people you do business with the more likely they are to be understanding. It may need to be a case of give-and-take whilst everyone adjusts to the new systems and the more openly and regularly you are communicating with your network, the better.

As touched on previously, staffing will be a majorly affected area for some businesses post-Brexit. But the movement of current staff may also be seriously affected. At present, staff can be deployed to anywhere around Europe at a moments notice. Whatever rules the UK implements on movement and immigration are likely to be mirrored to all staff. If lots of your team are from overseas or if European travel forms a large part of your standard business operations, it is definitely worth consulting with a legal specialist in this area. They will not only advise you on what to do now, will also keep you abreast of any changes as they happen and guide you through any evolution 

  1. Funding

Brexit will bring with it the loss of certain EU funding schemes for SMEs. Whilst these central European programmes providing SME finance will no longer be available, the bigger concern for business owners is what the appetite will be from current high street lenders to the SME market. What does this mean for their growth plans?

The flourishing alternative finance market has been bridging the funding gap left behind by the banks since the 2008 crisis. Brexit does not mean that you need to put your ambitions for your business on hold. Nor does it mean that you should not seek external finance.

Although in times of uncertainty the instinct is to retreat to safety and avoid bold decisions, this fear of the unknown could turn Brexit predictions for the economy in to a self-fulfilling prophecy.

Certainly it is always wise to exercise a degree caution – but that is true of all business decision making.

The business lending market is the strongest it has ever been, with more options available to businesses than ever before. Capitalise on this strength vs the perceived uncertainty post-Brexit. By planning, preparing and seeking a long-term finance partner now you can take the time to explore all your options, consult experts and find the right product that fits your business. You can continue to deliver your growth plans, or even just ensure that you have that reserve pot of money for peace of mind.

It is always much better to look for finance when you don’t need it – rather than waiting for the situation to become desperate when no one will want to lend and what you’re offered won’t be competitive. 

Although there may still be uncertainty the topics discussed here should allow you to safeguard your business as best you can and seek advice from professionals, where it matters. 

Source: SME Web

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Brexit fear greatest among innovative SMEs

THE most innovative and “economically important” small and medium-sized firms in the UK may be hit hardest by Brexit, new research warns.

The study, from the University of St Andrews, notes Brexit is viewed as likely to result in lower levels of capital investment, reduced access to external finance, lower levels of growth, reduced product development and lower levels of business internationalisation for small and medium-sized enterprises (SMEs).

The research has found concerns about Brexit are not felt uniformly across UK SMEs. The university says the results suggest Brexit-related uncertainty is likely to affect larger, export-oriented firms in the SME bracket and those in hi-tech and service-related industries most. And the study notes innovative SMEs “seem particularly concerned by Brexit”, and may be the most negatively affected.

SMEs based in Scotland and Northern Ireland view Brexit more negatively than their counterparts in England and Wales, the research has found.

The University of St Andrews notes this in part mirrors the “differentiated voting patterns” across the UK in the June 2016 European Union membership referendum.

Ross Brown, reader in entrepreneurship and small business finance at the university, declared reduced capital investment “critically weakens and undermines” SMEs’ ability to grow and prosper.

Source: Herald Scotland

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Invoice financing reaches record high in UK

Figures from finance and banking trade association UK Finance have shown invoice financing has reached a record high of more than £22 billion.

The figures showed an increase in invoice finance to businesses in the third quarter of 2017, with a year-on-year rise of 13 per cent.

Growth

A number of invoice financing firms have driven growth in the invoice finance and asset-based lending sector. Global electronic invoicing firm Tungsten Network Finance announced its total originated invoice outstandings have reached a record £54.5 million. This is up from 89 per cent of £28.8 million in October last year.

Despite the positive figures, there are concerns about how negotiations over Brexit will affect invoice finance levels, with research from tech services company Equiniti showing a connection between the confidence of businesses when borrowing and economic fluctuations in the UK. Figures from the analysis showed declines in GDP growth have had a knock-on effect on the confidence of businesses when it comes to invoice borrowing.

Encouraging

Commenting on UK Finance’s figures, UK Finance Director of Invoice Finance and Asset-Based Lending Matthew Davies said there is increasing understanding among businesses of all sizes of how invoice finance and asset-based lending are able to support them as they grow. It’s encouraging that a significant proportion of the sustained increases in lending recently is helping to boost exports.

However, he added  more funding could and should be provided through invoice finance, and called for the UK Government to bring forward long-awaited legislation to provide smaller businesses in particular with access to much-needed capital.

Source: LSBF

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SMEs optimistic about obtaining finance in 2018, report shows

A report from retail bank Aldermore has shown small and medium-sized businesses are optimistic about obtaining finance over the next year.

The Aldermore Future Attitudes report surveyed more than 1,000 business decision-makers across the UK. They found 75 per cent are confident they will be able to access funding to achieve their growth ambitions, up from 63 per cent in Q4 2016.

Positive

The report also showed businesses are positive about their revenues, with more than 40 per cent expecting their revenues to increase over the next 12 months, compared to 39 per cent in Q4 2016. Eleven per cent of respondents said they are expecting their profits to increase significantly over the next 12 months.

Business owners also revealed how they plan to achieve revenue growth, with 50 per cent planning to boost their marketing efforts. 38 per cent are planning to launch new products, and 33 per cent say they will boost profits by entering new markets.

Crucial

Commenting on the report, Aldermore Group Managing Director of Business Finance Carl D’Ammassa said it’s encouraging that optimism among SME leaders is increasing, with attitudes towards business revenues positive for the next 12 months.

He added SMEs make an essential contribution to the economy and with Brexit progressing, their ability to get finance and help support the economy is crucial.

Source: LSBF

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Agenda: The perils facing businesses which fail to plan for Brexit

DESPITE the stance adopted by Theresa May’s Government after the recent round of talks we cannot be too optimistic about the potential range of outcomes. The potential for a “disorderly Brexit” remains but now the banks can cope with it, says Bank of England Governor Mark Carney.

Attempting to instil confidence, banks have recently passed stress tests which include a 33 per cent fall in house prices, a rise in interest rates from 0.5 per cent to four per cent within two years and an increase in unemployment from its current 4.3 per cent to 9.5 per cent. But what planning are the banks doing for business customers they support? With no formal “duty of care” to their business customers how might a “sharp” Brexit restrict their ability to fund new money or maintain existing loans to business?

It’s clear that the banks will have a requirement to ensure their own balance sheet remains strong and they must also meet and pass tests as to how much cash reserves they hold. But in the heat of battle decisions must be made. Those small businesses which were trading after the financial crisis of 2008 recall the limitations to how they could invest or grow their business and, in the worst case scenarios how sudden decisions to withdraw from certain sectors saw business failures spilling over into communities: to jobs, livelihoods and families.

Our most recent research has confirmed that, even before Brexit is a reality, bank net lending to small and medium-sized enterprises (SMEs) has been collapsing.

Often SMEs are the ones that are taking the risk in innovation, or in developing new technologies – but in times of recession these types of businesses are often turned away by mainstream lenders when they should be regarded as even more vital to raise productivity and grow the economy out of a downturn.

If banks are stress testing their own businesses, how then are business customers stress testing theirs and working out what they should do? Our interim report, Brexit & Scottish Business, reveals that many businesses are still failing to undertake even the most basic planning for an orderly Brexit never mind the disorderly Brexit that is actively being considered by banks. Business owners cite “uncertainty” as to why they are failing to plan, with some living in the blind hope that Brexit will not take place at all.

Some businesses are taking advice on what to do. That advice is mostly being sought from Government agencies or from business bodies such as the CBI, the Institute of Directors, the Federation of Small Business or their local Chambers of Commerce. Ironically, it is the banks themselves that are being consulted the most infrequently with lack of trust in banks being a prime factor.

Thus, business is often not planning, banks are planning only for themselves and the Bank of England is actively conceding there could be “economic pain” for business and households. “Fail to plan – or plan to fail” is the mantra by which all business, regardless of sector or scale must live. For now that might mean stockpiling cash, ensuring credit lines remain secure and so forth. Diversification could be considered by some. Price rises in supply chains could be modelled to ensure sufficient profit is baked in.

This is a time for action particularly for the small, inexperienced or exposed businesses that have the lowest capital reserves. Businesses no less than banks need to be able to cope with a “disorderly Brexit”.

The uncertainty and lack of planning in business presents both the UK and the Scottish Government with a major policy challenge. Government, too, must take action to support business. As with business, to do nothing would be to invite failure.

Source: Herald Scotland

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The UK has the highest number of new business developments in a developed country despite Brexit

  • There were 218,000 new businesses in the UK last year, a 6% rise year-on-year. 
  • Other developed countries saw an average of just a 2% rise. 
  • Crowdfunding and peer-to-peer lending has been credited with this sharp rise in start-ups.

The UK outranked all other major developed economies in terms of the number of businesses established last year, according to figures from accounting group UHY Hacker Young.

It became home to 218,000 more businesses in 2016, a rise of 6% over year-on-year. Meanwhile, other major developed economies including France, Germany, Italy, Japan and the US saw an average 2% rise in number of businesses over the year.

The UK ranked sixth of the 21 countries studied by UHY, behind China, Pakistan, Vietnam, Malta and India. Across all the 21 countries, there was a 7.7% rise in established businesses.

“Enterprise and entrepreneurship in the UK have been gathering pace at impressive speed,” said UHY’s Daniel Hutson.

“As a range of new sources of funding gain traction in the market and the corporation tax burden lightens, the start-up climate is improving, financial pressures are easing and investment for growth is on the cards.”

UHY credited alternative funding sources, such as crowdfunding and peer-to-peer (P2P) lending, with helping to boost the entrepreneurial environment. The Conservative plan to lower corporation tax to 17 per cent by 2020 may also be helping to attract firms to the UK.

“The figures suggest confidence in the economic outlook, despite Brexit. Whether this is sustainable, given the uncertainties that still surround the ongoing negotiations with the EU, will be something the government will want to watch,” said Hutson.

While the UK had a total of 3.9 million businesses within its borders as of the end of 2016, China — which saw a massive increase of 19% — had 26.1 million.

The US fell in 13th place, with the number of businesses increasing by 2.1% over the year to 11m.

Source: Business Insider