Keep a weather eye on the global climate


Clouds gathering over the global economy have implications for all businesses. From small wholesalers to the largest corporates, no business is fully immune to the effects of a global downturn.

I’ve cautioned for some time that another economic slump could be on the horizon and there are a number of significant challenges for nations across the world to contend with.

Recent ripples emanating from China have pushed this train of thought to the fore as the Asian giant’s stock market slide on “Black Monday” caused markets all over the world to wobble.

China looks vulnerable for the first time in years. Could growth be over stated? Might the stock market and currency be overvalued?  Only time will tell.

Earlier this month, The Independent reported that Samsung is to cut 10 per cent of its staff at its South Korean headquarters and the outlook of SMEs in Singapore has hit a three-year low with weaker sales predicted across all sectors according to the Singapore Business Federation.

Closer to home, the Greek crisis is far from abating as the country plans snap elections later this month, which could have profound consequences on the European economy if the third bailout deal is reversed.

Add to such concerns uncertainty over the UK’s place in the EU – and questions over the timing of interest rate rises – it’s plain to see that a lot could go wrong over the months ahead, any of which could have adverse effects for SMEs.

I was intrigued as to why the noises from the Bank of England discount the impact of volatility in the Far East and focus on the threat of inflation above 2% domestically. I do wonder if  this is simply talk to prevent excess rather than a real desire to raise rates. Who knows?

I believe that there is underlying inflation masked by weak oil prices. However, when unmasked, demand may drop due to overseas forces. This could dampen down inflation by another means. For my money a rate rise would need to be small and cautious if it comes at all this year.

Preparing for the worst

Homing in on the market for SME funding, there appears to mixed signals about how they are faring amid this macroeconomic fog.

The Bank of England reported in June that loans to non-financial businesses decreased by £5.5 billion on an annualised basis.  This marks the biggest drop since the bank started collecting data in 2011. Probing the data further, it reveals that lending to all SMEs actually remained flat, while the contraction took place among larger companies.

Yet flat lending figures appear to have done little to dampen the confidence of SMEs in the UK. The Federation of Small Business (FSB) recently recorded the highest ever number of firms planning to invest in their businesses. The FSB Small Business Index found that “nearly one third of businesses (32%) plan to increase capital investment over the next 12 months.”

Ultimately this means there is a mismatch between SME perceptions and reality as, based on the BoE figures, we are not really seeing the kind of increase in business lending that could likely sustain the significant spending and investment they anticipate.

The squally economic and regulatory weather means that SMEs will be well advised to be careful who they borrow money from. Larger funders have a habit of doing the hokey cokey when it comes to the SME lending market. They’re in when it’s all good and out when the sun stops shining.

Credit appetites are being stretched and margins compressed, and this is a sure sign that when growth slows the economic impact will be painful. The longer things take to turn, the more painful things will be. Working with relationship-based funding partners with track records of growth during recessions is where SMEs will fare best.

Only time will tell how this melting pot of global challenges will impact SMEs. It’s for this reason that businesses should hope for the best and prepare for the worst and this involves making sure their cashflow is in order, sooner rather than later.

Queen’s Speech: More questions than answers?


In my last blog I revealed the policy ‘wish list’ of owners and decisions makers of 1,000 small and medium sized businesses. The overall take away was that SMEs want the Government to let them get on with running their businesses, without creating change simply for the sake of change. Last week in the Queen’s Speech, the Government announced its policy intentions for the year ahead with some positive signals for SMEs, though uncertainty still remains on some key issues.

Simplicity and stability are the two key desires of UK businesses, whilst the critical issues of productivity and EU membership are making small business owners across the nation ill at ease.

In the Government’s Enterprise Bill it was announced that “measures will also be introduced to reduce regulation on small businesses so they can create jobs”. The bill will focus on significant deregulation and the cutting of red tape, seeking to save UK PLC £10 billion in the process. The sentiment of this bill is welcome because a lighter burden would simplify the work of SMEs, providing more freedom and independence with less confusion and restrictions. But SMEs require clarity around how such a substantial saving of £10 billion will be made – with intricate details of where and when the red tape will be cut. Many hope the Government will disclose these details in July’s budget in order to provide full transparency and clarity to business owners across the country.

Another important feature of the Enterprise Bill will be the establishment of a Small Business Conciliation Service (SBCS). The service will operate with the sole purpose of settling business-to-business disputes such as late payments issues, preventing the need to go to court. In our recent survey, a fifth of business owners polled said that legislating to tackle late payments was an immediate priority. It is high time that late payments become an anomaly, rather than an ever-present feature of life for SMEs.

The prospect of an in-out referendum on the EU became a reality in last week’s speech as it was announced that “early legislation (will) be introduced to provide for an in-out referendum on membership of the European Union before the end of 2017”.

The issue of the UK’s relationship with the EU will continue to be a thorn in the side of small businesses as this uncertainty has hugely detrimental implications for stability and future prospects. Our research shows that a third of business owners want to see a commitment to remain in the EU from this Government. These businesses do not have the resources to scenario plan for a potential Brexit and assess the potential risks to their business. Unless a decision is made to bring the referendum forward – as many are hoping – for the next two years, SMEs will be in the dark. They will be doing their best to prepare for a worst case scenario, instead of pursuing their most ambitious dreams for the business.

Start-ups and small businesses across the UK need certainty and security in order to flourish and this is the benchmark against which the new Government will be held to account.

Next Government must recognise the full range of financing options for UK SMEs


The lead-up to the General Election on 7 May has had an unprecedented focus on small businesses, with all parties outlining policies designed to support their growth. The parties appear determined to help ‘working Britain,’ particularly the small business owner. But the political parties’ manifestos indicate a worrying ignorance of how SMEs seek financing. They imply that UK SMEs are faced with a simple dichotomy: the big banks on the one hand and emerging peer-to-peer lenders on the other. The reality is very different. UK SMEs have a number of financing options available to them, including thriving independent funders. Bibby Financial Services is one such funder, acting as the lifeline for small businesses during the recession and ensuring their survival. Now Bibby is helping these crucial businesses return to growth.

The political parties seem to believe that more quangos will solve all of SMEs’ problems. But will a Small Business Administration, a Small Business Conciliation Service and a British Investment Bank foster growth in the crucial SME sector? The next Government should focus on making all the options available to SMEs self-evident to business owners and decision-makers, rather than creating more public bodies. Equally the manifestos favour forcing more responsibilities and broader remits onto the British Business Bank. But surely narrowing its remit to the provision of financing for those SMEs that need it most is the most effective route forward.

The main parties have heaped praise on peer-to-peer lenders, with some planning to increase support for crowdfunding and alternative lenders by aligning them with Local Authorities. However, we must not lose sight of the fact that peer-to-peer lenders are risky and untested. The new kids on the block will not herald the salvation of UK SMEs. Nor do they represent a panacea to the market as a whole.

From our customer feedback, many small businesses are nervous about using these platforms and do not trust them. They prefer more personal and local service which can respond to their specific needs. That is why Bibby is expanding our locations and employee numbers to be nearer to our customers.

The next Government must open its eyes to the size and scale of the financing market serving SMEs. Simply ignoring independent funders who sit between banks and peer-to-peer lenders is not an option. We must prioritise educating UK SMEs about all the financing options available to them. Only then will we improve the UK’s productivity and innovation, areas where we are sadly underperforming against our global counterparts.

Thanks for reading

David Postings

UK CEO, Bibby Financial Services

About David Postings

David Postings is the UK Chief Executive Officer for Bibby Financial Services following his appointment in April 2012. David is an experienced senior executive with over 35 years’ experience in financial services. David has extensive knowledge of the commercial finance landscape.

You can read more about David Postings and his position at Bibby Financial Services in the About Me Section.

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