In the last month or so I have attended various events where the subject of the UK economy has been a major topic. It is clear that the perception or otherwise of a slowly recovering UK economy is dependent on whether you are being targeted as a voter or a business, especially an SME company. Five years of record low Bank of England base rate however has left savers out of pocket against inflation but borrowers getting better deals. The problem for businesses who have been surviving with low interest rates is what happens when they rise, even by small increments.
The public perception, being generated by politicians and those picking the most apt economic statistics, suggest the worst is over and growth is picking up, unemployment falling and house prices booming. It is however questionable whether fuelling the economy with “help to buy” for new and other property values of £600k actually helps the banks to lend more. It also allows buy to let landlords cash-in but hopefully stimulates more movement in the property market for first time buyers and those who have held back on moving recently. The warning signs are that possibly interest rates will rise earlier, that has an impact on mortgage rates and repayments and that year after year there are significant increases in utility, food and fuel costs that outstrip increases in wages, let alone the inflationary impact.
From a business perspective the view of how government and the banks are helping business is somewhat different. The larger corporate businesses have survived in the main and retrenched by holding cash rather than borrowing, investing or acquiring companies, but this may change. The SME companies however are still finding it hard to get appropriate and cost effective funding from the banks with some not wishing to be rejected with the additional information and forecasts being demanded as part of the loan negotiations. Potentially rising interest rates, consistently high business rates and rents are being pushed upwards. One of the costs that will impact a vast number of smaller businesses in the next year is auto enrolment for pensions with all the associated costs and administrative burden being with the companies.
It is not all doom and gloom but it does look that the recovery of the economy is going to be over a number of years, and certainly after the next UK election, due in 2015.
The last few weeks have seen each of the main political parties hold their annual conferences across the UK with, it appears, the small advantage in the YouGov poll changing from a Conservative lead at the start to Labour by the end. Apart from the odd poor comments and badly delivered jokes by various of the speakers, there were no stunning outputs of note.
Meanwhile, back in the real world of business, the signs are that the UK economy may be picking up in some areas and that businesses that have made the painful adjustments to surviving in adverse times may start to reap benefits as growth and demand improves. There are however the same problems cited by small businesses in the difficulty to obtain funding, even though the “funding for lending scheme” has provided some respite, with many finding the lenders change the approval criteria periodically and the “credit teams” within their organisations appearing to be the arbiters of signing off on lending. It is also clear that the arm’s length approach, where the decision makers not having any “client relationship” fundamentally do not understand the businesses requesting support.
The appetite to start new businesses and grow them is there but there must be more positive support from those that control the supply of funds.
It is a second year of low or no growth in the UK economy with many businesses continuing to struggle. Looking at the small and medium sized enterprise, (SME), sector, low interest rates have enabled companies to survive the downturn and where funding requests have been made, it has been to support working capital requirements and not for growth or expansion initiatives.
Businesses appear to be waiting for something to happen but it is individual company’s that can be the catalyst for stimulating the economy. Few are really carrying out an annual MOT – (Management’s review of Opportunities and growth Tactics), evaluating their strategy and where they want the company to be in a year or two years time.
MW Interim Finance can facilitate these business reviews and assess operational efficiency across their business function’s, provide strategic options and facilitate their implementation to drive growth benefits.
MW Interim Finance recently attended an Angel News sponsored event in central London, “Pitching for Management” and Martin Walby was asked for his views “This is the second event of this type I have attended via The Boulevard networking community. I was impressed by the enthusiasm and commitment of the companies presenting, both in terms of their products and service offering and the honesty with which they outlined their immediate management resource requirements. As an independent interim finance director it was also refreshing to encounter so many early stage businesses with growth potential against the background of a struggling UK economy.”