Considering the political situation in the UK, it’s easy to become cynical about the country’s economic prospects. British business owners, however, are striking a positive tone for their own prospects. More than three out of four small and medium sized business owners have recently expressed confidence that they’ll be able to access the funding resources they need to grow their revenues and expand their business in the coming year.
However, other reports indicate that business has noticeably slowed in many parts of the UK, even as costs have risen, leading to a decline in net business creation, revenue, and employment. With mixed messages like these, it can be tough to figure out what is really going on. The answer, of course, is that some industries and some regions are feeling the pinch more than others.
The numbers are down, but businesses expect growth
According to the Aldermore SME Future Attitudes report, small business owners have become far more confident of their financial security and the UK’s general trading conditions over the past year. In the 4th quarter of 2016, a 63 per cent of business owners indicated that they were confident in their ability to secure the funding they needed. Since then, that figure has risen to over 75 per cent. The business owners surveyed by Aldermore clearly don’t feel threatened by the UK’s ongoing political turmoil, and 42 per cent explicitly expect revenues to increase in the coming year.
At the same time, the CYBG SME Health Check Index for the Q3 of 2017 has dropped to its lowest score since Q1 of 2014. The Index’s score is based on 8 indicators, 6 of which declined from the Q2 to Q3 of 2017. The sharpest drops were in revenue, employment, confidence, and net business creation. Important to note, however, is that not all of the UK was affected adversely. The report indicates that the North East, West Midlands and Yorkshire experienced the sharpest declines, while the South East and London are actually growing at a healthy rate.
The question for business owners and investors alike is why some businesses are struggling while others are doing better than ever, and how to ensure that their own business is a part of the latter group.
Attracting foreign investors
One figure that has consistently increased for the UK since it announced its decision to leave the European Union is foreign investment. The falling value of the pound against the euro and the US dollar is a massive incentive for investors. Compared to previous years, these favourable exchange rates mean that investors can purchase significantly more equity in UK businesses with their foreign funds.
Simply by looking at where UK businesses are thriving, we can see the impact these investors are having. As a global business hub, London and the surrounding region is the natural gateway for foreign investment into the country, and it’s thriving as a result. Other regions that aren’t as well connected don’t have the same level of access, and are suffering as a result. It doesn’t mean these businesses can’t find foreign investors, it just makes them marginally less likely to have pre-existing international investor relationships that they can take advantage of immediately. Taking advantage of the opportunity would require those businesses to actively pursue foreign investors, which many small businesses simply don’t do.
Developing financial solutions for all UK SMEs
The cost of doing business in the UK reportedly increased by 2.5 per cent from the second to the third quarter in 2017. At the same time, the Bank of England’s first rate hike in a decade has made traditional financing less accessible to small businesses. For businesses that aren’t already positioned to take advantage of growing foreign investment, this trend is definitely part of the problem. To stabilise their cash flows, they need to find ways to access these new resources, and to prepare other financial solutions to manage any resulting insecurities.
That means working to network with foreign investors and other UK businesses with strong international investor relationships, and taking steps to find other financing solutions. For the latter, businesses can get better control of their finances by working with a financial institution like Fifo Capital. Tools like invoice financing, supply chain finance, and unsecured business loans allow business owners to access the funds they need to cover shortfalls and pursue growth opportunities quickly and easily.
The UK economy is strong, and offers a lot of opportunities for flexible and enterprising business owners. While the best way to access these new opportunities is changing, alert and proactive entrepreneurs can find and pursue these new growth opportunities to make 2018 their best year yet.