Sixty-five percent of small business respondents in the latest Enterprise Index by Smith & Williamson have indicated that they aren’t getting the support they need from the UK government. Not only has there been little in the way of government action to bolster small business recently, there has been no practical guidance on what businesses should expect in the coming years.
Businesses, both large and small, can’t afford to simply wait and see. As a result, they are forced to look for alternative private sector financing solutions to survive and to ensure their prosperity in an increasingly uncertain economic future.
What’s holding SME’s back?
Small businesses don’t have the support or the information they need to thrive in the British business environment today, and there are fears that this will exacerbate future economic troubles on the horizon with Brexit.
The UK’s upcoming withdrawal from the EU promises to wreak havoc on British businesses. This is less because of clear economic penalties that businesses will be forced to deal with so much as a stunning lack of progress in determining what trade policies businesses will be operating under when Brexit actually happens. Every day that businesses lack concrete information about the future is another day in which they can’t make clear and definite plans.
The response of large and internationally influential businesses to this situation has been telling. With investment banks and other large corporations already starting to move their headquarters out of London and the UK, small business owners are justified in feeling insecure. Instead of adjusting their operations to operate in the coming new environment, small business owners are forced to guess what will happen, and gamble with their livelihoods to make appropriate investments that may or may not put them in a favourable position in 2019.
Failing government support
While the UK government has offered a substantial amount of talk about keeping UK small businesses strong, there has been little concrete action to speak of. From a political standpoint this is understandable, since job growth has remained strong and the economy in general has held steady. Business owners, however, are aware that consumer confidence is shaky, and that they’re standing on relatively thin ice with little aid to reach for when the cracks begin to show.
Most recently, the Bank of England’s small rate hike was meant to signal a British economy in recovery. Surprisingly, the news was met with alarm instead. This suggests that the direct effect on consumer and SME buying power in the short term was seen as a greater concern than the broader positive implication of a rising interest rate: economic recovery.
Pursuing private sector solutions
To protect their interests going forward, businesses of all sizes need to prepare themselves as well as possible without top-down help from the government. While larger international businesses can do that by distributing assets and risk across multiple countries, SMEs need other solutions to see them through.
Working to attract foreign investment
The relative decline of the pound sterling over the last few years, along with a few other factors, has led to an increase in foreign direct investment in the UK. Foreign investors and their assets won’t be directly harmed by any localised economic downturn, and can continue to provide support even after domestic investors are forced to pull out. This makes them an important lifeline for businesses that are anticipating instability.
Preparing cash contingencies
Unexpected inflation, interest rate hikes, investor loss, or a simple drop in consumer confidence can wreak havoc on a small business’ budget in the short term. While a rescue from a foreign investor would certainly be a welcome sight for most business owners, many can’t afford to rely on that. Instead, they need to find ways to manage cash flows to adjust to the changing demands of their business on their own.
To respond to and resolve momentary financial issues, businesses need short term financing tools to allow them to consolidate current and future funds. Collecting outstanding payments early using invoice financing, or using supply chain finance to defer outgoing payments to suppliers allows businesses to resolve budgetary issues that might have rendered them insolvent otherwise. Most significantly, this can buy your business the time it needs to adapt to unexpected changes.
Despite a currently stable economy, small businesses in the UK are anticipating a tough road ahead. In the absence of financial support or clear information and guidance from the UK government, businesses need to take steps to protect their own interests and to ensure their success and prosperity in the years to come.