Posted: Thursday, 24 November 2022 @ 10:20
After much anticipation, British finance minister Jeremy Hunt announced updates to the nation's budgets and finances in the Autumn Statement last week, with a view to getting the economy back on track. So, as small businesses, what do we need to take into consideration to thrive over the next 12 months and beyond?
Setting the scene: Hunt's Autumn statement
The actions were described as "painful fiscal medicine to ensure Britain could build on the recent restoration of calm in financial markets." (Reuters)
Amongst other things, for businesses, key information included the freezing of business rates for the next five years, extended and increased relief for retail, hospitality and leisure businesses, a scheme to cap bill increases for businesses and the Supporting Small Business scheme. In context, the Office for Budget Responsibility (OBR) has forecast that GDP will grow by 1.3% in 2024 and by 2.6% in 2025 compared with its previous forecasts for growth of 2.1% and 1.8% respectively.
The result is a series of tax increases and fiscally responsible policies, with the necessary goal of driving down inflation and restoring investor confidence in Britain. That’s all well and good, but compounded by the increasingly conservative behaviours of nervous banks it doesn’t make for a terribly easy business growth environment.
Lending, loans and cashflow for SMEs
City AM reported in May this year that "banks across the UK are ‘pulling the drawbridge’ as lending to small businesses hits all-time low" - if this current economic downturn is not your first rodeo then that will come as no great surprise to you.
In Q1 of 2022 alone, successful loan applications were down 32 percentage points on the previous year to 44%. Of those approved, 42% planned to use credit to manage cashflow as the majority of small firms were impacted by late payment of invoices over the first quarter of this year - a propensity that has only escalated.
Bank of England figures showed that despite small firms making net debt repayments of close to £1bn in March alone, the annual growth rate of lending to SMEs was at a record low, while lending to big corporates had significantly increased.
The backbone of the UK economy That's fine, but when the economy needs to grow, who does the nation ultimately rely on?
It might look as though it's the ministers and the big banks, but in reality it's the small and medium sized businesses at the coalface of economic growth. SMEs account for 99.9% of the business population and this is where inflation and a lack of traditional bank willingness to lend really comes to the fore.
That said, the FSB found that between 2020 and 2021 the business population decreased by 390,000 (6.5%) - the second and largest decrease since 2000. It's a reasonable assumption that most of those businesses that suffered are SMEs, and given the state of the economy today, perhaps we need to be considering how we support them better?
SME cashflow and non-bank business growth solutions
This is where the ‘non-banks’ really show their value. The big banks’ lack of lending to SMEs when things get tough is a tale as old as time, and to some extent it's understandable given the way they’re structured. That doesn't help those of us on the ground however. In many ways this dichotomy was one of the driving forces for the creation of Rivers itself - to provide expedient loan options for hard working SMEs.
Independent, specialist lenders have historically been there for business of all sizes even when traditional banks have not. We were there in the last recession, all the days in between, and we’re here now, with a commitment to fast application and approval processes, fixed rate borrowing and an increased range of product options with two-to-five-year terms, including:
- Finance leases
- Hire purchase
- Sale and lease back
- Asset refinance
- Unsecured business loans
- Secured business loans
- Secured revolving credit facilities (incorporating the above products)
- Block discounting
So while the government’s doing their bit and the world continues to debate the pros and cons of Hunt’s actions, for those of us in business, we’re only interested in getting on, making things happen and thriving as we head into 2023. Shall we get on with it?
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