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Business Sentiment Index reveals a cautious return to confidence for SMEs

Close Brothers Asset Finance’s Business Sentiment Index (BSI), which measures SME business confidence, has risen for the first time since September 2021 following three consecutive falls, and a low at the end of 2022. These were caused, in the main, by rising inflation, energy cost increases and higher interest rates.

Despite the headwinds still being faced by small and medium-sized firms and inflation stubbornly remaining in double digits, wholesale energy prices have fallen from their summer 2022 peaks, and there appears to be more certainty about where interest rates rises are headed, all of which is helping firms plan with more assurance.

This change in confidence is better understood when looking more closely at businesses’ priorities, which are achieving growth (28%) and managing costs (26%), well ahead of issues like paying down debts (9%) and business consolidation (9%).

Neil Davies (pictured), CEO of Close Brothers’ Commercial business, said: “After well over a year of declining confidence – according to our data – it’s encouraging to see an element of positivity returning to the market, no matter how tentative.

“What business owners want, almost more than anything, is an element of consistency, which gives them the ability to plan and forecast effectively. Many of the recent challenges have been entirely unexpected, and after the difficulties of the past few years, it’s impacted their ability to grow.

“But what it has again demonstrated is the continued resilience of the UK and Ireland’s SMEs, and we’re looking forward to working with them in the coming months and years.”

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Appetite for investment. Overall, the appetite to invest remains strong, as it was at the end of 2022, with three-quarters of UK firms looking to seek funding for investment in the next 12 months, up from 67% in July 2022.

This is reflected across all key sectors, with the most notable rise coming in transport & haulage, where the number of firms planning to seek funding has risen by 9% to 81% (from 72%), while manufacturing & engineering remained very strong at 83%; services saw a fall of 13%, from 76% to 63%.

Missed opportunities. The number of companies that have missed business opportunities because of a lack of available funding fell from 51% at the end of 2022 to 45% in May 2023.

While this is an improvement, these are historically ‘high’ figures – for example, in May 2022, 37% of respondents answered ‘yes’ to the question ‘have you missed a business opportunity in the last 12 months, due to lack of available finance?’.

It would appear businesses are concerned about impacting their cashflow by dipping into their reserves or taking out a standard loan and adding to their debt burden.

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Economic outlook. Businesses continue to be more negative than positive about the macro-economic outlook but the gap between positive and negative sentiment narrowed significantly since the start of 2023.

That being said, this indicator that has contributed most to the decline in the overall BSI; for example, in November 2021 75% of respondents were positive about the economy – by December 2022 this had fallen to just 36%.

From a sector perspective, transport & haulage again saw the biggest swing towards the positive.

Predicted business performance. Predictions about future business performance remained stable, with the majority expecting their prospects to remain unchanged. Overall, fewer firms predict they will contract than earlier in the year (10% against 15%).

The most notable rise in positivity is the print and packaging sector, which saw an increase of 20% (19% to 39%) of firms expecting to expand.

Score calculation. The BSI is based on the views of 911 business owners and senior members of the UK’s business community and calculated from data charting their appetite for investment in their business in the coming 12 months; access to finance and whether they’ve missed a business opportunity through lack of available finance; views about the UK’s economic outlook; and thoughts on their likely performance in the coming 12 months.

By Lisa Laverick

Source: Asset Finance International

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Average SME plans to invest £321k to grow their business

New research from Aldermore’s SME Growth Index has revealed the investment and growth plans of small and medium-sized enterprises (SMEs) in the UK. Despite the ongoing cost-of-living crisis, SMEs plan to spend an average of £321K on growth strategies over the next year. One in eight (12%) SMEs plan to spend over £1 million investing in growth.

SMEs plan to grow online but curb talent spend

A third of businesses want to expand their customer base (33%) and grow their current products and services (29%) in 2023, while also reducing costs to combat the cost-of-living crisis (30%).

To reach their goals, business leaders plan to invest in their online presence. One in four SMEs (26%) will put money into improving or building websites and apps over the next year. This is in addition to investing in digital marketing (24%).

Interestingly, following the ‘Great Resignation’ fears that saw SME-leaders prioritise talent spend in 2022, talent acquisition and increases to employee salary and benefits are likely to see the least investment (17% each respectively) over the next year.

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Business leaders continue to put hands in their own pockets to invest

SMEs will often turn to business savings (27%) or various forms of business finance (e.g., asset finance – 11%) to meet their goals. However, nearly two out of five SMEs (18%) will turn to their personal savings and over one in ten will use their own overdraft (12%) to meet business costs.

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Barriers to growth

Despite optimistic plans to invest heavily in the coming year, the biggest concerns SMEs are faced with are high energy costs (24%) and double-digit inflation rises (24%). This will represent the biggest barrier to business growth in 2023.

Those concerned about inflation costs estimate it could lead to delays in existing projects (19%), missed opportunities for growth (21%), and difficulties securing new deals (20%).

Tim Boag (pictured), group managing director of business finance at Aldermore said: “SMEs are the backbone of our business community and their ambitious growth plans over the next year bodes well for the economy, however they also face challenges brought about by high inflation and soaring energy costs.

“At Aldermore, we’ve supported SMEs through challenging times. It’s great to see from their plans that a digital presence for many has become a major priority, as consumer expectations have evolved post-pandemic.

“For business leaders, there are many sources of investment, be it utilising savings or accessing a range of specialist finance products; and at Aldermore we remain fully committed to backing businesses to realise their ambitions.”

By Lisa Laverick

Source: Asset Finance International

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Significant Rise in UK SMEs Borrowing Money Expected in 2023

The majority of UK SMEs (88%) plan to lean on business finance and credit this year according to new research carried out by solution-led fintech provider Nucleus Commercial Finance (NCF).

As the economic situation continues to challenge the outlook and stability of UK SMEs, it is revealed that only 12% of SMEs say they have no plans to borrow any money over the next 12 months – this rises to 29% when including sole traders and micro businesses. With interest rates still at record high levels, this is going to place a real financial burden on UK businesses.

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The expected borrowing is not, however, solely to patch holes. The reason most commonly cited by small and medium sized businesses is to enable them to seize growth opportunities (38%). More than a third stated that they plan to borrow in order to help employees with the rising cost of living (34%). A similar number said that borrowing would be driven by a determination to use it to make the business more environmentally sustainable.

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Rising costs and financial stress are still having an impact, however. A third (33%) of small and medium sized businesses expect to use business finance to cover unavoidable rising overheads, while one in five (20%) are likely to do so in order to pay off existing debt.

Source: Fintech Finance News

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5 Tips To Make Your Business Stand Out In A Crowd Of Competitors

Separating your business from the pack is key to success in any industry. How do you make sure your business stands out from the rest? Superb service and product quality are critical, but how your business is marketed and perceived will also decide your success and growth. With that in mind, let’s look at our five tips for helping your business stand out in a crowd of competitors.

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Tip 1: Establish Your Selling Point
What actually makes your business special? Why should a consumer choose you over a competitor?

Having an answer to these questions will determine your business’ selling point and is the steppingstone towards proving your ‘why’ to consumers. Establishing this early on is paramount or your confidence as a business owner will be lacklustre.

After your selling point is cemented the next challenge smaller businesses often face is gathering the team to support these operations. This can be mitigated through virtual office providers such as Servcorp which offer businesses a fully trained support team. As a small business, having your own receptionist, secretarial assistance and I.T support without needing to undergo the hiring and training process is a large cost plus time saver – after all, your time is money.

Businesses also receive this staff support at the fraction of the cost they would otherwise be paying.

Tip 2: Present a professional working environment

Many businesses find it challenging to create a professional working environment to impress their clients, especially for newer companies competing in major global markets on a limited budget. Traditional office spaces require long and costly leases, with break-out clauses only every few years, if at all.

A more convenient and cost-effective solution is a serviced office. These can be rented at a far less cost than a traditional office, whilst still being located in major business hubs like London and New York. Moreover, customers will enter an unbranded reception area allowing businesses to imply that they control the entire floor.

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Tip 3: It’s all about Marketing
Your product may be superior to competitors, but it will all be meaningless without adroit messaging and unique marketing. Your business is likely to have thousands of competitors, which is why the first step is to complete a competition analysis.

Comprehensively understanding what your competitors do well, recognising trends and identifying where others are failing will provide your business the strategic insight needed. From this your business will have a decisive direction on its marketing goals, however finding new methods to secure a commercial advantage will accelerate your point of difference.

For example, using a virtual office can provide an established look for smaller businesses based in the UK. With a virtual office your company can legally register its business address as the virtual office’s address.

Tip 4: Always provide excellent customer service
Customers expect and deserve excellent service when dealing with you. Make sure you have processes to deliver the highest quality customer service and ensure that all your staff are trained to meet these expectations.

Whether it’s the front desk staff, your Customer Service team, or a manager calling back, providing the best care for your client will help retain them over the long term. Even an unhappy customer can be won back if the service they receive after a problem is effective and genuine.

Tip 5: Network!
Get discovered by networking. There are many ways to find networking opportunities. Meetup groups, seminars, conferences, and industry events are great ways to meet like-minded people. This an opportunity to make business partners and scope out your competition at the same time.

And don’t forget the power of social media – there’s an app for almost anything these days!

By creating meaningful relationships in your industry, you can leverage audiences and gain exposure for your business. It’s also worth noting that all Servcorp’s serviced and virtual office customers gain access to Servcorp’s online networking community of 50,000+ global businesses and networking events, providing them with a significant additional value from their small investment.

Source: Real Business

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Keeping it in the family? SMEs divided on working with relatives

SME owners are split on whether to keep their businesses as a family affair or not, according to new research by small business lender iwoca. Just two in five (41%) SME owners say they would give a job to a family member if they asked – by contrast, nearly one in three (30%) said they would not employ a relative.

This split reflects current small business arrangements – just over half (54%) of small business owners say they do not work with family in any capacity. Of those who do work with family, one in four (26%) small business owners works with their partner and one in twelve (8%) works with their child.

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Steptoe and Son or Succession?

Those who choose not to work with family are clear on why: two in five (39%) small business owners report wanting to keep family and business life separate. One in ten (11%) say they want their family to forge their own path – indeed, more than a third (35%) of SME owners surveyed say it is unlikely that their children would join their business. Interestingly, a tenth (10%) believe their relatives can find a better career outside of their industry.

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Improving family bonds

Despite a minority of SME owners employing relatives, those who do work with family members see it as a positive. Almost two thirds (64%) of SMEs report that working with their relatives had a positive impact upon their relationships, with only a small fraction (7%) of SME owners reporting a negative impact.

Those small business owners who do work with their family cite trust as a significant positive, with a quarter (25%) saying that they trust family members to do a better job than a stranger.

Seema Desai, COO at iwoca added: “For some, working with family members could be one of the best decisions they ever make, but, of course, it won’t work for all. Try to make an objective assessment about what your family member can add that is currently lacking in your business, and whether you could both maintain the right guardrails to protect both your professional relationship and your personal one. Clear roles and responsibilities will be crucial as you look to grow and build a successful venture in the future together.”

Lottie Whyte is co-founder and CEO of MyoMaster, which she set up with her husband, Joe. She says: “I co-founded a business with my husband Joe three years ago, and for the most part it works incredibly well. There are three key reasons for this, the first is commitment – the work is all consuming and if I’d been married to someone who wasn’t in the business with me I’m pretty sure I’d be divorced by now! The second, trust, is vital and it’s great being able to start with a foundation already so strong. And finally, speed – being able to skip the pleasantries and communicate efficiently has been crucial.

“There can be drawbacks of course, from never being able to switch off from work and the constant pressure to build our global business can sometimes spill over into our personal relationship in a negative way. But overall, my husband and I already have a long history of working well together, from organising our three day wedding to managing house renovations – we know how the other one works.”

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Graduates accelerate SME growth across the North East

Graduates are our future business leaders.

They play an important role in supporting the health and growth of our regional economy-encouraging them to stay in the region is vital to both.

The University of Sunderland has an excellent track record in delivering programmes of support with graduate employability and retention in the region at their heart.

One such pioneering scheme is the Graduate Internship Scheme. First launched in 2011, the University of Sunderland received European Regional Development Funding (ERDF) to run its Graduate Internship Scheme, connecting graduate talent with regional, Small to Medium Enterprises. It has since provided over 650 graduates the opportunity to work in a variety of small-to-medium private sector organisations across the north-east and delivered nearly £2.4 million in funding to those businesses.

By Autumn 2022, the internship scheme will have placed 250 graduates into full-time roles within growing SMEs, earning an average salary of £20,000.

Graduates typically bring fresh ideas into those organisations, as well as a new perspective, and often help deliver a new product, process or service for the business. After 12 months, employers can decide whether to extend the intern’s contract, and most do, with a high rate of graduates being offered full-time employment on completion of their internship.

Project manager Laura Foster says: “It’s been a well-documented difficult and uncertain time for businesses over the last couple of years, and our project helps SMEs in a really practical way with help towards graduate’s salary costs”.

There are many success stories to have come out of the project and the internships team regularly receives positive feedback from SMEs and graduates who have benefited. One such example is Blaydon-based HLF Group. They recently recruited BA (Hons) Graphic Design Graduate, Brooke Gerrens.

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Director Rachel Conroy said, ‘Brooke’s appointment has had a hugely positive impact on our business. Previously we outsourced a lot of this work (Graphic Design and Media Management) which took time, and they didn’t know our products as well. I believe we can clearly demonstrate we have grown the business through the work Brooke has produced’.

‘The future is very bright. We have three very large tenders going through at the moment with multi -national companies to refurb their stock across the country. We are also seeing steady growth into new trade sectors.’

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Brooke told us of her internship experience so far, ’I have always had a creative eye, in particular editorial design which feeds into designing brochures for customers, therefore the job fits into everything I have wanted to do.

The atmosphere working at HLF is fantastic, design is something I have always had a passion for, so to have the opportunity to be creative in my career is great.’

The scheme delivers European Regional Development Funding (ERDF) and supports SMEs with the cost of employing a graduate, providing up to £3,500 in subsidy payments. After 12 months, employers can decide whether to extend the Intern’s contract.

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92% of SME leaders call on government to do more about inflation

As costs and inflation rise to record levels, small and medium-sized businesses across the UK are urgently calling for Britain’s new Prime Minister, Liz Truss, and her cabinet to provide them with more support.

A poll of 250 British SME leaders reveals an incredible 92% think the Government must do more to support small and medium sized businesses during this period of unprecedented difficulty.

The survey, commissioned by technology provider, Babble, identified the five biggest issues keeping SME leaders awake at night:

  1. Rising inflation costs impacting profit margins (58%)
  2. Retaining customers and clients (46%)
  3. Winning new business (39%)
  4. Impacts of Brexit on importing and exporting (24%)
  5. Providing exceptional customer service (22%)

SME leaders in the North West are particularly concerned with inflation pressures, with three-quarters (75%) of respondents from the region listing it among their biggest worries. Meanwhile, two thirds (65%) of business leaders in the East Midlands are losing sleep over retaining customers and clients, as SMEs struggle to compete. Delivering good customer service when the business is stretched is a particular concern for leaders in the north too, with 31% in the North West and 30% in the North East citing it as one of their biggest worries.

Following the last few years of pandemic-induced chaos, the healthcare industry (73%) is understandably one of the sectors most concerned about the impact of inflation, alongside arts and culture (78%). Investing in new technologies is another key concern for the sector, with a third (33%) of healthcare SME leaders saying so.

The impact of Brexit is still weighing heavily on small businesses too – manufacturing (50%), architecture and engineering (37%), healthcare (33%) and retail (24%) leaders each had it among their top four concerns, with worries around the effect on imports and exports.

Calls for cost-cutting support
When asked what support they’d like to see the Government provide to British SMEs, respondents overwhelmingly voted in favour of measures tackling rising costs. Over two thirds (67%) would like a cap on business energy bills, similar to household energy bills, whilst almost half (44%) want to see work done to reduce rapidly rising insurance premiums, especially on mandatory personal indemnity insurance policies. Other methods of support SME business leaders would like to see include:

• Corporation tax remaining at 19% regardless of business size (35%)
• Reintroduction of the furlough scheme through the initial recession period (27%)
• Reintroduction of the Brexit Support Fund for SMEs who are exporting to Europe (22%)
• Faster rollout of Building Digital scheme so all businesses have fast broadband (20%)

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Tech investment key to navigating trouble
With support so far unforthcoming, British SMEs are having to consider which areas they should invest in to successfully navigate this period. Over half (57%) plan to invest in new technologies to stay ahead of competition, though a quarter (23%) said they would have to scale back on spending plans. When asked, business decision makers are most likely to invest in:

• Software to improve customer experience (48%)
• Cloud technology to improve hybrid and remote working (38%)
• Increased protection from cyber attacks (31%)
• Initiatives to keep staff morale high (29%)
• Software to manage HR and recruitment processes (20%)

Commenting on the findings, Babble’s CEO, Matt Parker, says “SMEs are the backbone of the UK’s economy. But instead of being able to dream big, they are being kept awake at night worrying about how they’re going to navigate the next twelve months and it is clear they are going to need more support to do this. Whether it’s reducing costs long-term, ensuring greater customer service, stronger defences against cyber-attacks or promoting greater collaboration between teams, cloud technology provides the answer.

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“At Babble, we’re passionate about working with SME leaders to find the solutions to these issues and seeing small businesses thrive. As the country enters a new era of leadership, we’re determined to see SMEs up and down the country get the support they need and make the right investments to allow them to dream big for the future of their business.”

Babble is committed to powering business up and down the country, aiming to provide a local service to its customers, with the all the benefits of a national provider. The company supports over 10,000 organisations across a range of sectors and has over 250 staff located nationwide.

This makes Babble a natural partner for Ride Across Britain, an annual 980-mile bike ride from Land’s End to John O’Groats. As lead sponsor, Babble is demonstrating its support for clients across the UK, reflected in the cross-country route, as well as fundraising over £500,000 for charities, The Prince’s Trust and The Buffalo Foundation.

By Serena Haththotuwa

Source: Business Leader

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How the Autumn Budget will affect SMEs

The Chancellor’s Budget announced earlier this week by Philip Hammond has promised an ‘end to austerity’ for Britain. With numerous policies to help first-time buyers, lower incomes and housing, we look at how the new Budget will impact the SME marketing in the UK.

A significant change will be the Chancellor’s attempt to help fledging high-street businesses, who have certainly felt the pinch over the last year, with noticeable casualties such as House of Fraser, BHS, Byron Burger and Jamie’s Italian.

In a move to better the current situation for high street businesses, Hammond has pledged to cut business rates by a third for all retailers with a rateable value of £51,000 or less for the next two years. This will help retailers save up to £8,000 per year and that includes high street shops, pubs, restaurants, cafes and other small business owners that are losing ground online.

A further £675m has been assigned as a Future High Streets Fund, to aid the transformation of the UK’s high streets, to improve footfall and regenerate areas in need of redevelopment.

For entrepreneurs, the start-up loan scheme originally founded by Rt Hon David Cameron will be backing a further 10,000 new businesses – this includes seed funding, start-up capital, merchant loans and business finance. A further £200m has been put aside by the British Business Bank to replace funding which they are likely to lose from the EU following the Brexit deadline in March 2019.

For SMEs that take on apprentices, the training bill will be reduced from 10% to 5%, and the government will pay the remaining 95%. Those apprentices aged 16 to 18 and working in companies of less than 50 will continue to have their training full funded.

Losing out from the Budget will be the powerhouse tech companies who started abroad but operate in the UK and use schemes to avoid paying tax. Pointing out the likes of Google, Facebook and Amazon, the tax will be imposed on those firms with a global revenue of £500 a year and the increase in tax will put £400 million back in the UK government, when it comes into place in April 2020.

Elsewhere, a scheme has been planned to offer interest free loans those struggling with debt caused by high cost credit – relating specifically to unauthorised overdrafts, rent to buy and payday products. This will be based on a consumer level and not impact businesses or sole traders using guarantor, personal or bridging loan products.

UK roads and infrastructure are expected to get a huge boost at just under £30bn in investment and first time buyers in shared ownership schemes will have their stamp duty scrapped – giving them a saving of £10,000.

Source: FinSMEs