Global research recently carried out by a leading UK financial services specialist points to continued global uncertainty affecting UK SME’s.
Coupled with continuing low productivity rates, the findings of the research can make for sombre reading.
The ongoing Brexit negotiations have led to periodic stockpiling which ebbs and flows with the ever shifting proposed Brexit deadlines. This in turn has led to spending peaks which quickly transform into significant troughs as UK businesses are forced to run down stocks held in reserve in anticipation of the impending withdrawal from the EU.
The UK’s manufacturing sector has also had to contend with the global downturn negatively affecting the industry. With long term trends predicting a contraction for the sector, it will almost certainly be SME’s further down the construction supply-chain that bear the brunt of the pressure.
Although larger businesses will be able to endure periods of decreasing demand, SME’s will likely not have the resources or reserves to do so. Interest rates have been at lower levels for a number of years and cannot feasibly remain that way indefinitely, whilst the market finance options currently available are much cheaper. As competition increases, businesses laden with credit card debt may well be the most affected.
The overall picture suggests a continuing rise in UK SME’s sourcing external finance. Under normal circumstances, a spike in the number of businesses investing in themselves would be considered positive. However, the research illustrates that the increased investments are being utilised to ease cashflow amid rising material costs as a result of the weakened sterling and increased competition as opposed to growth expenditure.
“The overall picture suggests a continuing rise in UK SME’s sourcing external finance”
What’s certain in an increasingly uncertain environment is the next 12 months will be crucial for the UK economy and it’s long-term robustness. For UK SME’s in particular, the challenges this global uncertainty has created will need due care and attention to ensure any opportunities can be capitalised upon.
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