SME’s Key Role, as 2014 Shows Signs of an Economic Upturn


While we are only just into 2014, it is being talked of as a promising year for both business growth and the economy.

Results have been presented by government agencies, economists and other financial institutions.  These numbers are overseen and administered by the Office of Budget Responsibility, mandated to ensure that there is no political manipulation of the economic figures.  One week is a dangerous statistic, but based on published results, growth in business investment has increased from 1.9% in 2013 to 6.1% in the first week of 2014.  Exports of services and goods have also increased from 1.5% in 2013 to 4.4% in 2014.  Finally, the average earnings of the public have increased  by 2.7% from 1.4%.

Each year the financial growth, or loss forecast, is supported by the Deloitte Survey of UK Chief Financial Officers.  This report is based on how major corporations in the UK plan to navigate through the opportunities and risks presented to them through the year.  While the survey only accounts for about 30% of the UK equity market it showed that, based on more than half of the CFOs interviewed, 2014 was a good year to consider more expansion.

What exactly does this mean for the economy in 2014?  It means that most company CFO’s are coming into the New Year with an increased level of confidence.  We have seen capital constraints and macro uncertainty wane.  The probability of the UK sinking back into a recession is down to 16% instead of the projected 40% of one year ago.  Expansion is the buzz word for 2014, with capital expenditure becoming a priority and mergers/acquisition activity expected to increase throughout the year.

Based on the Lloyds Bank Commercial Banking Business in Britain report, which worked with 1500 businesses in the UK, greater confidence is growing thanks to the projected stronger profits through more orders and sales between now and June.  Businesses feel that the growth in confidence that they are experiencing will continue, as evidenced by a 15 point jump from 30% in July 2013 to 45% in January 2014.  This is the fourth consecutive increase that business confidence has experienced and the reported 45% is very close to the 46% confidence levels last seen in Q194!

With the growth impacting companies in a positive way, many businesses are looking at financing that includes equities, bonds and importantly borrowing.  This is also a good sign for lenders as it shows corporate confidence in a viable source of financing.  Traditional SME financing remains difficult to come-by due to the reticence of banks; much of which has to do with the stability of the borrower, affordability and requirements for security. Alternative lenders, such as Merchant Money, have seized the burgeoning opportunity with products tailored to meet the short term needs of expanding companies by offering simpler and quicker access to available funds.

It still remains to be seen whether or not the economic growth that is being evidenced in the UK is sustainable.  So far much of the immediate benefits are seen in the increased consumer spending and rising prices of domestic property. While the Government is working hard to promote new business start-ups and inviting non-traditional lenders to invest in the UK, SME business lenders have a pivotal role to play in helping businesses recover, grow and develop. Only by funding more output and creating sustainable employment, will business and the economy be truly seen to be on an “upturn”.

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Jan Stefanowicz

CEO at Merchant Money