January is generally regarded as being a fairly quiet time in terms of business, a month long phenomenon exemplified by the presence of ‘Blue Monday’, the day on which a perfect storm of post-Christmas factors comes together to keep workers under the duvet and customers counting their pennies. There are a few stories, however, dating from this month or the latter stages of last year which, in their own ways, exemplify the challenges, issues and opportunities facing SMEs as they move forward through the rest of 2016.
Throughout 2015 much of the focus for SMEs was placed upon the increasingly vibrant and important alternative lending market, and the need for SMEs, in the face of continued caution from the High Street Banks, to become aware of and exploit this option. The BBA (British Bankers’ Association) report, published in December 2015, attempted to redress this balance, pointing out the degree to which most SMEs are still reliant on mainstream lenders.
The report, published in December 2015, focused on the third quarter of the year and found, amongst other things, that :
- The cash deposits held by SMEs were growing by 8% annually and exceeded the amount of money borrowed by £60 billion, thus, according to the BBA, reducing the need for finance.
- The number of finance applications from SMEs was continuing to slow, but of those that did apply, 80% were approved.
It could be argued, of course, that the reliance on building cash reserves was a sign of the caution of SMEs in the face of a tougher lending environment, and that the 80% success rate has to be viewed through the prism of fewer SMEs attempting to borrow – a symptom of either cynicism regarding the chances of success or a move toward alternative lenders.
One of the biggest and most shocking business stories of early 2016 – the kind of business story striking enough to break through and engage the general public – was the revelation of the late payment practices which supermarket giant Tesco had been engaged in. The Grocery Code Adjudicator, Christine Tacon, delivered a damning verdict, stating that Tesco had knowingly delayed payments to suppliers in an attempt to boost their own financial position. Although Chief Executive Dave Lewis insists that things have changed since the period covered by the report (June 2013 until February 2015), the revelations that some suppliers had to wait years for payments which, in some cases, amounted to millions of pounds, will send a shiver down the spine of SME bosses throughout the UK.
A survey published by insurers Zurich this month highlighted the extent of the issue of late payment. According to their survey:
- 53% of SMEs have problems with late payments
- 67% of those surveyed felt that late payments were forcing SMEs to close
- The amount owed to SMEs currently amounts to £225bn
- 20% of SMEs are owed more than £25,000
The nature of news stories is such that it tends to be the negatives that get highlighted. Other issues being discussed this month have included an Aviva report on cybercrime and SMEs which highlighted an alarming sense of complacency (44% believing they are unlikely to fall victim to cybercrime) and a general sense that many SMEs are wholly unprepared for the ramifications of the introduction of the Living Wage in April.
To contrast with this doom and gloom, however, is the news that Office for National Statistics (ONS) figures released this month revealed that the number of self-employed people in the UK had hit record levels, increasing by 98,000 in the three months leading up to November 2015 when compared to 2014. It seems that no matter what problems might be thrown up, more and more people are seizing the opportunity to face the challenges, hard work and undoubted opportunities thrown up by the chance to set out to create their own SME.