How crucial is SME growth to the UK economy post-Brexit?

SMEs are often described as the backbone of the UK’s economy and it has been said that their future success will be crucial post-Brexit.

There are an estimated 5.7 million SMEs in the UK accounting for around 99% of all private sector businesses and providing 60% of UK employment. The CBI (Confederation of British Industry) believes that the UK’s economic growth depends on them.

Analysis by the Centre for Economic and Business Research has suggested that helping some 22,000 high-growth small businesses to flourish could close Britain’s productivity gap with its rivals.

On these figures one can conclude that SMEs are vitally important to the UK economy, both now and in the future, and especially their ability to compete in foreign markets to bring in the needed income to replace Europe once tariffs are in place.

Yet, it is also alleged that SMEs’ are not being given sufficient attention by the Government during the ongoing negotiations about leaving the EU.

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Do the Q1 insolvency figures suggest Brexit chickens coming home to roost?

brexit insolvency May 02, 2018

Yet again, as in the last quarter of 2017, construction and retail were the top two sectors in the insolvency statistics for January to March 2018.

The first three months of 2018 were at their highest quarterly level since the same quarter in 2014, with a total of 4,462 companies entering insolvency, 3209 of them via Creditors’ Voluntary Liquidations (CVLs) accounting for 72% of all the quarter’s insolvencies.

Total insolvencies also represented a 26.2% increase on the same quarter in 2017 and an increase of 13% on the pre-Christmas October to December quarter.

Regardless of the excuses of the usual post-Christmas slump, and this year, the effects of the three-week weather event known as “Beast from the East”, it seems clear now that insolvency numbers are heading inexorably upwards as they were throughout 2017.

Equally clear, given the vast numbers of CVLs as a proportion of the total, it seems that company directors are no more optimistic about the future...

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Are creditors and their lawyers using Winding-Up Petitions for debt collection?

I have written previously about short term thinking by businesses and the effect it has been having on their ability to plan ahead for the medium and longer term.

It has been affecting businesses’ ability to invest in capacity, efficiency and R & D as planning for growth. Instead, most SMEs seem to be focused on cash flow and immediate profits, in that order.

In the current uncertain economic climate short term thinking may seem to be a rational response by creditors seeking payment.

However, there is another, perhaps more worrying trend that I am seeing among creditors, many of them suppliers to SMEs. Larger companies owed money and their solicitor advisers are often pursuing debts by early use of a winding-up petition instead of speaking with their SME clients and if necessary helping them. Unlike most reporting which is about large companies delaying payments to SMEs, I am focusing on large companies’ aggressive debt collection from SMEs.

Sometimes it is necessary...

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