By Edward Winterton, commercial director at Bibby Financial Services
Business activity during the second quarter of 2012 among 4,000 UK SMEs using non-bank funding facilities has seen a dramatic rise to pre-recession levels, according to our latest quarterly Business Factors Index (BFI).
Bibby Financial Services have been tracking the turnover performance of its client base across five key sectors since the second quarter of 2007 and the latest data shows a surge during Q2 led by surprisingly strong performances in the manufacturing and construction sectors.
The findings echo official statistics from the National Institute of Economic and Social Research, which also reported a rise in manufacturing activity in May. The surge is thought, in some part, to have been down to the traditional May bank holiday moving to June for the Queen’s Jubilee.
In addition, 450 SMEs who took part in a survey of business outlook which runs alongside the Bibby Financial Services BFI have seen increases in performance. Encouraging levels of new orders, new inquiries and general confidence about trading conditions suggests growing positivity in some areas.
However the report also highlighted that fewer businesses compared to Q1 are planning to trade overseas with just 11 per cent stating it was a current business objective.
Crucially more than two thirds (69 per cent) of businesses say they have not applied for any external funding during this quarter, up from 55 per cent previously.
The level of turnover seen by clients in the past quarter, and more widely since the recession, is testament to the role funding can play in driving up business performance.
The business turnover data we have from the second quarter from our own client base demonstrates the importance of funding options to business in the UK.
In addition, the latest figures from the Asset Based Finance Association highlight how turnover from companies using asset based funding has grown six per cent, compared to last year.
The Government and the Bank of England announced that more funds will be available to businesses through the Funding for Lending Scheme, but once again it will be the banks that act as the conduit for those funds.
Given the strength of the asset-based lending sector and spotlight on alternative finance by the Government itself, this could have been an opportunity to deliver funding through a wider range of channels.
The danger is we will continue to see promising businesses fail because they have not had the necessary support or, of most concern, because they are not aware of all the options.
Key findings of the Business Factors Index for Q2 include:
- All sectors performing better than pre-recession levels when the Business Factors Index started in Q2 2007
- More than half (51 per cent) of UK businesses say trading conditions are steady and they are hopeful about the future — down from 58 per cent in Q1
- Almost a quarter (23 per cent) of SMEs have seen an increase in orders during Q2, slightly down from 28 per cent in the previous quarter
- More than a third (38 per cent) are reporting an increase in new customers, about the same as Q1 at 41 per cent