By Claire West
New research amongst managing directors of 155 companies across the UK into the financial habits of small businesses in the UK has highlighted that those in the North (North East, North West and Yorkshire) are more worried about their finances and have less access to funds than companies in the South of England.
The research, which was carried out by The Mackman Group on behalf of corporate finance advisory boutique Leoni Sceti Group revealed that SMEs based in Northern England are twice as likely to be in debt than those in Southern England, with only 10 per cent of Northern firms stating they are debt free compared to nearly a quarter in the South.
The research also explained that Northern SMEs are more worried about their cash flow and especially concerned about getting access to funding, with a lack of public investment in particular impacting the small business funding stream. The amount of businesses in the North who stated that access to investment is a key priority for them was nearly three times as many businesses in the South.
The relationship small businesses have with banks was also a key emphasis within the research. Northern companies, especially those in the North East, North West and Yorkshire are significantly less happy with the service they receive from their bank than their Southern counterparts. Only 14 per cent of SMEs based in the North of England believed their bank genuinely understood their business and its objectives, in comparison to nearly a third of Southern small firms who have a 'satisfying' relationship with their bank. Nearly 30 per cent of small companies in the southern regions felt their bank adequately and proactively met their needs, compared to just 10 per cent in the North.
"This research comes at a critical time for the future of UK SMEs as we anxiously wait to see exactly where the Government's spending cuts will fall and who will be affected the most," said Patrick Leoni Sceti, managing director at the Leoni Sceti Group who commissioned the research. "It shows how the financial crisis and resulting economic conditions have truly affected the way small firms think, plan and operate and, critically, has served to widen the North-South divide, highlighting stark differences between the country's Northern and Southern SMEs."
Financial direction was also a key distinction between SMEs. 72 per cent of small firms in the North said they had in place a designated finance director compared to 58 per cent in the South. Also small business owners based in the North met with their bank manager more than southern firms, with 27 per cent of the North's SMEs holding meetings with their bank manager at least once a month, compared to just 11 per cent in the South.
The Shadow Minister for the North East, Rt Hon Nick Brown MP, also commented on the research: "This survey, coming hard on the heels of the BBC/Experian Survey [8 September 2010] is deeply worrying. They [the two surveys] effectively show that the North East is in for a double whammy of being least resistant to public sector cuts and worst served by private sector financing. The Government should do all in its power to get the banks lending again and fast. Otherwise we could be in for a double dip recession and a 1980s style waste land in the North East."
"It's been a tough time for UK SMEs that's proved particularly detrimental to small firms in the North who, in a nutshell, have been neglected by investors and banks in the Capital since the financial crisis unfolded", added Leoni Sceti. "SMEs across the North East and North West, for example, are starved of the funding essential to their growth despite the wealth of entrepreneurial potential across the Northern region."
"It's understandable and inevitable that investment prudence will be an ongoing theme as austerity Britain looks to economically recover but this cannot and should not be to the detriment of small businesses. The North in particular stands to suffer the most from a smaller investment pipeline and if such SME talent is wasted, this will only serve to hamper Britain's recovery in the long run, given SMEs are the lifeblood of the UK's economy."
"Ultimately, Northern companies are equipped with financial acumen but they lack the resources to utilise financial support. This is where advisory and investment management firms, such as ourselves can fill the void. We can provide the high level financial expertise, knowledge and direction as an outsourced entity that small companies need to progress, and ensure a healthy financial channel, putting Northern companies on an equal footing with their Southern counterparts."