Reports from the Federation of Small Business and Lloyds Bank have recently demonstrated a drop in business confidence from small businesses in the UK. The FSB revealed that whilst businesses in the South and in sectors such as technology and professional services are growing in confidence, those in the North East, Yorkshire and in the devolved governments of Scotland and Wales are feeling less confident about the new year.
The bi-annual ‘Business in Britain’ report from Lloyds Bank mirrors these findings, outlining that small and medium-sized enterprises (SMEs) are currently experiencing a gloomy outlook when looking ahead into the new financial year. Concerns regarding the future of the Eurozone, Brexit and the demand for overseas exporting were the principal factors listed as affecting business confidence, with 31% stating that their biggest concern was weaker domestic demand.
In response to this decline in business confidence, many SMEs are approaching 2016 with a nervous outlook, pausing growth plans, stopping significant commercial changes and, most worryingly, ceasing investment.
The first few months of the year are a critical time for businesses and SMEs must appreciate and understand the value they bring to the UK economy. The combined annual turnover of small businesses in 2015 covered almost half of the total annual turnover in the private sector, reaching an incredible £1.8 trillion.
With this in mind, it is clear that smaller and independent businesses must remain resilient ahead of the uncertainties in 2016, and a flexible and sustainable growth plan will be key for this. To cease all business development because of a nervous future would risk a business stagnating, becoming too rigid in what needs to be a time of fluid business forecast, and could risk the demotivation and ultimate loss of staff. Additionally, with uncertainty brings positive opportunities, and internal investment can maximise the potential of these.
How can small businesses start to build their confidence?
In the face of uncertainty, small businesses must regularly take an honest gauge on the future. It is crucial to prepare realistic projections, particularly in the case of finance. By having an accurate finance forecast on hand, any trouble can be identified well in advance, giving businesses the chance to counter any issues ahead of time.
If investing in external markets or new business partnerships is considered too risky in a time of economic and political concern, SMEs can use their own resources and invest money back into the business. Taking the time to develop your workforce, whether by implementing an apprenticeship scheme or investing in existing staff training, will ensure employees feel valued, and start the year off on a positive note. Implementing these steps to develop the business from the inside out will only serve to benefit in the long term.
Continuing with business plans in anticipation of both political and economic uncertainty will only be a benefit to SMEs in 2016. By continuing with prepared strategies, businesses will be able to reap the rewards that domestic growth has to offer and prepare ahead of time for those uncertainties beyond a business’ control.
By Tracy Ewen, Managing Director, IGF Invoice Finance