Half of UK SMEs predict a recession, with significant knock-on effects for Irish firms says research from Bibby Financial Services

Brexit burden draining resources with 17% citing rising material costs as a significant burden

Half of UK SMEs believe the country will fall into recession this year, while 44% are struggling with cashflow as they prepare for Brexit. This is according to the latest SME Confidence Tracker from Bibby Financial Services in the UK. As the Brexit deadline approaches, Irish SMEs are being warned that this downturn in the UK will have important knock-on effects.

The report, which surveys 1,000 business decision-makers on a quarterly basis from across the UK, found that rising material costs are a significant burden for 17% of businesses, with 15% also feeling the strain of increasing competition. As SMEs ramp up Brexit preparations, there has been a six per cent rise (to 29%) in the number of SMEs actively using funding in Q2 of 2019. Seventy-two per cent of SMEs are also investing an average of £16,400 more than predicted at the end of Q1.

According to economic analyses from the PMIs and the Office for National Statistics, it appears that this additional investment is being used to offset risks associated with a no-deal Brexit. Sixty-nine per cent of UK SMEs are preparing to further invest in their businesses in Q3 as they attempt to protect themselves from any negative impacts of Brexit.

Given half of UK SMEs believe a recession is likely, many have turned to quick-fix forms of funding, with over a quarter (26%) of those needing finance making use of credit cards, bank overdrafts, and borrowing from family and friends.

Mark O’Rourke, Managing Director of Bibby Financial Services Ireland, said:

“Despite the events of recent days, the threat of no-deal hasn’t gone away, and this research highlights the extent to which UK SMEs are already feeling the financial strain of Brexit – and should act as a warning to their Irish counterparts. For Irish SMEs who trade with the UK there will be significant knock-on effects due to the disruption to raw materials and commercial activity that Brexit will cause.

“Irish SMEs will need to think strategically about how they can best protect their business – whether this means looking to new export markets or adopting alternative financing methods as a means of safeguarding cashflow.”

Sharon Wiltshire, UK Commercial Director at Bibby Financial Services, said:

“Ordinarily a rise in the number of companies investing in themselves would be a boon for the economy. But with increasing competition, rising materials costs and the broader economy stalling, businesses appear to be sourcing finance to cope with these challenging conditions rather than investing for growth.

“With the current uncertainty, it has never been more essential for SMEs to be aware of all the funding options available to them before they commit to more borrowing.”

Bibby Financial Services Ireland is a leading provider of financial support and funding solutions to Irish SMEs. The company helps businesses to thrive and grow in domestic and international markets by providing tailored and flexible funding solutions for a range of scenarios including cashflow funding, new equipment purchase, growth and expansion, management buy-ins and buy-outs, refinancing, corporate restructuring and mergers and acquisitions.

Bibby Financial Services Ireland’s funding portfolio includes confidential invoice, trade and export finance, foreign exchange services, bad debt protection and specialist funding for a range of sectors. With a 95% client satisfaction rating, our clients have confidence that we support their business.

Bibby Financial Services Ireland is part of Bibby Financial Services Group, a leading global financial services partner operating in 40 locations across 14 countries. With 40 years’ experience, the business has a funding capability that exceeds £1 billion and an annual collective client turnover of £10.1 billion.

9 September 2019

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