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Brexit Transition Should Educate SME’s about Better Access to Finance

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Following Theresa May’s recent speech in Italy, in which she revealed her desire for a two-year transition period post-Brexit, Mark Burn, group chief financial officer at Henry Howard Finance, examines the potential impact of a prolonged period of uncertainty and the finance options available to small and medium-sized enterprises in Wales.

Last week in Florence, the Prime Minister announced her desire for a two-year transition period post-Brexit that would see the UK retain full access to the EU’s single market during that time. This transition period, the prime minister suggested, could last until 2021.

While political opinion is divided on the opportunities and challenges this seemingly ‘softer’ Brexit approach could pose to small and medium-sized enterprises (SMEs), many within the finance sector feel that a longer transition period will only prolong the uncertainty that has left some business owners understandably anxious.

(C) HUW JOHN

Most SMEs depend on access to funding at some point, so it’s understandable that businesses may feel cautionary pressures when considering growth plans over the medium to long term.

SME performance is fundamental to the success of the British economy, and will be critical in bolstering a strong and competitive domestic economy post-Brexit. Certainly, business owners and finance directors keen to explore new business opportunities in the months ahead must feel confident that they have access to the right financial support so that they, and the rest of the country, may thrive.

At various stages within a company life cycle, investing in new services, additional products or new staff is invariably necessary, however accessing funding for these critical requirements can be concerning. Business owners today face additional challenges as many traditional financial institutions, under increasing pressure to tighten lending criteria, remain reluctant to support certain sectors with new and additional refinancing requests.

In fact, this summer, the government announced yet more plans to encourage bank lending to SMEs, such was the concern that UK businesses should receive necessary support when Britain leaves the EU. Despite such incentives, lending to SMEs was down by £200 million in July 2017, compared to the previous month, according to the Bank of England.

However, there are plenty of reasons to remain optimistic. Despite the current economic and political climate, many entrepreneurs remain positive thanks to alternative finance providers who have been able to assist businesses with both expected, and unexpected financial requirements.

Being able to respond quickly to changing market conditions is important for all businesses, but even more so in times of uncertainty. Certainly, SMEs have never had so many options for specialist funding and advice, with the growing number of alternative and innovative funding platforms available. The next two years could be a key opportunity for the finance sector to communicate that various finance options are available for SMEs, and to inspire confidence in business owners when identifying alternative facilities.

In that light, the transition can be seen as a both an opportunity for alternative funders – and a reality check for the larger high street commercial lenders who may need to evolve deep rooted practices to stay competitive.

It remains unclear what future trade deal the UK will agree with the EU “27”. Change is unsettling, but it can also present new opportunities, and Henry Howard Finance remains on hand to guide SMEs through this unprecedented period, using its expertise and knowledge to ensure access to tailored and competitive finance solutions.