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People How Invoice Finance could drive the UK economy following a no-deal Brexit Published: 23rd November 2018 Share With the details of Theresa May’s recent Brexit deal pushing cabinet members to resign, and a seemingly long road ahead before a draft deal is passed by the UK parliament, a no-deal Brexit is becoming more than just a worst-case scenario. Small-to-medium-sized businesses are making more conscious efforts to put serious contingency plans into place, as a result. A CBI survey on Brexit preparedness this year stated that more than 50% of businesses had examined different Brexit scenarios, and more than 60% had begun developing contingency plans in the event of no deal. However, findings from the same survey showed that 77% of businesses said the number of potential scenarios made planning for Brexit challenging. Amid all the uncertainty, the question remains, what can SMEs do to keep a strong economy post-Brexit? A study published this year by Equiniti could have highlighted Invoice Finance as the answer. The report demonstrated a close correlation between the level of business borrowing and rising Gross Domestic Product (GDP); connecting the two makes a strong case for Invoice Finance being an optimal way to fund business growth in the wake of a cliff-edge Brexit. Understanding the threats So what happens if we depart from the European Union with no concrete agreement? Where does that leave the small business owners of Britain? One of the biggest talking points surrounding life post-Brexit falls on the dissolution of a transition period. Without a deal in place before exiting the EU, we would need to revert to trade on the basis of World Trade Organisation rules in a matter of days, meaning businesses would need to be ready to react to the changes, and fast. CBI data shows 48% of businesses that had completed scenario planning found the main difficulties related to the costs incurred for internal resources or for hiring external help. With no implementation period, increasing costs attached to simple business essentials, additional tariffs and the anticipated fall in sterling, SME survival could be in real jeopardy. Numerous organisations including the Centre for Economic Performance at the LSE and the OECD have raised concerns that the WTO scenario may reduce UK GDP by up to 10% or more, which could result in company earnings and stock prices reducing with it. These unfavourable outcomes could act as deterrents to potential investors looking for investment opportunities, placing further pressure on the types of funding available for SMEs. To survive a no-deal Brexit, UK SMEs will need to find quick and accessible ways to acquire and maintain healthy cashflows, source new suppliers, and access funding facilities that grow in line with their business to help pay unexpected tariffs, charges and taxes. However, searching for the best most relevant methods of financing and investment will be difficult in the current climate, leading many to query which kind of financial backing is the most viable for SMEs post-Brexit? Connecting the dots There are a small number of financing options that allow SMEs to borrow large sums of money without having equally large minimum turnover requirements. There are even fewer that also provide flexibility, competitive prices and the kind of quick turnaround decisions that will be necessary to keep the economy afloat post-Brexit. One of the main sources of funding that adheres to all the above is Invoice Financing, and it is this option that may well hold the key to the betterment of the UK economy. Invoice Finance is a way for businesses to borrow money against the outstanding amounts due from their customers. Businesses pay a small percentage of the invoice amount to the lender as a borrowing fee which allows business owners the financial flexibility to access working capital. Findings from the Asset Based Finance Association (now known as UK Finance) show that Invoice Finance is already popular amongst SME’s, with the amount advanced to the UK’s smallest businesses jumping over 60% within just a year. The goal here will be for SMEs to continue this pattern after Brexit decisions have been made. With small and medium enterprises totalling 99.3% of all UK private sector businesses, the loss of capital from this sector could stifle business growth and impact the overall strength of the British economy. To stop this from happening, small-to-medium sized businesses need to continue growing and thriving, with strategic lending solutions such as Invoice Financing acting as a brilliant way to adapt confidently after Brexit has passed. * Steve Noble is chief operating officer of UK-based Ultimate Finance, which has provided more than £1 billion in funding to thousands of businesses of all shapes and sizes, in a range of industry sectors, over nearly 20 years in business. Asset Finance Connect Asset Finance Connect brings you news and updates about UK and European auto, equipment and asset finance providers. Sign up to our newsletter Featured Stories AppointmentsStellantis strengthens leadership structure Leasing ProfessionalsCatfoss Finance announces team for AFPA Trust Big Clays Corporate Member AppointmentsShoosmiths appoints Rebecca Copcutt as Legal Director