roundtable 35


Reading Station, the second biggest station outside London, is undergoing huge investment. Communications are second to none, we are close to airports and companies are re-investing here. The Thames Valley is still where major foreign companies want to be.”


Andrew Latham agreed: “We are dealing with businesses that are seeing growth and generating good cash. The Thames Valley is still a very strong economic area and will hopefully drive the UK recovery.”


Insolvency activity was an economic ‘barometer’ said Robinson. “Thames Valley practitioners have not been as busy as they would have expected and this is a big positive for the region.”


A benign attitude to debt by banks and the HMRC, and low interest rates had also benefited many struggling companies Murray pointed out.


Paul Robinson


products to market. It’s often not cashflow but investment funding that’s the problem. Funding costs can be too high or the accessibility of cash is not there because SMEs’ balance sheets are weak.


Are banks still not lending enough?


Loftus: “I am convinced that banks have wanted to lend money, but equally businesses have not wanted to borrow money, they have just wanted to survive. There is a huge funding gap but, if companies provide a robust well thought out business plan, devised with professional advisers, then they will stand a much better chance of securing their funding requirements. However, it will take a little longer than previously.


David Caddle Cashflow problems? Pass the pain!


Virdee: “Our business is generally purchase ledger led with the NHS our main and largest debtor. The NHS is guranteed to pay within the terms agreed but we do need to fund working capital from our own resources so cashflow is very important. “


Coiley: “Cashflow is something that you have to keep your eye on constantly. The issue we have seen is primarily to do with confidence. A wobble in the economy can cause cashflow to dry up almost overnight because companies hang on tightly to their cash. If the top of the chain does not pay, things can dry up very quickly.”


Loftus noted that corporates have been stretching out payment terms from 60 to 90 days.


Mike Reeves said ‘cash is king’ again, and new funding structures are required to offset payment delays. “Many businesses have been using their sales ledger to support invoice discounting, but some are now resorting to supplier finance structuring provided by banks like Santander.” (Banks step in as an interim paymaster to ease supply-chain cashflow difficulties).


Goodsell confirmed that many businesses are using invoice discounting to sustain their cashflow. One positive of the focus on cashflow was that vetting of potential customers had become more sophisticated and credit control procedures had improved.


Caddle: “Manufacturing has actually improved its cashflow through greater adoption of the lean model of only producing what is actually required. Nonetheless, SMEs can struggle with finance, particularly when trying to innovate or get new


THE BUSINESS MAGAZINE – THAMES VALLEY – JUNE 2011


Murray highlighted the Bank of England’s Trends in Lending that reported credit availability virtually unchanged in the past three months, and SMEs experiencing tighter conditions than larger corporates. He queried: “Are more businesses trying to reduce their facilities? Is demand for money not as great as the national press make out?”


Robinson agreed that many businesses have been focused on reducing their costs and paying off their debts to secure their short-term survival. Having gained stability, they are now beginning to consider their future growth and the need for borrowing extra money.


Caddle reported that, based on a Q1 members’ survey on funding costs, 36% of SMEs were seeing costs increase compared to only 6% of large organisations.


There had been a modest improvement in access to finance.


Preston said businesses were finding the cost of simply moving their bank account was becoming prohibitive too.


Reeves accepted that funding costs “did go Susan Elliott


Elliott: “Looking at how we can structurally support the de-risking of companies is the way to go. A recognised benchmark, to provide quality-tested programmes that make banks more comfortable with funding propositions, has to be welcomed.”


Latham agreed: “De-risking would be fantastic. There is huge pressure on banks to support small businesses and we are working very closely with our risk partners to achieve that.” He said 70,000 Santander customers had recently been mailed with details of the availability of unsecured business finance (subject to a director’s guarantee) up to £25,000.”


Elliott: “That’s right, it’s not always the multi- millions that are required. Sometimes it’s just match-funding for around £50,000 that’s needed. The biggest funding gap is often right at the early stages to get people off the ground.” She also highlighted the paradox that “. . . the business may be a start-up but the management team are not.


Mike Loftus


www.businessmag.co.uk Continued overleaf...


through a spike but have now reduced, although nowhere near pre-recessionary levels.” Funding costs for banks had also increased – unreported by the media coverage – and many bank-funding margins were at break-even or loss-making levels. Ancillary business was largely supporting bank profits.


Inflation pressures and interest rates are still a concern. “At some point we will see a base rate increase, but if it’s too much it could push some businesses over. It’s almost on a knife-edge with the amount of leverage and borrowing out there.”


Caddle: “Any base rate increase would certainly slow things down for the manufacturing sector.”


Could we de-risk funding and move to a ‘MAS-ed’ market?


Caddle revealed that the government has provided £57m for the next MAS national contract (2012-2015) to improve productivity and competitiveness of the manufacturing sector and EEF is bidding to deliver this. EEF the manufacturers organisation provides professional business services for the sector and sees an opportunity to de-risk funding agreements between manufacturers and lenders.


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