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news opinion
Have we had the best of it? Has the recovery hit its peak, with the pace of growth now slowing as we head into 2016?
Indeed, are we likely to experience a dip in the pace of growth in subsequent years?
Economists are predicting that, in the latest cycle, we may well have experienced the UK’s best year in 2014. From now, it’s a slow tapering off.
But let’s not be gloomy. The UK is still experiencing one of the best recoveries anywhere in the world. In fact, our economy is marginally less buoyant than the United States, but way better than the eurozone.
So, what will happen in 2016? If the US raises interest rates, as it may do soon after this magazine goes to press, we will probably follow suit a few months (two quarters?) afterwards. The rise will be tiny, so no-one is going to have to hand their house back, and the effect on business will be negligible.
There will continue to be growth in earnings – and since companies are finding it tough to raise their prices to customers, businesses will have to cope with tighter margins. They might be able to claw some of that back by investing in technology and equipment that will give them productivity gains, but those benefits may only be felt in subsequent years.
If businesses want to forge ahead in 2016 and beyond, they are going to need funds. The levels of lending to SMEs are worryingly low. Have business owners lost their nerve? Do they think they are going to be turned down by the bank, so they would rather rely on slower, safer, organic growth?
With the annual growth rate in lending to UK SMEs at minus 0.9%, the Government needs to look carefully at how it can make access to finance even easier. Without such impetus, the recovery could stall ...
David Murray Publisher
www.businessmag.co.uk
SE businesses performing better than national average
Businesses in the South East are performing better than the national average, according to the latest Business Distress Index from insolvency trade body R3.
• 57% of businesses have seen an increase in sales volumes
• 48% are investing in new equipment
• However, a third say an interest rate rise of 1% would put them in financial difficulty.
Over half of businesses in the South East (57%) have reported an increase in sales volumes, compared with a national average of 43%. Just under half (48%) are investing in new equipment.
However, the figures from the southern committee of R3, which brings together insolvency practitioners from local accountancy, legal and recovery firms, also show that a third of businesses in the South East (33%) would be put into financial difficulty if interest rates were to increase by 1%. This is far higher than the national average of 18%. The South East has the joint second highest number of businesses reporting this in the
UK, tied with the North East* and just below Northern Ireland* at 39%.
Despite this, the region is also more optimistic about the economy than most of the nation, with 65% saying they are more optimistic than they were three years ago, compared with an average 54% of respondents across the UK.
Andrew Watling, chairman of the Southern Committee of R3 and a partner at Quantuma in Southampton, said: “It’s a great sign for the South East that its businesses are outperforming the national average and it certainly is a good position to be in, which is why I believe so many of them are optimistic about the future.
“However, a third of businesses report that they would be put into difficulty after an increase in interest rates, which represents a substantial amount of businesses that could struggle. Local business owners will be keeping a keen eye on the Bank of England in the New Year.
“Businesses can still run into trouble in a growing economy, so it’s important to ask for help in good time.”
*Caution small bases Enterprise thrives as start-ups rise 7%
The number of new businesses starting up in the South East grew by 7% in the year to March 2015 to total 243,000, according to the latest Barclays and BGF Entrepreneurs Index, a bi-annual series tracking the UK entrepreneurial lifecycle.
The boom in the number of businesses echoed a trend seen at a national level, where the number of active companies rose by 3.86% – the biggest rise since the Index began in 2012. Nationwide, the number of company dissolutions was also lower than in the previous six months – the first time this has happened since the Index began – reversing a three-year trend.
In further evidence of the region’s healthy start-up scene, the report found that the South East saw 256 deals resulting in wealth creation of £200,000 or more over the 12 months to the end of June 2015, an increase of 19% on the same period previously.
However, the report showed that while the region’s start-up and wealth creation activity has maintained positive momentum, the proportion of high-growth companies stood at 19.9% in the year to December 2014, down 1.3% on the previous year.
NEXT EDITION NEXT EDITION
In the February issue of The Business Magazine
• Southern Tech 100 • HR Focus
• Spotlight on High Wycombe & Bucks
• Reading 2025 conference report To participate in these features email
Peter Laurie at
peter@elcot.co.uk or
Tamsin Napier-Munn at
tamsin@elcot.co.uk
THE BUSINESS MAGAZINE – THAMES VALLEY – DECEMBER 15/JANUARY 16
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