By Paul Evans, area director SME Banking in Essex & East London, Lloyds Bank Commercial Banking
As we reach the end of 2013, now is a natural point to reflect on how UK businesses have fared over the last twelve months and what, if anything, has shifted on our economic horizon, helping business leaders to gauge expectations for the New Year.
This has been the first year in half a decade where positive messages about the UK’s economic prospects appear to have outweighed the negative headlines, and it seems that confidence is slowly but surely beginning to creep back. The Office for Budget Responsibility (OBR) recently revised its growth forecasts for this year from 0.6 per cent up to 1.4 per cent and predicted growth of just over 2 per cent in 2014. These figures are extremely encouraging – particularly when compared against a backdrop of persistently sluggish world growth.
The OBR’s statistics were revealed on 5 December as the Chancellor delivered his Autumn Statement, which also outlined a range of measures intended to give SMEs the support they need to drive growth. The Government reaffirmed its commitment to helping businesses reach overseas markets by increasing the export finance capacity available to firms, which should be a confidence booster to those firms which named their ability to export to the Eurozone as a future source of concern in our summer research this year.
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The Business in Britain report, produced bi-annually by Lloyds Bank Commercial Banking, canvasses the views of over a thousand business leaders across the country, monitoring their confidence levels and how they expect their businesses to perform over the next six months. The latest results showed that confidence had reached its highest peak since the depths of the financial crisis in 2008 and businesses were reporting a greater appetite to invest for future growth, with sights set on boosting sales and developing expansion strategies.
However, Danny Alexander’s recent call for UK businesses to start investing their cash reserves suggests that the positive outlook reported in July may have been a little optimistic and that businesses might not yet have ‘put their money where their mouth is’ and backed themselves to the extent that we might have expected.
So, were business leaders right to feel so confident earlier in the year? The latest figures from the Lloyds Bank Commercial Banking Purchasing Managers’ Index (PMI), a monthly report which monitors business activity and performance levels across UK firms, can help us to understand the current landscape.
Figures released in early December showed strong business activity across all nine English regions in November with Wales also displaying growth, albeit at slightly weaker levels. Growth was most vigorous in the South East, followed by London, as many might have predicted. New order volumes were also highest in the South East, suggesting that the area may be benefitting from offering lower operating costs than the increasingly expensive capital. This would suggest that the positive outlook displayed earlier in the year has played out into some tangible advances.
Hiring and retaining the best people is an ever-present concern for organisations and a difficulty that a significant number of the businesses surveyed in our Business in Britain report claimed to have been experiencing. Pleasingly, and backing up the confidence displayed earlier in the year, there was an overall increase in job creation across the board in England and Wales during November. Again, London saw the creation of the most jobs whilst the North East and Yorkshire & Humber saw the weakest rise in employment opportunities, though the all-important growth was still present.
The PMI figures would suggest that whilst the recovery is still weighted towards London and the South East, certain parts of the country are bucking the trend, for example the East Midlands and South West, and are not far behind these regions in terms of growth.
Companies looking to take advantage of the new opportunities presented by this encouraging renaissance have access to a range of options.
There are a number of Government initiatives designed to help growing firms, including the Funding for Lending Scheme which enables businesses to benefit from discounts on their interest rates. Under the scheme Lloyds Bank Commercial Banking offers all of our SME clients a one per cent discount on interest payments for the life of their loan and we have committed more than £28 billion of gross new lending to UK businesses and homebuyers since we launched the offer in September 2012.
As we’re aware that many business leaders place a real emphasis on building skills within their firms throughout the year, we also strive to provide more than just the traditional banking facilities – indeed our services extend into alternative forms of support such as enterprise mentoring. This has been a key initiative for us since the introduction of the national mentoring scheme in 2011 and we have seen encouraging results amongst the businesses we have worked with so far.
We also host a number of regional business events and seminars throughout the year as part of the Lloyds Bank Commercial Banking charter pledge. The seminars focus on specific themes and topics relevant to small business leaders, with the aim of creating a forum where knowledge can be shared and discussed between bank experts and the local business community. Most recently, we teamed up with Google and held a series of business breakfasts across the country based around improving digital capabilities. Guests were able to hear from industry experts on how the internet can benefit their firms on a day to day basis, as well as gain a deeper understanding on the facilities available to support their digital activity.
Exploring all of the available options, from finance to informal advice and guidance, will help business owners to capitalise on the recent ‘good news’ figures. It is coaxing through this bottom-up growth that will ensure a sustainable recovery fit for the long-term.