Small and medium enterprises provide the backbone of Britain’s economy. Brexit is clouding the future for businesses as many are now left uncertain over the impacts a no-deal could bring to their workforce. In order to stay afloat, it is essential that SMEs get the support they need. The government has now launched a Business Finance Council to provide SMEs with more opportunities for growth.
On September 5, Business Secretary Andrea Leadsom chaired a meeting with ministers, bank leaders and lenders to discuss how the government can better support SMEs as Britain prepares to leave the EU on October 31.
She was met by Environment Secretary Michael Gove, Chancellor of the Duchy of Lancaster, John Glen, the Economic Secretary to the Treasury and Kelly Tolhurst, Small Business Minister in round-table talks.
Mrs Leadsom and Mr Glen announced plans to co-chair a new Business Finance Council consisting of senior representatives from the UK’s leading banks and alternative lenders.
The Council will help identify financial issues SMEs face particularly with working capital and finance for investment, providing an opportunity for lenders to show their commitment to supporting their business customers.
Mrs Leadsom also spoke about the UK’s current guarantee schemes through government-owned British Business Bank, urging lenders to make full use of them to support SMEs and provide assurance to businesses during widespread Brexit uncertainty.
The Enterprise Finance Guarantee (EFG) scheme, available through the British Business Bank, provides over 31,000 loans and other facilities totalling more than £3.3 billion to smaller businesses.
Mrs Leadsom encouraged bank leaders to take advantage of the initiative, which currently has around £300 million further headroom available to lenders.
The programme allows SMEs to obtain finance from their lender, allowing them to invest in capital, increase export capabilities and manage cashflow.
The EFG allows smaller businesses refused from borrowing to have lenders overturn their credit decision from a “no” to a “yes”.
“Lenders must empower their SME customers to seize the huge variety of opportunities that lie ahead as we leave the EU on 31 October,” Mrs Leadsom said. “Our new Business Finance Council will bring together key players, ensuring that finance continues to flow to our brilliant British businesses so they can do just that.
“Our financial system is strong and banks have the capacity to lend. I would urge lenders to take advantage of the support on offer from our fantastic British Business Bank.”
Despite increased government support, SMEs are still having to deal with the long-term impacts of Brexit which will inevitable bring increased risk and uncertainty into their business.
Stephen Davies, CEO of Penderyn Distillery, said his company has already set up alternative arrangements with stock and trade, but as there is still uncertainty over the outcome after Brexit, it is tricky to move forward with a clear and precise plan of action.
“It’s difficult to prepare when nobody knows what the new rules will be,” he said. “We export all over the world so we think we can cope with most situations as we as familiar with exporting outside as well as inside the EU.
“We have built considerable additional stock of our brands which has been a strain on cash flow when that cash was earmarked for new projects. It’s a problem because nobody has a clear timescale to work with.
“Of course, There is only one issue isn’t there? Give us certainty! Make an clear agreement and implement it, allowing a period of transition so that business can plan the way forward. The government needs to provide certainty for the trading environment and then we can all move on and deal with it.”
He stressed how company contingency plans have had significant impacts on cash flow and increased the risk of “a number of aspects of the business” but were necessary in order to “mitigate against potential issues” that could arise after Brexit.
Speaking about Mrs Leadsom’s new initiatives to support SMEs during Brexit, Mr Davies added: “I hope this will be effective. We have been the beneficiary of EU funding in the past that has allowed us to expand production at our distillery and open a visitor centre to become a tourist attraction.
“This has been in the form of EU grant support and repayable finance and we have been able to use that investment very effectively. Support ongoing direct from the UK government will be essential to help SME’s to grow.”
With increased government support, it is likely SMEs will have more guidance and opportunities to thrive after Brexit – but only time will tell how businesses will fair in an uncertain economy.