This ‘first of a kind’ index tracks small business debt factoring volumes over the previous two years. It shows the final quarter of 2009 will see increasing business failures and trading conditions are likely to worsen again in quarter one of 2010.

The Business Factors Index has been compiled by leading independent invoice financier Bibby Financial Services and is unique within the alternative finance sector. Today sees the first in a series of quarterly reports which aim to reveal key findings about the UK economy and small businesses - on this occasion the data highlights that a ‘V’-shaped recovery is unlikely but trading conditions should ultimately improve over the coming year.

The Bibby Business Factors Index tracks small business turnover over the past two years and the trends derived from this data have been collated with the results of a series of interviews conducted with more than 300 business owners of a range of businesses across the UK. The study revealed:

• 44 per cent of business owners do not anticipate an imminent recovery
• One in 10 (11 per cent) feel that the worst of the recession is still to come
• One in five (19 per cent) do not expect trading conditions to improve for at least a year

More encouragingly, however:

• Half (52 per cent) expect trading conditions to remain the same in the short term
• One in ten expect the recovery may come by summer 2010

Findings from the index are supported the CBI’s latest economic forecast showing that, although the economy is expected to show signs of recovery in the second half of this year, with GDP expected to grow by 0.3% in Q3 and 0.4% in Q4, the pace of recovery will remain constrained by a lack of consumer spending and a decline in government expenditure.

Indeed, as the UK starts to move back into positive economic growth even the Bank of England’s own policymakers have warned against too much further quantitative easing, for fear of the balance tipping the other way, therefore, the picture is not yet a favourable one for Britain’s businesses.

Edward Rimmer, UK and Ireland chief executive at Bibby Financial Services commented: “As is highlighted in the Business Factors Index, October is always a busy month as businesses prepare for Christmas and, while the reminder of 2009 should see a broad uplift in trends as companies re-stock and find ways of capitalising on the downturn - such as taking on the supply chains of failed competitors – it’s unlikely the real problems will emerge until quarter one of 2010.  Once this is out of the way, however, sustainable economic growth is more than likely.”

The Bibby Business Factors Index also showed:

• Confidence in the financial markets peaked at the same time as the Bank of England base rate, in July 2007
• October remains the most active month of the year for invoice volumes
• The mood now remains as subdued  as it did six months ago, when the Royal Bank of Scotland announced losses of £24.1 billion
• However, with interest rates having fallen to record lows there has been a rise in confidence in market conditions over the past year as a whole
• To date, 2009 has demonstrated much reduced market activity with very little belief in perceived access to finance, however, a shift towards alternative finance providers is clear with Bibby’s own figures supporting this

The Index also looked at confidence across the UK’s different business sectors and showed:

• The construction sector has been one of the worst hit by the current recession
• The wholesale sector has been one of the top performers over the past two years but now appears more cautious than other industries
• Despite faring consistently throughout the recession, the mood now among SMEs in the transport and storage sector remains gloomy due to problems with legislation and increasing costs  
• Recovery of the business services sector is lagging behind other industries, indicating the delayed impact of the recession on budgets moving into the new financial year

Edward Rimmer concluded: “While the downturn is now well established, the Index highlights how its impact has been staggered, with some sectors only just hitting the bottom of the curve. Perhaps more revealing, however, is the array of attitudes in relation to a recovery. It is also interesting to consider each sector’s perceived access to finance - which has shifted considerably in favour of alternative providers in recent months. 

“To move forward, one thing remains clear; despite the unprecedented turmoil of the past twelve months, memories can be short in any industry and recent issues may soon be forgotten. So as a business and a responsible lender, Bibby Financial Services has a duty to pioneer and uphold the key learnings of the current recession to ensuring its many valuable insights are not lost better equipping owners and managers in the coming years.”

Edward Rimmer, UK and Ireland chief executive at Bibby Financial Services

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