“Its encouraging to see positive signs of possible economic recovery, with the latest ONS figures showing the unemployment rate has dropped to 7.8 per cent a decrease of 33,000 to 2.45m people.

“We know from reviewing the performance of a range of sectors in our latest Business Factors Index that small businesses in the UK have been hit hard by the recession, with one in four owners and managers reporting that they are struggling to survive – but these figures will give the economy a much-needed boost at a crucial point in the year.

“Looking ahead at a brighter future, it has never been more important that small businesses are well prepared to bring on new staff for an increase in business, and a rise in outgoing customer invoices. The issue of cash flow and survival are intrinsically linked and businesses will do well to invest now to ensure they have robust credit management systems in place.

“Alternative cash flow funding solutions, such as invoice finance, can plug the funding gap left by the banks by providing an immediate injection of cash into the business against the value of outstanding customer invoices and also ongoing funding as invoices are raised. This frees up vital cash flow to ensure companies have a healthy flow of funds and do not hit cash flow difficulties further down the line.”

Edward Rimmer, Chief Executive, Bibby Financial Services UK

Article submitted by Business Credit Management

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

Article image copyright: Flickr

While there are some indications that a recovery is on the horizon offering a glimmer of hope for recruiters, Edward Winterton, Bibby Financial Services’ recruitment finance specialist offers a word of warning and gives his view of the current state of play.

The speed and ferocity of the economic downturn came as a nasty surprise to many in the recruitment industry. After many years of consistent growth, the sheer size and scale of the unprecedented global slowdown came as a big shock to a significant number of recruitment professionals who had never experienced anything other than business growth.

While it would be foolish to claim we are without a doubt over the worst of the recession, there are some good signs that the UK economy is on the up.

In June the Pound rose to its highest value since December 2008 against both the Euro and the dollar at €1.17 and $1.6350 respectively. And in the property market, the most recent report issued by the Royal Institute of Chartered Surveyors (RICS) 1 documented an increase of 25.7 points – its largest rise since September 2007.

The recruitment industry itself is reporting a more positive outlook. In fact, a recent joint report from the Recruitment and Employment Confederation (REC) and KPMG found that permanent placements in June fell at their slowest rate for over a year. Similarly, temporary/contract staff billings declined at the slowest rate since last September.

It would appear that beyond all expectations, the UK jobs market is showing signs of life. The REC makes the point that this appears to be driven in part by the public sector which has continued to recruit as well as the rise in demand for temporary and contract staff.

However, if the first green shoots of recovery are to take root, it is clear that demand needs to return to the somewhat beleaguered private sector to ensure the UK jobs market experiences a sustained recovery to its former glory.

Many industry experts warn that it is still far too early to talk about a revitalisation of the UK jobs market. In fact, some of the improvements could be driven by the fact that employers are asking staff to work reduced hours for lower pay instead of embarking on aggressive and costly redundancy programmes. Quite rightly, many employers are making the sound decision to try and retain the skills and knowledge within the workforce – essential if businesses are to make the most of the significant opportunities which will come their way when the upturn does eventually come.

Caution should be the name of the game within the recruitment sector as we take the first tentative steps towards economic recovery. As with any economic ebb and flow, change takes time to filter through the innumerable cracks and crannies of UK industry. And any claims that the recession is now fully relinquishing its hold on UK businesses should be regarded with care.

For every positive economic statistic there is a corresponding negative figure lurking. That said from here on in the only way is up – as long as the right measures are introduced from the outset.

Never has it been more important that recruitment firms work to keep costs under control and ensure credit management processes are robust and watertight. Cash is king and a healthy flow of funds should be the number one priority.

It goes without saying that the banks have had their fingers burnt by the global downturn and they have a long road to recovery ahead. Alternative cash flow solutions such as factoring and invoice discounting can plug the funding gap left by the banks providing a fast, flexible source of finance that grows in line with business. And dedicated recruitment finance packages, such as those offered by Bibby Financial Services incorporate invoicing, funding, collection and payroll services which allow businesses to retain an immediate and ongoing supply of working capital.

Online timesheets for temporary workers, combined with a chaser service for both these and outstanding invoices, are broadly available. Unique to Bibby Financial Services’ however, is access to information such as candidate details and gross margins at the touch of a button.

And it is this amalgamation of invoicing collections services with payroll, which can otherwise drain up to two whole days from the middle of the working week, that leaves recruiters free to concentrate on what they do best.

The cyclic nature of the world economy means downturns are a fact of life. Recruiters who have never experienced recessionary pressures are learning valuable lessons in how to cope with a slowdown. While painful, this experience will ensure more robust business models for the future where cash flow measures and alternative funding options are at the fore. This has to be a good thing for the sector as a whole. And while we may not be out of the woods yet it would appear the horizon is at last beginning to clear.

1 www.rics.org
2 www.niesr.ac.uk
3 Office for National Statistics
4 Research was conducted on behalf of Bibby Financial Services by Continental Research among 301 owners or managers of small and medium sized businesses (i.e. businesses with a turnover between £50,000 and £1m) across the UK between 2 and 6 February 2009

Contributed by Edward Winterton, Bibby Financial Services’ recruitment finance specialist

www.bibbyfinancialservices.com