Hilton-Baird Financial Solutions SME Trends Index April 2011 Report

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  • 1. Hilton-Baird Financial Solutions SME Trends Index – April 2011
  • 2. Introduction“A year ago, Hilton-Baird Financial Solutions, the UK’s “The report combines soundings taken in Q4 2010largest independent introducer to the SME sector, set and Q2 2011, indexing business confidence, concernsout to take a temperature check of UK businesses in and sources of finance against initial findings back inpost-recession Britain. The results revealed the 2010. In addition, a selection of topical questionsnation’s 4.7 million SMEs to be bruised but unbowed have been added to tap into a couple of key currentafter enduring the worst trading conditions in living issues affecting the UK business community.memory. Naturally, concerns about access to financeand late payment continued to trouble our sample, “Meanwhile, for the first time the report also featuresbut a palpable optimism underpinned our study. a composite indicator of business health, which should combine to provide a reliable litmus test of“There have been many changes in the past 12 business confidence over the years to come.months which have impacted the landscape. We havea new Government and have officially been out of “I hope you find this report of interest and the insightrecession for five quarters. However, January 2011 within it helpful to your business. We welcome andsaw VAT rise to 20% and SMEs have also faced value any feedback you may wish to share.rampant inflation, affecting not only luxury items butalso the essentials, such as food and fuel, as well ashaving to deal with sweeping cuts, which have “Finally, I would like to sincerely thank all of ouraffected business and consumer demand. respondents for taking the time to partake in this insightful and informative study.”“This latest study provides a fascinating insight intohow business sentiment has shifted during this time Evette Orams, Managing Directorof intense volatility. Has their optimism persisted? Hilton-Baird Financial Solutions 2
  • 3. Background to researchHilton-Baird’s research was undertaken among 1,293businesses across a wide variety of business sectors,providing a representative sample of the UK’s SMEs.The research was conducted in two waves: Wave 1took place in November 2010 with Wave 2undertaken between March and April 2011.The results provide a snapshot of current businesssentiment and a fascinating opportunity to establish agraphic picture of business trends. 3
  • 4. Key findingsWhist the SME Trends Index in Q4 2010 depicted an concern for those six months was generating andSME community which appeared to be emerging winning new business, with a further 17% citing theresiliently from the ravages of recession, the results of rising cost of raw materials and fuel and 15% worriedthe most recent survey (Q2 2011) are more bearish as about managing cash flow.businesses struggle to deal with the still sluggisheconomic environment whilst Government spending The survey indicates that this latter concern could becuts begin to take their toll. overcome by securing a tailored funding solution that focuses on boosting cash flow. Once again, moreThis underlying anxiety is relayed in the first traditional sources of funding such as bank overdraftscomposite scores for our Business Health Index, which (44%) and credit cards (42%) were the most popularreveals an overall decline in the financial health of UK amongst our respondents, with more focused andbusinesses over the last six months, with the median flexible solutions such as asset finance (25%) andscore declining from 0.49 in Q4 2010 to 0.35 in Q2 invoice finance (21%) used by considerably fewer.2011. Yet, as this SME Trends Index demonstrates, assetAs a result, there was a substantial drop in the based finance users continue to fare better thanproportion of firms expecting their business to others as an increased access to working capitalexpand in the next six months. Just 33% of Wave 2 enables owners to secure new business andrespondents indicated they expected theirs to do so ultimately grow.compared to 45% reporting the same in Q4 2010.More than a quarter (28%) stated that their biggest 4
  • 5. Business Health IndexThe Business Health Index, which uses a range of using other forms of funding, as did those with afactors including bad debt levels, tax arrears, turnover turnover of more than £3m (1.48). Likewise, firms inand profitability to generate a true reflection of the Wales (1.10), eastern England (0.91) and thosefinancial health of UK firms, fell to 0.35 from the 0.49 operating in the wholesale sector (1.38) are showingrecorded in November 2010. the most promise.Companies using asset finance (0.70) and/or invoice But, in general, trading conditions appear noticeablyfinance facilities (0.62) fared better than businesses more challenging this time around. 10 9 8 7 6 5 4 3 2 0.49 0.35 1 0 -1 -2 November 2010 (640) April 2011 (516) -3 -4 -5 -6 -7 -8 5
  • 6. Business confidenceIn the first study, almost half (45%) believed their Six months on, however, the picture is somewhat lessbusiness would expand in the next six months. optimistic with only 33% reporting the same.Over the next 6 months do you believe your business is going to... (%) Expand Remain the same Contract Dont know Total (1120) 39 36 15 9 November 2010 45 32 13 9 (625) April 2011 (495) 33 41 17 9 0 10 20 30 40 50 60 70 80 90 100 6
  • 7. Business concernsWhen asked about their key concerns for the However, day-to-day concerns such as rising materialfollowing six months, 28% of respondents cited and fuel costs (17%) were much more of an issue thangenerating and winning new business as their primary macro factors. Only 3% were worried about inflationconcern. Perennials such as managing cash flow in the abstract and a similar number found a potentialconcerned 15% of respondents and 11% highlighted rise in interest rates a cause of anxiety.late payment as a concern. % stating that their biggest concern for the next 6 months is... Generating/winning new business 28 Rising material/fuel costs 17 Managing cash flow 15 Customers taking too long to pay 11 Inability to access funding 10 Rising inflation 3 Rising interest rates 3 VAT increase 2 Other 7 No concerns 3 Dont know 1 0 10 20 30 40 50 60 70 80 90 100 7
  • 8. Routes to financeManaging finance and an over-reliance on highly Promisingly, 21% of respondents in Q2 2011 enjoyedleveraged forms of finance are troubling. Bank the flexibility provided from invoice financeoverdrafts remain SMEs’ preferred method of solutions, freeing the cash from their sales ledger.securing credit (44%), whilst credit cards (42%) Meanwhile 25% of the sample used assetemerge as the second most commonly used method finance, though this figure is down 10% on Q4 2010.of finance. Nov ‘10 April ‘11 % types of Finance currently used by business Difference (630) (502) N/A 49 Existing cash flow** 49 49 44 Bank overdraft 47 44 42 Credit cards 43 35 25 Asset finance (including HP &… 30 22 24 Bank loans 23 19 21 Invoice finance (Factoring & ID) 20 Loans from family & friends 17 20 18 Credit insurance 4 5 4 Government schemes 4 5 4 Export finance 1 1 1 Venture capital funding 1 2 1 Other 4 5 3 None of the above 13 17 9 Dont know 1 1 1 0 10 20 30 40 50 60 70 80 90 100 8
  • 9. About Hilton-Baird Financial SolutionsAs the UK’s leading independent commercial finance risk management across a wide range of industriesbroker, Hilton-Baird Financial Solutions specialises in and sectors.identifying the exact funding needs of businesses andmatching them with suitable funding providers in the The emphasis Hilton-Baird places on delivery of aUK and overseas. tailored service that meets all of our clients’ needs is central to its business proposition and has played aHilton-Baird’s independent status has enabled the large role in the company’s growing success. As acompany to foster strong relationships with more than member of the Asset Based Finance Association70 dedicated lenders, ranging from major banking (ABFA), Finance and Leasing Association (FLA) and thegroups through to smaller boutique funders. This National Association of Commercial Finance Brokersobjective approach and market expertise delivers real (NACFB), the company maintains the highest servicebenefits for clients, enabling the right business standards at all times.solution to be sourced and ensuring that Hilton-Bairdalways delivers positive and innovative financial Hilton-Baird also recognises that its highly trainedsolutions allied to exact business requirements. team is its true strength and is fully committed to supporting them, creating a vibrant workingEstablished in 1997, Hilton-Baird Financial Solutions environment with a team that is dedicated tohas helped in excess of 3,000 businesses during its 14- delivering beyond expectations.year history. It is part of the Hilton-Baird Group, oneof the UK’s leading independent business financegroups consisting of a team of 50 professionals withexpertise in all aspects of commercial fundraising and 9
  • 10. Contact details Evette Orams Managing Director Hilton-Baird Financial Solutions By post: Hilton-Baird Financial Solutions Ashwood House Ashwood Gardens Southampton SO16 7LF Telephone: 023 8070 7390 Email: evette@hiltonbaird.co.uk Website: www.hiltonbaird.co.uk/fs 10