Small businesses are more agile following the financial crisis of 2008, but they want some certainty as to what the impact of Brexit will be, according to the boss of a small business investment provider.
Alex McWhirter, CEO of Finance Yorkshire, believes that there is more finance available to smaller firms now than there was in the grip of the recession but that small firms acre cautious when it comes to availability of finance in the future.
He told The Yorkshire Post: “By and large, SMEs have got some concerns. They are cautious about what happens in the future and the availability of finance.
“If anything, what they are going to need to do is look at marketing strategies and how they penetrate international markets and maintain their presence in international marketplaces.
“The impact of Brexit as it stands at the minute is the uncertainty.”
Several forecasts have been proven wrong in the past year, says Mr McWhirter, leading to many small firms being cautious.
“If anything has taught me a lesson over 2016 believing in anyone’s forecast is slightly daunting,” said Mr McWhirter.
“Because there has been a lot of forecasts about various things written over the last 12 months and quite a few of them haven’t been accurate or correct so everyone is cautious about what happens.”
However, many small firms that have lived through the recession are more agile and better equipped to deal with challenges. Mr McWhirter said: “They are aware of the uncertainties. There is some caution about that but I also think that we’ve had that period from 2010 to where we are in 2017 and businesses are more agile now than they perhaps previously were.”
He added: “They’ve lived through a financial recession, they’ve lived through uncertainty, they’ve lived through a lot of change and I think they are more agile and able to cope with challenges in the future.”
Over the past six years, Finance Yorkshire has invested £113m. In December, its investment fund was extended following an injection of fresh capital from Leeds City Region Enterprise Partnership (LEP) and Sheffield City Region LEP, with funding totalling £5m allocated.
The £400m Northern Powerhouse investment fund will come into force later this year, meaning that there will be less of a need for Finance Yorkshire.
However, Mr McWhirter says he will be having discussions with his board and stakeholders as Finance Yorkshire “has established a brand name”.
“I would like to think that there is still a position that Finance Yorkshire could fulfill in the future without competing with the Northern Powerhouse investment fund,” he said.
Mr McWhirter says that manufacturing is a “great strength” of this region, “which is great for this region because making things brings a great degree of increased GDP for Yorkshire”.
He added that small businesses are hugely important to the region.
“Over 95 per cent of businesses we have in the region are classed as SMEs,” he said. “Without those you lose the real engine room.”
Although there is a greater availability of finance, Mr McWhirter believes there’s still a need for gap financing – finance provided to businesses who are unable to obtain funding from conventional sources such as banks.
“There is still going to be demand for a huge amount of gap finance for SMEs in this region,” he said.
Tech firms struggle to access funding, due to a lack of tangible assets, and Finance Yorkshire sees growth in helping them realise their ambitions.
Huge risk in tech market
Technology investments don’t fit the normal investment model, says Alex McWhirter.
There needs to be longer investment periods and they also need to be closely managed. He added: “The tech market carries a huge amount of risk because not every proposition is going to be successful. Therefore another aspect that needs to be built in is the attrition or failure rate as a portfolio overall.”