Businesses in the UK are used to facing an emotional rollercoaster as they drive on with their planned growth, with 2018, vying for the most emotional yet! With the press full of both positive and negative stories, it can breed a feeling of uncertainty and it can be difficult to remain positive. However, one thing is sure, businesses need to learn how to remain and act positive in uncertain times if they are to keep up momentum and in turn support economic growth.
It may not seem it now, but no one can deny that the majority of the year did give everyone a real feel-good factor driven by events outside of the business environment which most certainly did have a positive impact on the UK economy. From the royal wedding, to England’s World Cup performance, to the sense that we had all unwittingly moved to southern Europe as we sweltered in temperatures we were not used to working in! However, the Autumn has been filled with Brexit discussions and the ongoing “will there be a deal or a no deal”.
The economy has fared well. Latest figures from the Office for National Statistics show that the UK economy bounced back from 0.1% GDP growth at the end of Q1 to 0.4 at the end of Q2 and continuing to rise to 0.6% at the end of Q3. GDP was 1.5% higher in Quarter 3 2018 compared with the same quarter a year ago. This is the 23nd consecutive quarter of positive growth since Quarter 1 (Jan to Mar) 2013.
However, this growth predominantly driven by the service sector does mask a decline in manufacturing which has been contracting with zero growth in August and September, which doesn’t bode well for the Governments desire to move towards a higher value manufacturing economy post-Brexit.
Insolvencies have also made the news recently. Total company insolvencies in Q2, 2018, stood at 3914, a decrease of 12.4% compared to Q1 2018 while the underlying number of insolvencies decreased by 2.0%. When compared to the same quarter last year, total company insolvencies have increased by 12.0%.
Speculation that this increase in growth could result in an interest rate rise came true in August. An unaccustomed rise in interest rates – only the second time in a decade - was announced by the Bank of England. It might only have been a quarter of a percentage point, from 0.5% to 0.75% but it’s the highest level since March 2009. Interest rate rises will impact on operational costs and therefore they need to be planned into a businesses’ budget.
The decision means that businesses will experience an increase in lending costs which might at this point have limited financial impact, however, the suggestion by Mark Carney that there would be further "gradual" and "limited" rate rises to come means uncertain times for UK business. It also risks undermining confidence at a time of significant political and economic uncertainty.
And of course, the outcome of the Brexit deal vote in December is important for business and they should be keeping a watching eye on the situation and planning for every eventuality as to how it may impact on trading with overseas customers or suppliers.
With so much uncertainty, Pulse Cashflow have highlighted some key pointers to help every business to identify potential issues and thus remain positive.
Know where you are - Understand the position your business is in, both from a business and financial perspective especially with regard to future cashflows.
Be informed & plan effectively - Collate information on the market, your customers, the competition and the economy, so you are aware of what could impact your business performance and therefore plan for different scenarios and how to deal with them.
Focus on the things you can control - Accepting where your business is and building on it, thus focussing only on the things you can control is essential. Don’t spend time fretting about things outside your control.
Get your business in order - Review all aspects of your business to ensure they are working effectively. Be agile and flexible and make any changes where required so that every area is fit for purpose and ready to act when needed.
Be confident and think outside the box - Confidence is key when maximising opportunities that present themselves. Opportunities can arise at any time so keep looking out for them. Think outside the box and look to see how you can maximise a situation where someone else may be impacted by uncertainty.
Be decisive - Indecision can lead to a lack of action which will hold your business back. Make decisions based on the information you have and take action to stay ahead of your competition.
Spread your risk - Make sure you protect your business from the different types of risks ensuring you are not too highly exposed in any area. Consider customer spread, flexible financing, supplier risk, as well as others.
Engage with key stakeholders - Ensuring you keep open lines of communications with suppliers, customers, funders and other business contacts is really important to help you keep things in perspective, receive the support you require and help you make good decisions.