In this week’s blog post, we sit down with our chief executive Stephen Deakin to discuss how access to business finance will play a vital role in allowing our economy to uncoil as strongly as predicted following the pandemic.
In light of Coronavirus restrictions being lifted on the 19th July 2021 and the vaccine roll-out, the Confederation of British Industry (CBI) predicts that UK GDP is set to bounce back to its pre-COVID levels towards the end of 2021, a year earlier than the previous forecast made in December 2020.
The CBI is forecasting GDP growth of 8.2% this year, and 6.1% in 2022 revised up from 6.0% and 5.2% respectively. Hopes of a boost in consumer spending will be essential for recovery across the UK and will drive just over a quarter of GDP growth in 2021 and 70% in 2022.
In April 2021 it was said that the West Midlands region will be one of the fastest to recover from the impact of the Coronavirus pandemic despite being one of the hardest hit regions in the UK. Birmingham, Wolverhampton and Walsall saw their economies decrease by more than 11.7% in 2020, yet they are predicted to recover more effectively this year than other UK cities with growth rates of 4.8% and higher.
We asked Stephen Deakin to share his insights into SME recovery.
Stephen, do you think the economic predictions are realistic from your perspective?
“As a lender who supports small businesses on a daily basis, I have always believed that the West Midlands region is home to some of the most resilient businesses in the world.
“The government-backed funding schemes available during the pandemic resulted in businesses having more finance options available to them than ever before and my hope is that businesses now have the working capital needed to help propel recovery, innovation and sustainable growth as our economy continues to uncoil.
“Recognising that the Bank of England has an incredibly difficult job, our view is that increasing interest rates in the short term would stifle recovery and limit the affordability of capital to support growth. While many lenders, including BCRS, may offer fixed interest rate loans, raising interest rates would impact the ability for many businesses to repay existing variable rate debt taken out under government support schemes.
“Therefore, providing businesses either have the funding they require or ability to access finance when needed, together with retaining low interest rates, I believe that the optimistic growth predictions could very well be achieved. However, I think it will be more difficult to achieve this if subsequent lockdowns are needed to control the spread of Coronavirus.”
Stephen, what advice do you have for businesses in the West Midlands that are looking to kickstart business recovery plans?
“SMEs are the backbone of our economy and it’s essential that we support them as we make the transition back to pre-pandemic trading conditions.
“The British Business Bank’s latest business advisory community survey found that the majority of smaller businesses in the West Midlands region will require extra funding during the next 12 to 18 months as a result of the coronavirus crisis and some are unclear as to what finance options are available to them.
“It is therefore really important for companies to keep on top of their cash and regularly update their forecasts to ensure they don’t over-trade and have the working capital required to support growth in turnover.
“When the need for finance arises, I would recommend that businesses approach their bank in the first instance. However, if their bank is unable to help, my advice would be to consider alternative lenders and/or CDFIs such as BCRS Business Loans. A good starting point would be to check which alternative lenders and CDFIs are accredited to deliver the Recovery Loan Scheme on British Business Bank’s website.”
Finally, do you think access to business funding will be key to the recovery of businesses in the West Midlands?
“The closing of the CBIL scheme on the 31st March 2021 saw the huge demand for finance subside somewhat. From my perspective, it appeared that most businesses had secured the finance they needed for the time-being with many businesses hoping to see turnover increase as restrictions ease.
“Since going live as an accredited delivery partner for the Recovery Loan Scheme (RLS) in May 2021, we have seen demand rise again, but at a much steadier pace. This is a positive sign as it suggests that businesses are generally in a much better position financially.
“Further reassuring news is that the loan applications we’re receiving indicate that businesses are now sourcing finance to spearhead growth and recovery plans; some picking up from pre-existing plans that had to be shelved due to the outbreak of Coronavirus and others that have developed completely new plans for growth. Both bode well for the weeks and months ahead.
“However, now the economy has fully re-opened, it is safe to say that access to finance will continue to be an important contributor to SME recovery over the next few months. Kickstarting the recovery quickly is essential to stimulate economy in the short-term, in ways that will also support a long-term sustainable recovery that is both green and more inclusive.
“As we recover, if past recessions are an indicator, it is likely that many lenders will tighten their credit appetite. This is where BCRS, other CDFIs and alternative lenders will become increasingly important. By taking a flexible and human approach to lending, we will deliver vital funding to businesses when they need it most to ensure we are able to build back better following the pandemic.”
To discover more information about BCRS Business Loans and how it is supporting the growth and recovery of businesses across the West Midlands with loans ranging from £10,000 to £150,000, visit www.bcrs.org.uk. BCRS is an accredited delivery partner for the Recovery Loan Scheme (RLS).