Uncertainties about the economic outlook in 2019, including those related to Brexit, meant UK businesses deferred spending and investment until they had more clarity about the future trading environment. Will firms see more cause for optimism in 2020?
Business investment growth has been weak since the referendum - “much lower in the UK than in other advanced economies on average over that period,” notes the Bank of England.
Businesses might’ve been encouraged by Prime Minister Boris Johnson signing EU withdrawal agreement in January - purely in terms of what it meant for economic stability - but continued threats of no-deal Brexit mean that any investment plans won’t be taken in haste.
For finance facilitators, then, the challenge is twofold: to provide a risk-mitigating solution, encouraging small businesses to invest for growth in this uncertain economic climate, while improving the security of the lender’s lending book.
SME's 'being realistic'
As a condition of raising business finance, directors are increasingly being asked to sign a Personal Guarantee. But the prospect of putting their personal assets on the line could see directors defer making any big investment decisions for another 12 months.
However, responses from SMEs to Barclaycard’s inaugural SME Barometer suggest that they’re not ruling out the possibility of taking the odd risk in the name of growth in 2020.
One in five SMEs questioned in in the survey said that they began trading internationally last year, with a further 10% intending to start doing so in 2020
Asked about prospects for the UK economy, on average businesses were positive, with one third of SMEs (33%) saying they were optimistic. The same percentage of SMEs also said that they felt positive about prospects for their sector.
Commenting on the report Emma Jones, Founder of Enterprise Nation, says, however, that SMEs won’t be getting carried away and take unnecessary personal or business risks.
She said: “Being an entrepreneur has its peaks and troughs. With the economy stabilising, resilient self-starters and business owners are being realistic about the next 12 months.”
Could PGI help provide some risk assurance?
Personal Guarantee Insurance provides business directors with cover in the event the lender calls on their Personal Guarantee following a financial shortfall at the company.
Knowing that they’re protected in the event that things don’t play out as planned, directors might be more inclined to sign a Personal Guarantee in order to fund the growth of their business.
Available against a wide range of business loans (both secured and unsecured), Personal Guarantee Insurance could feasibly help kickstart the recovery of UK growth. After all, the more money UK SMEs are generating, the stronger the economy.
Instead of SMEs playing it safe – which could prove costly for them if it results in missed opportunities, competitors gaining an upper hand, and becoming over dependent on a small customer base – Personal Guarantee Insurance moderates their risk so that they can make their move now and invest for growth.
Purbeck Insurance is a specialist Personal Guarantee Insurance underwriter, authorised and regulated by the Financial Conduct Authority. We work alongside lenders and brokers to provide a bespoke insurance solution based on the lender’s individual requirements and risk profile. Please contact one of our specialists today to learn more on 0208 004 7250.