In this series of articles we seek to provide a quick reference point on all the up to date news and data that impacts on SME Growth Strategy. This follows hard on the heels of recently published data from the Bank of England.
Growth in the UK economy
The ONS recently confirmed that GDP for the period April to June 2015 was up by 0.7%. This follows on from an increase of 0.4% in the first quarter of the year.
In its report published on 5 August 2015, The Bank of England has increased its forecast for UK growth this year to 2.8% from the May prediction of 2.5%.
Inflation
The Governor said that the rapid fall in Consumer Price Inflation is the most striking development in the UK in the last year! He suggested in his speech that the economy could return to negative inflation in the coming months due to the continued fall in the price of oil. It is expected to rise to just 0.5% by the end of 2015.
Interest rates
The minutes of the recent Monetary Policy Committee meeting have just been released. To many commentators surprise, the committee voted 8- 1 in favour of keeping rates on hold at 0.5%. The Bank of England’s Governor made the point in his speech that a rate rise is drawing ever closer. Analysts are seeing this as confirmation that rates will not now rise till 2016!
The strength of Sterling
The pound fell following the Banks announcement, on the basis that the data showed interest rates would stay at their record low for longer. In the last three months the Pound had risen in strength by some 3.5% against a basket of currencies, stifling export demand for UK products.
Employment
The Banks report showed a slowing in employment growth, and it believes that the jobless rate will stay at 5.6% in the three months to the end of September.
However, the ratio of vacancies to unemployment was around pre-crisis norms, and business surveys of recruitment difficulties had been rising in recent months and were now around or above pre-crisis levels.
This data suggests that the level of slack in the labour market was greatly reduced given the significant falls in unemployment since the summer of 2013.
Overall the Committee’s judgement was that the margin of spareeconomy was around 0.5% of GDP.
Finance
The Bank of England’s Credit Conditions Review to the end of June shows a Growth in the stock of lending to UK businesses as a whole taken up in 2015 to date. However the report also confirmed a fall in June 2015 of £5.5bn in outstanding lending!
This is the biggest drop since the Bank started collecting data in 2011
The survey suggested that the overall level of demand for bank lending from small and medium-sized enterprises, however, remained subdued.
Net lending to SMEs by participants in the Funding for Lending Scheme Extension in 2015 Q1 was £0.6 billion.
According to respondents to the Survey, Credit was more widely available for large Companies than for small firms. The Bank’s Agents reported that credit availability, despite a gradual improvement, remained tight for small companies.
The Business Bank was criticised by the Alternative funding providers for dragging its heels with the promised referral scheme in situations where the main banks were unable to help!
Business confidence
Comment
All in all an improving position for the SME business with an ambitious growth strategy. However we believe this is still an environment that demands the utmost caution and attention to detail when creating and implementing these plans.
If you have any comments on this article or would like to discuss any aspect of it please contact me at info@transcapital.co.uk.
John Thompson is Managing Director and founder of Trans Capital Associates.
