The fall in the value of the pound since the Brexit vote seems likely to result in rising inflation as the cost of imported goods goes up, and this shift is just beginning to affect the UK’s leasing business in a number of specific areas, according to Adam Tyler, former chief executive officer at NACFB
For buyers of British products outside the UK, a trip across the Channel (or the Atlantic) to these shores can now work out cheaper than buying that product in the local currency, because the seller with the stock has already paid for that stock when the pound was stronger. They are unable to make a profit if they reflect sterling’s decline in their prices. The opposite applies when buying foreign-built products from UK stockists, but it will not apply for much longer.
It is not really the day-job, but we do get approached by SMEs quite often, and they are largely startups and the smallest businesses which most need the good advice that our brokers are in a position to offer.
Speaking generally, such business are nervous of making early missteps, of failing to take into account things that would be obvious to a more well-established company. They are looking for handholding and they are looking to build up understanding of the market from a low base-point. Their risk appetite tends to be very low.
This rather flies in the face of the theory is that small businesses can afford to take more risks than large ones because they can react more nimbly when things do not go as predicted.
To take a simplistic small-scale example, if you made money selling lemonade from a garden stall in the summer, an unseasonable cold spell might have you selling hot chocolate for a few days instead. But if you have made a name for yourself selling 200,000 branded cans of lemonade every week, there is not much you can do to shut down factory output and reconfigure for those few days when lemonade is not selling. You take the hit because you are too big to back away from the punch.
But late payment continues to be a problem for small businesses, and it means that when the punch finally reaches them, there is no way to bounce back.
Recent figures show that about a quarter of SMEs continue to potential financial crisis due to late payment of invoices. The average SME claims to be owed more than £40,000 from unpaid invoices, and fully half of those invoices are post-deadline. One quarter said late payments have put them at risk of closure, and the same proportion said that the worst offenders for late payment were large businesses, for which the balance of power works in their favour.
So perhaps it is inadvisable to encourage small businesses to take risks. Launching a new product, hiring a new team or opening a new office all tie up capital and do not come with guarantees on return. Like queue-jumping a mule, it is a gamble where the potential wins are not worth the potential damage.
We need to keep the pressure on larger businesses to pay promptly, because while they may fit the stereotype of being slow to act on change, there is no excuse for being slow to pay invoices. The smallest businesses do not even have dedicated accounts teams, yet the figures show they tend to be the fastest payers. That is not because they can dedicate all their time to keeping on top of payments – more likely that they are hoping for the same courtesy in return!