ARCHOVER’S chief executive has called for a change in mind-set around debt as a tool for growth, after new data showed that poor consumer demand and rising cost pressures have weighed on British businesses.
The BDO monthly business trends indices, which collate the results of all the main UK business surveys, found that optimism in the service sector fell in April.
“Consumer-focused services have been the hardest hit by the recent squeeze on household disposable incomes,” said the report. “In particular, retailers posted their weakest performance since 2010 in the first quarter of 2017 as total volumes bought fell by 0.8 per cent in quarterly terms.”
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However, there was some good news as confidence amongst manufacturers edged up slightly last month. There has been strong international demand for UK goods, boosted by the weak pound following the EU referendum. However, the sector is under some pressure from rising costs, the research said.
Angus Dent (pictured) said that the index illustrates “true British stoicism” in the face of uncertainty.
“The challenges British businesses are facing range from poor consumer demand and rising costs, as well as prohibitive thinking around debt,” said the head of the peer-to-peer business lender.
“To herald stronger growth in confidence and boost the economy, we need a change in mind-set. Debt is viewed as a bad word, yet the reality is, if you are a small business that needs to borrow to service more customers, you’re going to need the help.”
The UK government has been making efforts to boost small businesses’ access to finance. The bank referral scheme mandates high-street lenders to refer rejected business borrowers to three aggregator platforms, which pass the opportunities on to alternative finance providers.
“We need to think differently about how debt enables growth,” said Dent.
“It’s nearly 10 years since the crash, but 35 per cent of SME loan applications are rejected by mainstream banks.
“Many businesses get stuck in a vicious cycle, needing cash to secure profitability and vice versa. We must let them know there’s help available beyond the nervous banking sector.
“There’s a key role for alternative finance to play in helping SME borrowers maintain healthy cash flow, giving businesses quick access to the funding they need to put themselves in a position of strength.”