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Businesses still face perfect storm of economic pressures

Author: ICAEW Insights

Published: 13 Feb 2023

Higher interest rates, a shortage of loans and a slow-down in the property market are knocking confidence – but careful planning and risk management may see businesses through a difficult year.

Supply chain pressures, inflation and confidence issues regarding consumer demand are all impacting businesses at once, compounding pressure on them, says Josh Levy, Chief Executive Officer of Ultimate Finance. “Add that to increased borrowing costs and higher taxes, and you realise it’s a very tough trading environment that’s likely to get harder.” 

Founded in 2002, Ultimate Finance is a specialist asset-based lender, offering flexible funding solutions tailored to SME businesses that may have faced difficulty obtaining lending from banks. With 20 years of expertise, they offer working capital, asset finance, bridging finance and structured finance.

The team at the firm hears customers’ economic concerns loud and clear, says Levy. “Our customers’ concerns are our concerns. The current disruption offers both challenges and opportunities, but we’re in a tough period of adjustment.”

For the SME or mortgage holder, having to adjust to the reality of increased interest rates is a big concern. People’s refinancing options after a fixed-term mortgage contract will be more expensive, and that will impact the housing market, he says, adding: “Many of my customers are in the construction supply chain and will be exposed to what happens in the residential market, so there are knock-on effects for different industries.”

As a relationship-based lender, Ultimate Finance has client managers who work with clients locally. This bespoke approach enables them to tailor their services on an individual basis – whether for additional funding, extending repayment facilities or tweaking a client’s terms. “We try to play the role of a partner, not just a lender,” explains Levy. Clients have access to funding experts, skilled underwriters and product specialists.

This is welcome reassurance. But Levy says it’s crucial for the government to show “stability and confidence” in order to gain the trust of the nation and its fearful business owners. He notes that while the government has taken the role of intervention further than we’ve seen in previous years, it’s essential that they don’t overpromise. “They need to provide the conditions for businesses to trade. Understanding the terms of the Brexit deal and implementing that is important,” he stresses. 

Even with a viable plan of action and more robust leadership from the government, Levy acknowledges how difficult next year will be. “The property market will inevitably slow down – we’re already seeing transaction volumes fall – and there will be more insolvencies. Some businesses have survived the last couple of years through government support initiatives and, as that unwinds, there will be repercussions.”

From a business perspective, Levy remains cautiously optimistic and says that, with careful risk management, there’s an opportunity for growth. “We expect to see an increase in demand for borrowing. Generally, in times of uncertainty, the banking market will take a step back from SMEs. That’s where we can step in and provide the funding that would otherwise be missed.” 

In the meantime, the transition to net zero is also a factor for the independent lender. With greater expectation for businesses to support the green finance initiative, Ultimate Finance is continually working to play its part in promoting sustainability. “Businesses may need to upgrade the efficiency of their machinery and a lot of the funding we provide is to help buy assets, so there are ways we can help,” says Levy. This solution-led approach filters through Ultimate Finance’s business model. 

As the economic environment and its impact on business continues to shift, Levy encourages all business owners to avoid burying their heads in the sand and instead actively forward plan: “Speak to your financial adviser or accountant and assess the next 12 months – and beyond. Ask yourself what support you might need.” 

Cost of doing business

Insights, analysis and resources for organisations facing rising costs of doing business amid a multitude of challenges, including energy prices, inflation, supply chain disruption and staff recruitment and retention.

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