Increased optimism through long term investment

Whilst 2012 was a period of caution for many businesses, the last quarter of 2013 has seen many of our clients look forward with increased optimism. Business continues to be tight but many companies are now looking to invest in long term strategic plans.

The banking sector continues to have its own issues with the major high street banks facing challenges on what seems like a daily basis. These challenges are reflected in the banks approach to funding opportunities. On the shop floor relationship managers are actively looking to strengthen relationships and support clients but there is a clear issue with progressing deals quickly through the approval process. Our experience is that the individual banks credit functions are still highly cautious and continue to take prudent decisions, even with long established customers.

Through our work with Sheffield City Region LEP and the Regional Growth Fund we have worked with a number of businesses that are making significant investments in long term projects. Whether this investment is through additional resources, new product development or infrastructure it is clear that what sets these businesses aside is each has clear Sustainable Competitive Advantages in their own markets. Whether these advantages are based on service levels, quality of products or technical ability, it is businesses like these who will reap the benefits of growth in the economy.

Against this renewed optimism as the business climate improves companies will face new challenges. As companies look to grow so called Zombie companies, those barely surviving, will find that working capital restrictions will force them over the edge. The risk is that these insolvencies will affect stronger businesses, therefore companies should continue to manage their customer base closely to ensure they limit their exposure to these underperforming companies.

The final quarter of 2013 has seen an improvement in the level of optimism in the economy but this improvement does bring its own challenges. It will be interesting to see whether the continued optimism does start to deliver strong growth. It will also be interesting to see if the major banks can finally get their houses in order and support the experienced relationship managers who work with their clients.

Steve Bell is Head of Corporate Finance at Hart Shaw and can be contacted on T: 0114 251 8850 or steve.bell@hartshaw.co.uk.

 

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Positive signs for South Yorkshire economy

As we enter the second half of 2013 and the fifth year since the start of the banking crisis you could be forgiven for thinking it was Groundhog Day. There is still debate between government, banks and business about access to finance. The news-cycle continues to include reports of fresh banking problems, but behind all the rhetoric there does seem to be a glimmer of hope.

 

Our involvement with the Regional Growth Fund has given us access to companies who are willing to invest considerable sums in new opportunities. Whilst the RGF system does provide grant support, the commitment from these companies does highlight our view that the “recession” is very much multi-sided. There continues to be talk of zombie companies, but in general the discussions are quieter.

 

Banks continue to be cautious but there appears to be the feeling that they have got their act together and are now focusing on outward investing as opposed to internal restructuring. Manufacturing companies that have restructured and modernised are now benefiting from new opportunities in local and international markets.

 

Whilst there are strong indications that the South Yorkshire economy has weathered the storm there are some key issues facing the region. The continued debate over the High Speed rail link and its route through the region continues to create doubt and uncertainty, especially for those Companies that are in the firing line. The delay in the redevelopment of Sheffield City Centre, and the debate over whether Next and Ikea will locate in the region puts the region under the international micro-scope. These decisions, whilst not directly impacting on business do reflect on the regions ability to plan and invest for the long term look to attract prestigious businesses and their employees into the region.

 

Businesses in the region have an excellent reputation in international markets for innovation and quality but we have to ensure we have a 21^st Century infrastructure to support our international partners in their decision to select the region over our close competition.

 

Steve Bell, Head of Corporate Finance

T: 0114 251 8850, Email: steve.bell@hartshaw.co.uk

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£95m boost for small businesses

Small and medium sized businesses in England could benefit from £95 million in government investment.

The government funding, announced on 10 November will support small and medium-sized enterprises (SMEs) considering investing in new capital assets. The government expects the funding to unlock around £500 million of new investment and create at least 4,000 jobs.

The money forms part of the government’s £1.4 billion Regional Growth Fund, which supports projects that can create jobs, are based in areas dependent on the public sector and are supported by private sector investment.

The new scheme will provide grants designed to support SMEs considering investment in new capital assets and creating new employment but which have been unable to secure commercial funding for their projects.

These schemes will directly help SMEs that want to invest and create new jobs. They will deliver a shot in the arm to local communities and help small businesses drive local growth.

RBS, NatWest and HSBC have agreed to facilitate the distribution of the £95 million. To qualify for the scheme run by NatWest and RBS, SMEs need a turnover of less than £25 million. To qualify for the HSBC scheme the SME will need a turnover of less than 50 million euros.

SMEs can qualify for a grant if they are going to invest in new capital assets, such as plant and machinery, and create new jobs but cannot get normal bank finance. Grants of up to £500,000 will be awarded alongside the award of a new bank loan on commercial terms.

For further information about business grants please contact Steve Bell, Head of Corporate Finance on T: 0114 251 8850 or email: steve.bell@hartshaw.co.uk.

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