Craig Reeves https://www.alpha-week.com/ en The UK SME Sector: A Lot Tougher Than It Looks in the Headlines https://www.alpha-week.com/uk-sme-sector-lot-tougher-it-looks-headlines <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>The UK SME Sector: A Lot Tougher Than It Looks in the Headlines</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 01/18/2021 - 08:53</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span><span>As we move into 2021 many of the unknowns of 2020 have become the knowns of 2021 - the US election has taken place and we have a new president about to be sworn into office. An initial Brexit treaty has been negotiated and the UK has left the European Union. The UK is also leading the way in the deployment of new vaccines which signal the possibility of the end of the pandemic this year.</span></span></span></span></p> <p><span><span><span><span>As a private debt manager, we have to look to the fundamentals, however, and we see much to be encouraged about, with huge fiscal stimulus programs being rolled out in both the UK and US, our core markets. According to Goldman Sachs, the US is en route to 3%-4% GDP growth in 2021, with the UK forecast to see 5%-7% GDP growth.</span></span></span></span></p> <p><span><span><span><strong><span><span><span>A year of change and opportunity</span></span></span></strong></span></span></span></p> <p><span><span><span><span>The UK market sets out in 2021 with manufacturing PMI at a three-year high. Preparations are afoot to host a G7 summit in the country as well as the important UN Climate Change Conference. It is going to be a year of change and of opportunity for businesses on both sides of the Atlantic.</span></span></span></span></p> <p><span><span><span><span>Investors often ask us about job losses in the UK and the state of the SME economy. The UK government has recognised the importance of the SME sector for economic growth and employment, hence the headline-grabbing stimulus packages that were rolled out by the Chancellor in 2020.</span></span></span></span></p> <p><span><span><span><span>According to the UK’s Office of National Statistics, aggregate national profit share (gross trading profits of the corporate sector) rose 23% to a record £126bn in the three months to September. For the first nine months of last year, according to the ONS, total corporate profits averaged £116bn a quarter, compared with £115bn in 2019. In other words, <em>companies in the UK were more profitable during the pandemic than before it.</em></span></span></span></span></p> <p><span><span><span><span>While turnover has fallen, so have the bottom lines for many UK companies. Grants, tax deferrals and tax cuts, not to mention the employee furlough scheme, have all had a substantial impact on the UK corporate bottom line. This leaves many UK companies with the prospect of making considerable savings - the Office of Budget Responsibility expects UK companies to have saved around £30bn in cash in 2H 2020. Profits may be subdued, but many UK firms are now seeing bigger cash margins they can potentially deploy in 2021.</span></span></span></span></p> <p><span><span><span><strong><span><span><span>UK small businesses are resilient</span></span></span></strong></span></span></span></p> <p><span><span><span><span>The UK small business sector has proved very resilient under the twin threats of both Brexit and the pandemic: according to Goldman Sachs, for every two businesses that have cut jobs during the pandemic, another has increased its employee base. Although 44% of firms have cut jobs last year, 62% have continued trading without interruption. This can be attributed in part to the fact that more than 80% of the UK economy is service-based and it is also the world’s second largest exporter of services after the USA.</span></span></span></span></p> <p><span><span><span><span>The financing of small businesses through government-backed schemes has played a critical role in helping to support small businesses through these trying times - 98% say government support has had a positive impact on small businesses, with 80% telling Goldman Sachs that the current support on offer from the government is enough to ensure their business survives. Not only that, but 59% say that current support levels are equipping them to growth their business in the future. Four out of five UK SMEs now feel they no longer require further government support to prevent further redundancies.<sup><a href="#_ftn1"><span><span><span><span><span>[1]</span></span></span></span></span></a></sup></span></span></span></span></p> <p><span><span><span><span>How has the SME sector proved so resilient? Business owners have demonstrated their readiness to take on external finance, and they have proved dynamic enough to change their business models to meet the new challenges presented by the pandemic. Many business owners tell us that these changes are likely to prove permanent, as they further embrace new and dynamic operating models.</span></span></span></span></p> <p><span><span><span><strong><span><span><span>Brexit: removal of uncertainty will be beneficial for SME’s</span></span></span></strong></span></span></span></p> <p><span><span><span><span>Brexit has also captured many headlines in the UK and Europe in Q4 of last year. For SMEs this has presented an additional challenge, and it is true there are some companies with heavy exposure to EU trade flows. But for the vast majority of UK SMEs Brexit will make little or no impact on the way they do business. Uncertainty has probably been one of the biggest worries for business owners.</span></span></span></span></p> <p><span><span><span><span>However, it is heartening to say that despite fears of a no deal with the EU throughout the course of 2020, less than 25% of SMEs were concerned about the negative impact of Brexit<sup><a href="#_ftn2"><span><span><span><span><span>[2]</span></span></span></span></span></a></sup>. According to a survey from accounting software provider FreeAgent, almost 60% of SME owners are not worried about their future, and the number that thought Brexit would have a negative impact on the economy has fallen steadily in the course of 2020.</span></span></span></span></p> <p><span><span><span><span>SME owners are refocusing their efforts on either trading within the UK, or trading with countries outside the EU itself. From the government, they want to see a further trimming of red tape and additional financial support in terms of grants and tax reductions.</span></span></span></span></p> <p><span><span><span><span>This positive narrative for SMEs is now being described as ‘surthriving’ - describing those firms that have embraced the changes forced upon them and have become more dynamic - according to data from FreeAgent only 21% of UK SMEs are now worried about the impact of Brexit, and 10% say the pandemic has <em>actually opened up new opportunities</em>.</span></span></span></span></p> <p><span><span><span><span>Last year was a testing time for many small business owners, but it has also proved that in the UK we have a diverse and opportunistic small business sector with the strategic support of a government that is prepared to do what it takes to shelter SMEs from the worst of the pandemic and pave the way for future successes in this sector.</span></span></span></span></p> <p><span><span><span><span>**********</span></span></span></span></p> <p><em><strong>Craig Reeves</strong> is Founder of <strong><a href="https://www.prestigefunds.com/">Prestige Funds</a></strong></em></p> <p><span style="font-size:11px;"><a href="#_ftnref1">[1]</a> Small Business Britain - The Impact of Covid 19 to Date (Goldman Sachs) <a href="https://www.goldmansachs.com/citizenship/10000-small-businesses/UK/infographics/small-business-britain/">Small Business Britain: The Impact of COVID-19 To-Date (goldmansachs.com)</a></span><br /><span style="font-size:11px;"><a href="#_ftnref2">[2]</a> Survey data based on 500 SME interviews by FreeAgent, October 2020</span></p> <p> </p> <p><em>***</em></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/alternative-credit-private-debt" hreflang="en">Alternative Credit - Private Debt</a></div> <div class="field__item"><a href="/directory/prestige-funds" hreflang="en">Prestige Funds</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=7494&amp;2=bookmark" token="wMzkYInrlzpM7qGxobf4LbriQ4QLHlfMLcSr60IUfek"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/craig-reeves" hreflang="en">Craig Reeves</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 18 Jan 2021 08:53:39 +0000 AlphaWeek Staff 7494 at https://www.alpha-week.com Don’t Be Distracted by Brexit Brinkmanship https://www.alpha-week.com/dont-be-distracted-brexit-brinkmanship <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Don’t Be Distracted by Brexit Brinkmanship</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Fri, 09/28/2018 - 13:04</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span><span>UK and international headlines prominently feature the ongoing negotiations over Brexit between the UK and the European Union, but as the angry rhetoric is leveraged upwards to secure a deal both sides will be happy with, so the narrative surrounding the health – or otherwise – of the UK economy is becoming misleading. A picture is being painted of business grinding to a halt because of political paralysis, but this is far from the case.</span></span></span></span></p> <p><span><span><span><span>As a fund manager specialising in the provision of private credit to thousands of UK SMEs in a variety of sectors, we have daily knowledge of the health and activities of the companies we lend to. This is essential if we are to be able to manage the risk in our portfolios. Our finance teams report a different situation entirely.</span></span></span></span></p> <p><span><span><span><span>A great deal of valuable investment work and business is carrying on. We are seeing record levels of deal flow and economic activity: Brexit does not often occur in the discussions that we have with some of the 5m SMEs active in the UK. Indeed, 92% of the UK SMEs we work with do not deal with other EU countries.</span></span></span></span></p> <p><span><span><span><strong><span>A growing SME sector</span></strong></span></span></span></p> <p><span><span><span><span>The number of UK SMEs has expanded considerably since the Brexit vote in 2016, and that expansion is being supported in part by sound economic factors. There was an increase of 197,000 small businesses between 2016 and 2017 and according to the Federation of Small Businesses, the number of SMEs employing staff rose by 3% after the Brexit vote. Our generic SME lending business alone has lent more than USD200 million in the last 12 months. This does not look like a moribund part of the economy.</span></span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"><img alt="Craig Reeves" data-entity-type="file" data-entity-uuid="704b34b6-2fb8-46ca-b01e-8164715ab552" src="/sites/default/files/inline-images/Craig%20Reeves%20-%20Prestige%20Funds%2C%20informal%20250.jpg" /><figcaption>Craig Reeves</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span>The UK economic fundamentals have not been badly damaged by the Brexit negotiations. True, the British Pound jack knifes every time a politician makes a Brexit speech in London or Brussels (although other currencies including the Swedish Kroner have fallen more this year against the US Dollar), but UK unemployment has fallen consistently since 2016 and the UK 10-year government bond yield has remained lower than many other European nations and solid credit risks, including New Zealand, Australia, Canada and the USA.</span></span></span></span></p> <p><span><span><span><span>In short, our finance companies continue to see strong deal flow, exceptional activity in the critically important SME sector, and a community of businesses that seem focused on getting on with business, regardless of the political situation. We continue to provide vital finance to these firms through our private finance enterprises, fuelled to a large extent with overseas capital from major foreign investors who are not fazed by the Brexit vote.</span></span></span></span></p> <p><span><span><span><span>Foreign interest in investing in the UK remains strong – institutional investment appetite for UK lending is high. At Prestige we have hosted 50 site visits from international investors over the last 12 months, from as far afield as Brazil, the Middle East, Switzerland, China, Japan, and South Korea. Since the Brexit vote we have raised more than USD500 million from overseas investors for exclusively UK-focused direct lending strategies. </span></span></span></span></p> <p><span><span><span><span>According to data from Intertrust, two thirds of institutional investors expect the private debt market to grow in 2018, while 36% plan to increase their allocation to private debt strategies. Intertrust also says that most investors favour direct lending over infrastructure debt or real estate debt. Loan finance and specifically direct lending is becoming a favoured avenue for foreign investment to be deployed in the UK. </span></span></span></span></p> <p><span><span><span><span>Between them, our finance companies, which carry out the day to day lending and credit oversight work, have lent almost GBP2 Billion Pounds to SMEs in the UK. This is a good indicator of the economic activity that continues regardless of the state of Brexit negotiations.</span></span></span></span></p> <p><span><span><span><span>The focus of many UK SMEs is very much on rising costs and access to credit, practical concerns where Prestige can support them. Our role now extends beyond pure lending to consulting with company management and designing solutions for companies that help them to become more productive and to upscale cash.</span></span></span></span></p> <p><span><span><span><span>As we tell our investors every day, we are confident of the health of the UK SMEs we are dealing with. Clearly when lending money one needs to know and understand the customer and sector, get as much security as possible and continue to monitor them. We understand the nuts and bolts of what makes them profitable and the markets they serve. The Brexit narrative that currently dominates headlines and forces knee jerk reactions from public markets does not, we feel, reflect the reality of the day to day world of helping UK businesses function to their full capacity.</span></span></span></span></p> <p><span><span><span><span>**********</span></span></span></span></p> <p><span><span><span><span><em><strong>Craig Reeves</strong> is Founder of <strong><a href="https://www.prestigefunds.com/">Prestige Funds</a></strong></em></span></span></span></span></p> <p><span><span><span><span><em>***</em></span></span></span></span></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/alternative-credit-private-debt" hreflang="en">Alternative Credit - Private Debt</a></div> <div class="field__item"><a href="/directory/prestige-funds" hreflang="en">Prestige Funds</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=1656&amp;2=bookmark" token="dec0ZUEOEYILg0V8ZxQzkRQztENjYUkBxdCsPH9c4-0"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/craig-reeves" hreflang="en">Craig Reeves</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Fri, 28 Sep 2018 12:04:50 +0000 AlphaWeek Staff 1656 at https://www.alpha-week.com