Business performance these days could be equated to battery life. And we all know that Duracell’s AAA batteries last the longest. But what effect will it have on Britain’s SMEs now that the country’s credit rating has been downgraded from AAA to AA1? Will our companies still be able to perform as well as that famous Duracell battery-powered rabbit that was the last to judder to a stop?
Last month the credit rating company, Moody’s, downgraded the UK’s credit rating to reflect the ‘sluggish growth’ being experienced in the economy, which they also add will last ‘into the second half of the decade’. With even more threats of a triple-dip recession from the pundits, the light at the end of the tunnel for UK business seems even further away.
Moody’s do however say that the UK’s creditworthiness ‘remains extremely high’ and they don’t see any further downgrading because they regard the new AA1 status as ‘stable’. Nevertheless, the move has helped to weaken the strength of sterling, in particular regarding the pound falling against the dollar and the euro. Official figures also show that UK manufacturing output has again fallen back by 1.5% in January, after an encouraging rise by 0.9% in December last year.
The weakening effect on the value of sterling will clearly have an up and down effect on businesses involved in importing or exporting. Purchases from overseas, and particularly the USA, will be more expensive. At the same time, the good news is that overseas sales will benefit by being less expensive and should theoretically attract more buyers. Companies in the first camp though may well need additional funding to see them through yet another lull in their fortunes. SME business owners need to be aware of the risks they are likely to face, as well as maximising on any good fortune that they can identify in the near future.
In the week before Chancellor George Osborne announces his latest budget, he has tried to allay fears by saying,
“The steps we have taken to support manufacturers, to help with investment allowances as I’ve announced, to make sure they have access to those growth parts of the world like China and India, this is all part of rebalancing and rebuilding the British economy.”
His words of encouragement may well fall on deaf ears when it comes to companies struggling to keep a grip on their working capital. This is an area though where Johnson Reed can come to the rescue with equipment leasing finance that could help to save the day.
It’s a fact that 90 per cent of The Times Top 100 companies use leasing. It’s clear to see why. Equipment leasing is designed to give SMEs fixed term finance, with fixed repayments that attract maximum tax relief. Traditional banks are still being criticised for not making more money more easily available, so leasing is the logical alternative. You can increase your profitability by releasing working capital for other uses. Meanwhile you can acquire the best quality equipment and pay as you use with the cost spread typically over three to five years. And you can upgrade at any time to keep pace with technological advances.
In an age when your finance director has more than enough worries, equipment leasing is one way to help him sleep at night – fixed repayments, simple direct debits, credit lines intact and improved cash flow will all be music to his ears. At least until he hears the next bad news business bulletin.
