Some of Britain’s most successful entrepreneurs revealed that they are still fearful of a ‘double-dip’ recession. Only 52% expect the UK economic environment to improve over the next 12 months (only 4% expect it to improve greatly), with 27% believing it will get worse and 21% anticipating no change.
This, plus the fact that just 21% believe the country is an attractive place to launch a new business, helps explain why 11% plan to drop their UK residency, and a further 13% are considering this. More worrying for the UK economy and jobs overall is that 15% of the entrepreneurs interviewed are planning to shift their UK business operations to other countries with more favourable terms and conditions, and 13% are considering this.
These findings came out in the Investec Entrepreneur Confidence Index, which is published in association with the Entrepreneurs’ Organization, which tracks the confidence levels of entrepreneurs in the UK economy and their own enterprises, has seen a small rise of 2% since December last year.
Ed Cottrell, Investec Specialist Private Bank said: “Clearly, there is still a lot of uncertainty amongst entrepreneurs on how the UK economy will perform over the next few months, but our research shows that despite this many have high hopes for their own businesses. Alarmingly, one of the biggest obstacles holding them back could be access to funds, so financial services organisations need to take a flexible approach here and ensure that strong businesses get the financial support they need. This means offering them a wide range of solutions, including mezzanine finance and asset based lending.
“In addition to this, there is also still much to do in terms of making the UK a more attractive environment for businesses from both a regulatory and tax perspective.”
Dr Sally Ernst, President, EO UK said: “Although our findings show a general improvement in sentiment for the UK economy, we are still in a very fragile position and we need to ensure that everything we can do to support entrepreneurs is being done. Entrepreneurs have a key role to play in both wealth and job creation as well as in the country’s economic recovery.”
Optimism about their own businesses
Despite their mixed views on the UK economy, many of the entrepreneurs interviewed are extremely optimistic about the prospects for their own businesses. Nine out of ten (91%) expect revenue from their UK businesses to grow over the next 12 months, with one in three expecting growth of over 20%. Similarly 92% expect profits to rise, with 35% expecting significant increases here.
Some 65% of entrepreneurs interviewed expect their cash flow to improve (only 17% expect this to deteriorate), and 65% expect to increase the number of people they employ over the next 12 months (only 2% expect to see a reduction in employees).
Access to funds is likely to be difficult
Given this level of optimism, 57% of the leading entrepreneurs interviewed are looking to secure capital in the UK to fund organic growth, and one in two needs this to grow their operations through acquisitions.
However, the research also indicates that access to funds is likely to be very hard to secure. Only 6% expect access to sources of capital to be easy over the next 12 months, with 51% saying that it will be ‘quite hard’ to secure, and 13% believing it will be ‘very hard’. Given this, 49% say that they will have to secure capital through making cost savings in their businesses and improving working capital, and 9% expect to have to sell assets in order to raise funds.
In terms of the biggest risks to growing their UK operations, 30% of entrepreneurs cite access to credit, and 13% identify the cost of this as being a negative factor.
Do you agree with the findings of this report?