LONDON: Britain’s smaller companies are hoarding cash and cutting investment, bankers say, a sign of business confidence starting to wobble as the government sets off down the uncertain path of leaving the EU.
Companies with revenue of less than £1 million ($1.23 million) expect to invest an average of £21,690 ($26,520) in their businesses in the next six months — a fall of 74 percent compared with July, Lloyds Banking Group said on Friday following the latest results of its six-monthly survey.
This is the biggest drop since the bank added the question about investment plans in 2015 to its long-running Business in Britain survey of small businesses.
“Businesses need to be careful that in cutting back on investment to boost resilience they do not put the brakes on too hard,” said Jo Harris, a managing director at Lloyds, one of Britain’s largest business lenders.
Sitting on cash could help companies weather any economic slowdown, but bankers say that reduced spending also threatens to dampen growth prospects for the economy.
The head of commercial lending at another major bank said the last time that he saw smaller companies hoarding money to a similar extent was during the 2008 global financial crisis.
The banker said companies were paying off overdrafts and other loans amid concerns that the economy may suffer after Prime Minister Theresa May seeks to begin the formal process of negotiating a divorce settlement with the EU later this month.
“Customers are nervous ... they are worried that as the news of Brexit negotiations begins to filter through then sentiment will dip,” the banker said.
Lloyds said economic uncertainty was identified as the main threat over the next six months, followed by weaker UK demand and political uncertainty.
Britain’s businesses and banks have largely defied expectations that the economy would suffer an immediate blow from the referendum result in June last year, but in recent weeks there have been signs of mounting concerns as the real Brexit process gets underway.
Aldermore Group, a specialist lender to small and medium-sized businesses, said a survey of 1,000 such companies conducted in the last financial quarter showed cash flow was their biggest concern.
About a fifth of companies said they missed an opportunity to expand their business because of a lack of available finance, Chief Executive Phillip Monks told Reuters.
Britain’s small companies hoard cash as Brexit looms
Britain’s small companies hoard cash as Brexit looms
Lebanese social entrepreneur Omar Itani recognized by Schwab Foundation
- FabricAID co-founder among 21 global recipients recognized for social innovation
DAVOS: Lebanon’s Omar Itani is one of 21 recipients of the Social Entrepreneurs and Innovators of the Year Award by the Schwab Foundation for Social Entrepreneurship.
Itani is the co-founder of social enterprise FabricAID, which aims to “eradicate symptoms of poverty” by collecting and sanitizing secondhand clothing before placing items in stores in “extremely marginalized areas,” he told Arab News on the sidelines of the World Economic Forum in Davos, Switzerland.
With prices ranging from $0.25 to $4, the goal is for people to have a “dignified shopping experience” at affordable prices, he added.
FabricAID operates a network of clothing collection bins across key locations in Lebanon and Jordan, allowing people to donate pre-loved items. The garments are cleaned and sorted before being sold through the organization’s stores, while items that cannot be resold due to damage or heavy wear are repurposed for other uses, including corporate merchandise.
Since its launch, FabricAID has sold more than 1 million items, reached 200,000 beneficiaries and is preparing to expand into the Egyptian market.
Amid uncertainty in the Middle East, Itani advised young entrepreneurs to reframe challenges as opportunities.
“In Lebanon and the Arab world, we complain a lot,” he said. Understandably so, as “there are a lot of issues” in the region, resulting in people feeling frustrated and wanting to move away. But, he added, “a good portion of the challenges” facing the Middle East are “great economic and commercial opportunities.”
Over the past year, social innovators raised a combined $970 million in funding and secured a further $89 million in non-cash contributions, according to the Schwab Foundation’s recent report, “Built to Last: Social Innovation in Transition.”
This is particularly significant in an environment of geopolitical uncertainty and at a time when 82 percent report being affected by shrinking resources, triggering delays in program rollout (70 percent) and disruptions to scaling plans (72 percent).
Francois Bonnici, director of the Schwab Foundation for Social Entrepreneurship and a member of the World Economic Forum’s Executive Committee, said: “The next decade must move the models of social innovation decisively from the margins to the mainstream, transforming not only markets but mindsets.”
Award recipients take part in a structured three-year engagement with the Schwab Foundation, after which they join its global network as lifelong members. The program connects social entrepreneurs with international peers, collaborative initiatives, and capacity-building support aimed at strengthening and scaling their work.
