Productivity beyond the 'B Word' (the view from our Crystal Ball)
Productivity is just one metric that UK economists are busy looking at in order to predict what the nation’s businesses might see change in the next year or two. At the time of writing, the Brexit issue alone makes their task unenviable. The business support world awaits a decision on this matter before any advice or help can be delivered with confidence.
The 'B Word' is, of course, only one variable in the mix. Output and productivity trends, confidence levels, business starts and insolvencies are monitored along with many others. From an economic development perspective, many factors work together with both reaction to and impact on the health of our economy.
Foundation East also looks at economic trends. Happily, though, our task is less onerous. As a provider of business loan finance under the Responsible Finance banner, our perspective differs from that of an economist looking at UK plc in at least three ways.
1. Foundation East focuses on a local view
Our clients are based in the six counties of the East of England. We are very interested in the local economy. National / international issues carry less weight in our analyses.
2. Foundation East focuses on micro, small and social enterprises
Foundation East operates at the micro and small end of the business demographic. That means we offer support to the great majority of local business units. We do not need to forecast trends for the regions medium and large businesses (except as potential customers for our clients).
3. Foundation East is all about addressing financial exclusion
All businesses address borrowing issues as part of plans for growth and/or productivity improvement. Our clients invariably engage with Responsible Finance members because they have been turned down on a loan application by a high street bank or other main stream lender. Worse, many have already resorted to a loan from a high cost alternative finance provider.
Our focus, then, is on the business environment as it affects businesses that are not viewed as good risks by mainstream finance providers. Unhappily, our view is that this issue is a major constraint on business development for social enterprises. This is why so many of the region’s social enterprises, including PlayPhysio, BeeBee Wraps, Cambridge Community Arts, Fire Services Fundraising Shop, Harry Specters Chocolate, Recovery Hub Ipswich and Arjun Technology Ventures, turned to Foundation East for funding.
These are, of course, only three examples of our specialist role in a discrete marketplace. They do though illustrate how Foundation East has a very specific interest in reaction to forecasting, and where possible influencing, the financial exclusion of small businesses in the East of England. Doing so helps us offer relevant and informed support to our clients.
So how is Foundation East reading the signs in regards to the future of financially excluded micro, small and social enterprises in the Eastern region now?
Smaller business, usually owner managed, reflect changes in both business confidence levels and consumer confidence. Similarly, corporate insolvencies, redundancies and even personal bankruptcy, bear upon business start-up numbers and self-employment levels. A macro-economic view is that when confidence levels decline, insolvencies and redundancies increase.
Oddly, the number of new business starts can also be a negative indicator. Of course, we need a constant supply of new businesses to replace business failures, but high numbers of business births (as the National Office of Statistics calls it) can be a mixed signal.
New business start numbers have slowed over recent years. Our region saw a decline in 2017 for the first time in some years. Taken with strong performance on reducing employment vacancies, this is an indicator of a healthy economy and positive business confidence. We will look closely at numbers for 2018 when they are published toward the end of this year. Another year of Brexit uncertainty may well have taken its toll.
The FE "take" on this is that when times are tough, new start numbers will increase and, because the economy is likely to be struggling, Responsible Finance provider services will be important. Existing businesses are just as affected by these economic indicators. Mainstream lenders are constantly reviewing lending policies in the light of the (mainly national) economic outlook.
At Foundation East, we look at our loan applicants through the unique Responsible Finance lens. We are not bound by complex algorithms. We prefer the knowledge and experience of our staff and experienced, expert volunteer directors to assess both the purpose of the additional finance and the client willingness and ability to repay.
Boom or bust, our role is to lend. We support entrepreneurial activity, community benefit and local economic resilience, whatever the weather. Achieving our first aim (supporting entrepreneurial activity) has always required fighting the financial exclusion that inhibits our other aims (supporting community and economic benefit). We do not expect this to change.
You, though, can help.
How can you help Foundation East to support entrepreneurship and build community and economic resilience in the Eastern region?
Foundation East’s funds for lending come from a variety of sources. The UK Government periodically supports our sector’s activity, and other public bodies do so as well. Increasingly though, our lending funds are invested in Foundation East by people and organisations that share our ambition to facilitate growth of ethical business ventures in the East of England and remove the frustrating financial barriers.
You can invest funds and support our lending activity by becoming a member of Foundation East.
Right now, you have the additional option of committing some funds for a five-year period, which adds the investor benefit of a 25% tax allowance on your investment (5% for each of the 5 years). Investing in our CITR shares allows the investor to derive a minimum 25% of the total invested, spread over a 5-year period. The tax relief is available against either Income Tax or Corporation Tax. This ‘Community Interest Tax Relief’ (CITR) is a unique benefit from HMRC made available specifically to help attract funds to our Responsible Finance sector.
Please read our Investment Prospectus, which we hope will interest you enough to invest in us and begin the process of making a real difference to the growth and development of businesses located in the Eastern region.
Oh – and if you know of any micro, small or social enterprises who are struggling to access funding, do please let them know that we’ve got money to lend …