‘Fragile’ economy holding back businesses from seeking investment

Businesses are holding back on seeking investment to grow because they are still suffering the “aftershocks” of the longest recession in living memory.

Phil Bates, Principal of Cheshire and Wirral accountants Phillip Bates & Co says there is a “fear factor” among companies in the North West because the economy remains “fragile”.

Bates, whose office is in Neston, said: “The lack of certainty in the economy makes it extremely hard to plan ahead. Businesses are seeing a number of good weeks followed by flat weeks.

“I think the banks are keen to lend to businesses again, but the bigger issue is the reluctance of companies to take on finance. There remains a fear that any growth will be temporary and that the banks could then pull the rug from under them.

Bates said that avoiding investment in a business could be a false economy.

He said: “During the recession, a lot of companies cut costs in all sorts of areas including training, marketing, repairs and maintenance. For manufacturing businesses, too much short-termism can be a dangerous thing, for example continually patching up an important production line rather than investing in a new one.

“Businesses need to scrutinise all of their costs. If a cost is making a contribution to top line sales or bottom line profits then it is usually a cost worth shouldering.

“Ultimately, if you cut all costs you have little or no activity and you lose the spirit behind the business.”

Bates said he welcomed many of the new entrants offering businesses alternative forms of finance.

He added: “There is no doubt that for the right business owner, alternative finance such as crowdfunding can be a good option, but there is a need to do your due diligence.

“It is important to read the small print and understand any risks that might be written into a contract. Sometimes, business owners are so desperate for funding they do not carry out all the necessary checks.

“It is also vital that investors getting involved in funding businesses do their homework on any potential investment and understand the risk profile of each one.”

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