Cash Flow Problems and Brexit
Will Brexit Bring Cash Flow Problems to Your Business?
Following the referendum, there have been plenty of predictions about the impact of Brexit on business. All we know for certain, right now, is that the new Prime Minister has said it is likely that Article 50 will be signed early in 2017. Between now and then we will begin to find out what the terms are likely to be. One thing is certain though, and that is the economy and businesses are likely to go through a period of uncertainty in the short term, which could present cash flow problems and other business issues. This article looks at some of the more recent predictions for the economy. It suggests how we at Business Recovery Specialists could help provide solutions to the difficulties that might result.
Some Predictions for the UK Economy
The well known economic think tank, the EY Item Club, has cut its GDP growth forecast for 2016 from 2.3% to 1.9%, from 2.6% to just 0.4% for 2017 and from 2,4% to 1.4% for 2018. Whilst it is very early days yet, we note that there is no prediction of a recession here. A recession is defined by economists as two or more successive months of negative GDP growth.
The same report also noted that the drop in the value of Sterling, makes exports cheaper and imports more expensive. This could see exports grow by 3.4% and imports fall by 0.3% in 2017. In other words a period of uncertainty and slowdown, with reduced growth and investment, but no recession and perhaps some benefits too.
Another well reported quote has come from Richard Buxton, the chief executive of Old Mutual Global Investors. He said that the Brexit vote would have a “horrible” impact on the UK economy, which could “judder to a halt”. But then he went on to say:
“I think the economy is going to judder to a halt [or] have a mild recession. I don’t think it is going to be as severe as some of these shares are pricing in. The real economy is only going to gradually emerge over the next three to six months.”7
Again it is worth noting that behind the headline he is predicting at worse a mild recession, and therefore, by definition, nothing like a return to the grim days of 2008/09.
So What Does This Mean for Businesses?
The above are very early stage predictions but they are also general economy-wide predictions, focusing on the stock market, the exchange rate and national GDP levels. In our experience some industries will fare worse and some better than others, and whilst we welcome the views that things might not be as bad as some were saying before the Brexit vote, it seems certain that some businesses will come under pressure.
One of the first signs of a business coming under pressure is when cash flow problems start to appear. There could be plenty of reasons for this, all associated with a possible slowdown in growth:
- Slower payment of invoices from clients
- Creditor pressure to pay invoices
- Difficulties in raising finance to invest or otherwise fund the financial well-being of the business
- Cash Flow and Profit forecasts that are now out of date
As Business Recovery Specialists we know that cash flow problems can be overcome. There are solutions – if the problem is recognised and addressed quickly enough. Our experienced consultants can help with plans to:
- Speed up payments by clients
- Keep pressure from creditors under control, including from HMRC
- Help you with finance or funding problems
Contact us for Solutions to Your Cash Flow Problems
If your business is beginning to experience some cash flow problems, either because of post referendum uncertainty or for other unrelated reasons, insolvency is not inevitable. Contact us or call us on 0333 222 8065 about our Business Recovery Services.