We asked Damian Webb, Advisory Partner at RSM Restructuring Advisory, for his views on the current market in the second of our new Q&A series.
There are some fairly gloomy statistics being reported around business sentiment at the moment – what’s your experience of the current market and what are the biggest challenges for SMEs?
It’s an interesting market at the moment because of the economic and political uncertainty, confidence amongst businesses is low, people are nervous and they are waiting. Capital investment is being stalled or delayed until there’s more visibility over the economic and political direction, consumers and business are delaying investing or making new purchases. These decisions are leading to lower consumer and business activity which is undermining economic activity.
Currently, the biggest challenge is the absence of clarity on Brexit and the election. Brexit could have a profound impact on businesses and individuals’ personal circumstances. A good example would be the automotive sector, who are very dependent on imports and exports – any changes to trading arrangements with Europe could have a significant impact on their competitive position, this has been reflected by Honda’s decision to close its manufacturing plant in Swindon and the uncertainty associated with Nissan’s plant in Sunderland. Fundamentally, businesses and people want stability and the current political environment is not providing that, hence unnecessarily damaging the underlying economy.
As a specialist in the FinTech and Alternative Finance sectors, in your view how has the sector changed in recent years?
There is significantly more regulation and regulatory oversight, coupled with significant institutional investment. The entrepreneurial behaviour that characterised the sector four or five years ago is now being replaced by corporate governance and professional management. What we’re going to see in the next few years is some clear winners and losers, the winners will generally be the ones that have a good corporate structure supported by experienced management teams.
What’s the best way for SMEs to keep up to date with industry changes and stay abreast of the diverse array of lenders in the market?
It’s very difficult. I would say that SMEs need to ensure they have decent, carefully selected advisors that are close to the market. As an advisor and someone who focuses on the sector, I am regularly surprised by the breadth of options and emerging products, hence for an SME to understand the range of options will be difficult unless they are advised appropriately as the market is constantly evolving.
How important do you think product development will be in supporting SME communities and what is the best way to communicate these needs to lenders?
Development is key and I would expect an SME to really rely on their advisors to articulate what the proposition is.
Would you make any predictions for 2020?
Regrettably I believe the current political uncertainty is undermining business and consumer confidence, consequently, I believe as evidenced by the recent economic forecasts that the economy will struggle in 2020. Where it goes thereafter is anyone’s guess and to a large extent depends on the forthcoming election.
This economic uncertainty will accelerate the rationalisation of the alternative finance sector as credit conditions tighten. Poor practice and weak business models will be exposed. However, the long term trends for the sector are good.