Small business growth and investment activity is being put under threat by concerns over access to finance and cash flow – uncertainty which could severely impact the recruitment sector, according to research by alternative finance provider, Hitachi Capital Invoice Finance.
The firm’s inaugural SME Resilience Index reveals that one in four (27 per cent) SME owners do not plan to invest at all over the next 12 months and are in ‘survival mode’. Crucially, just 21 per cent said they planned to invest in recruitment activities in the next 12 months.
More than half of SME owners are also concerned that the UK’s decision to leave the EU could impede their access to finance, as 59 per cent predict that it would be more difficult to obtain finance in future.
For many businesses, the preservation of working capital is still a major concern. A third (34 per cent) cite late payment as a problem, and 31 per cent report being paid late by their clients on a regular basis.
For many recruiters, this will likely affect their customers’ financial health and ability to seek external consultancy. However, those that act now can develop solutions to ensure they continue doing business with SMEs and gain an edge over the competition.
In addition, these issues are likely to impact smaller recruiters themselves, increasing the need for them to make in-depth financial forecasts and make strategic decisions to navigate changing market conditions.
Andy Dodd, managing director at Hitachi Capital Invoice Finance, thinks that, although business confidence has taken a hit following the Brexit vote, recruiters must not allow this to stall growth opportunities.
Dodd adds, ‘During times of economic turbulence, cash is king, and recruitment companies should act now to strengthen their own working capital, in order to offer more flexible payment solutions to their clients and to guard themselves against late payment caused by delays further down the supply chain.’
He concludes, ‘For recruiters, the key to strengthening market position lies within intelligent investment in sales and marketing activity, as well as devoting resources to the attraction and retention of key staff members.
‘In order to offset against more stringent lending criteria, they should examine alternative finance options such as peer-to-peer lending and cash flow finance to encourage investment activity. Seeking out funding opportunities early and maintaining an open dialogue with clients is essential if recruiters are to win and retain business from SMEs. ‘