Increased optimism through long term investment

16th December 2013

Whilst 2012 was a period of caution for many businesses, the last quarter of 2013 has seen many of our clients look forward with increased optimism.

Business continues to be tight but many companies are now looking to invest in long term strategic plans. The banking sector continues to have its own issues with the major high street banks facing challenges on what seems like a daily basis. These challenges are reflected in the banks approach to funding opportunities. On the shop floor relationship managers are actively looking to strengthen relationships and support clients but there is a clear issue with progressing deals quickly through the approval process. Our experience is that the individual banks credit functions are still highly cautious and continue to take prudent decisions, even with long established customers. Through our work with Sheffield City Region LEP and the Regional Growth Fund we have worked with a number of businesses that are making significant investments in long term projects. Whether this investment is through additional resources, new product development or infrastructure it is clear that what sets these businesses aside is each has clear Sustainable Competitive Advantages in their own markets. Whether these advantages are based on service levels, quality of products or technical ability, it is businesses like these who will reap the benefits of growth in the economy. Against this renewed optimism as the business climate improves companies will face new challenges. As companies look to grow so called Zombie companies, those barely surviving, will find that working capital restrictions will force them over the edge. The risk is that these insolvencies will affect stronger businesses, therefore companies should continue to manage their customer base closely to ensure they limit their exposure to these underperforming companies. The final quarter of 2013 has seen an improvement in the level of optimism in the economy but this improvement does bring its own challenges. It will be interesting to see whether the continued optimism does start to deliver strong growth. It will also be interesting to see if the major banks can finally get their houses in order and support the experienced relationship managers who work with their clients. Steve Bell is Head of Corporate Finance at Hart Shaw and can be contacted on T: 0114 251 8850 or steve.bell@hartshaw.co.uk.

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