Tuesday, May 28, 2019

Frederick Achom looks at how the Brexit delay is affecting small businesses

Small businesses in the UK are showing signs of Brexit fatigue, according to research by the Telegraph. Its business trackers shows that morale ‘remains very low’ among small businesses, and the most commonly cited reason remains Brexit uncertainty.

The index analyses Tweets from 25,000 UK small businesses and entrepreneurs. After extracting marketing and neutral posts, it compiles the data to show how many businesses are showing signs of strain or positivity.

Government delay continues

There have been no further votes in Parliament regarding Brexit since 10 April, which has left the UK enduring a level of sustained uncertainty. As the path to leave the EU remains unclear, businesses have been sharing their opinions online.

The most recent results from Business Tracker concern Tweets from 25,000 small British businesses, start-up owners and entrepreneurs that were published between 26 March 2019 and 22 April 2019. As this is the immediate aftermath of the decision for a Brexit extension being taken by the Government, it has yielded particularly relevant data.

Overall, the tracker shows around 64% expressing pessimistic sentiments, and 35% remaining generally positive. Measured against 2018’s results, there has been a significant increase in pessimistic Tweets on a month-to-month basis. There are around 19% more negative Tweets from the representative sample of businesses compared with the same time period last year.

However, not all of the negative posts are directly concerned with Brexit. Just over half of the negative posts specifically point to Brexit as the cause for their flagging morale. So, while it isn’t the biggest concern for every business, it’s the biggest for a significant number. More than half are worried for their business’ future given the seeming lack of progress in negotiations. More than 11% are worried that the UK may still leave the EU with no deal at all.

Confidence measuring index

The Federation of Small Businesses (FSB) runs its own confidence measuring index (SBI). And the most recent data from the index concurs with the Telegraph’s findings. It shows almost 90% of small businesses completely ceasing to recruit new staff, and 12% actively reducing their workforce.

Out of the small businesses that rely on European exports for trade, expectations are the lowest in the eight-year history of the index. Just over 25% of SMEs that rely on trading overseas expect to see their exports rise during Q2+3 2019, compared with 42% last year.

Around 68% of small business say that international sales are either declining or failing to rise, up 3% since Q1 2018. And looking ahead to the near future, under 40% expect to see revenue rising, a fall of 45% from this time last year.

What the SME community can do

The SBI measures small business confidence at -5.0 for Q1 2018, compared with +6.0 from Q1 2018. Can Brexit be blamed for the sharp drop? Mike Cherry, Chairman of the FSB believes so. He says: “Small firms… have suffered 1000 days of uncertainty since the Brexit referendum, leaving us unable to plan, invest and grow.”

As a community of small businesses, entrepreneurs and investors, we must accept that, for now, the position remains uncertain. Starting from this basis, we must find ways to remain resilient and continue our contribution to the UK economy. The Brexit transition period is particularly difficult for the SME community, as they are lighter on resources and less likely to weather cashflow storms.

Some small businesses that rely on European trade are simply refocusing on different regions, such as the US and Asia. By transferring business operations to countries outside of the EU, they can retain some balance and remain in business.

We also shouldn’t ignore the positives showing in the economy nationally. We have decreasing levels of unemployment, for example, with 32.7 million currently in work. Additionally, data shows that small businesses outside of London are finding positives in the support they are receiving. About 12% of the Tweets in the Telegraph’s business tracker are enthusiastically positive about the high levels of support available to UK SMEs. This is where we can find the positive of the current situation and continue working towards a brighter future.

Tuesday, May 21, 2019

Frederick Achom explains the complexities of Fintech


Fintech is a topic you hear a lot about in the media right now. It’s long been a key interest area for me as an investor and supporter of start-ups and disruptors. But it’s more than just a buzzword.

Think of Fintech as an umbrella term for a variety of working based on developing new, innovative technology to improve the financial services sector. There is no definitive definition, and it’s changing all the time. In this blog, I’ll talk about what I believe encompasses Fintech, and breakdown some of its sub categories.

What makes a business ‘Fintech’?

First things first. The word Fintech derives from two words: financial technology. Most people understand it as a descriptor for agile start-ups that focus on delivering financial services using technology. And many Fintech companies do come under this description.

Broadly speaking, Fintech companies are smaller businesses that are flexible, agile and quick to disrupt a traditional sector. But it’s worth remembering that many well-established financial institutions, including the major banks, are also working in this sector too. Most are using Fintech in the background and working with consultants and Fintech start-ups behind the scenes to come up with new ways to streamline and improve the financial services sector.

What does a Fintech business provide?

A confusing aspect of Fintech for those new to the sector is whether it should be used to describe the companies providing technology, or the companies providing the end service to the consumer.

I think it’s both. Some businesses use digital platforms which have been developed by Fintech companies to deliver financial services. Other use different aspects of financial technology to deliver services directly to the consumer in a more traditional manner.

So, while a company providing technology may be using a service model, they’re still ultimately delivering financial services. The Fintech sector is constantly evolving, and in many ways is in its infancy. With the advent and use of automation and artificial intelligence (AI), we can expect to see the sector continuing to create new business models, new technology and new products, apps and processes.

Fintech subcategories

Fintech encompasses a broad range of services and platforms. Here’s how some of its subcategories fit in.

·         Online payments

One of the most obvious and commonly used manifestations of Fintech is online P2P (peer-to-peer) payment platforms. Many of us are well used to using the likes of PayPal, Apple Pay and many others to complete day-to-day transactions. We pay with QR codes and our smartphones, as well as specific platforms and banking services.

The ability to make fast, secure, online payments without even using a bank or traditional financial institution is one of the revolutions created by Fintech. This also means businesses can quickly scale their operations without having to wait on financial institutions to go through their often-slow processes.

·         Banking services

Technically, there are very few pure banking services that come solely under the banner of Fintech. This is because in most countries, banking services are highly regulated and controlled. However, there are many Fintech companies working in different parts of the banking delivery chain.

For example, a Fintech start-up could offer a service that focuses on opening and account quickly and easily and moving money between accounts. Along the way, they will also be working with a licensed financial institution or bank, although it may not be immediately apparent.

There are some hybrid companies that offer both tech and banking services, including solarisBank, which is based in Germany. They are both tech companies that also own and operate a banking facility. They’re not common, and most Fintech companies are facilitating a portion of the chain, rather than offering an entire banking service.

·         Money lending services

Another category within Fintech that is already commonly used by consumers. Both individual people and companies can use technology platforms to access funding of all kinds. This could be a simple loan, right up to business finances and mortgages.

·         Personal finance and investment assistance

There are many tools available, and plenty in development, to help people manage their personal finances and make investment decisions. Examples include comparison websites for credit cards and loans, to automated investment apps.

Fintech companies are present within every part of the financial services sector. You’ll find them in the cryptocurrency and blockchain space, as well as crowdfunding and much more. It covers a wide range of services, products, apps, many of which are in the background of the services delivered to the consumer.