Many small companies are saving their cash reserves rather than investing in growing their business.
In March 2017, Reuters quoted figures from the Business in Britain survey, which found that companies that turnover less than £1m are planning to invest on average £21,690 in the second and third quarters of 2017. This is a decrease of 74% compared to July 2016.
The reason given for this slowdown in investment is uncertainty about Britain’s economic future following Brexit. Many businesses fear that the economy will suffer after Prime Minister Theresa May invokes Article 50, which begins Britain’s withdrawal from the European Union.
As well as companies hanging onto their funds, there could be less demand for loans and commercial mortgages to grow businesses.
Immediately following Brexit, there were concerns that the EU vote would affect the economy, but it has generally remained strong. However, there are signs now that, as the Brexit process starts, the economy could weaken.
Hanging onto cash is a strategy to weather an economic slowdown, but banks have said that reducing spending could threaten the prospects of the economy increasing.
At the March Inspiring Growth Conference sponsored by the Scotsman, finance experts recognised that there had been a slowdown in bank lending and that loans are more difficult to obtain. This has led to the rise of a number of alternative products such as bridging loans that are readily available for businesses that want to borrow funds to expand their businesses.