Economic uncertainty, fed by Brexit, is undermining SME sector development according to a new report from the British Business Bank. However, alternative finance is offering businesses a platform for growth.

The Bank study reports a decline in confidence among small businesses, with owners predicting lower growth in 2016. The principle reason for this outlook is economic uncertainty, which is being exacerbated by Brexit. These findings are hardly revelatory but they do underline the challenging position that SMEs are in; they must also manage other pressures on capital and cashflow, such as costs relating to pension auto enrolment, cybersecurity, business rates and the living wage.

Another recently released report, from Ernst & Young, draws similar conclusions on the impact of the decision to leave the European Union, although its survey of entrepreneurs is more positive, with over two thirds of those questioned optimistic about prospects in the coming year.

While there’s no getting away from the fact that economic uncertainty is hanging like a dark cloud over the SME sector, the report from the British Business Bank highlights how alternative finance services, such as invoice finance, asset finance and peer-to-peer lending, are bringing some light to the situation of small business owners in the UK.

According to the Bank, asset finance and peer-to-peer lending are playing a key role in the improvement of credit conditions for SMEs, with the services worth £16.8 billion and £1.3 billion in 2016 respectively. In addition, figures from the Asset Based Finance Association show invoice finance use reaching record levels.

It is true that the challenging economic conditions that are hampering SME sector development look set to continue for the short-term at least. It is also true that if businesses are going to manage this pressure and others, and grow going forward, alternative finance has a key role to play in their financial strategies.

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