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|Business predictions for 2016|
|Wednesday, 23 December 2015|
As we head in to 2016, Mark Sismey-Durrant, Chief Executive Officer at Hampshire Trust Bank, predicts that devolution will provide opportunities and challenges for UK SMEs, economic and political uncertainty could dampen business appetite for growth and that capital requirements continue to impact on banking competition.
“2016 needs to be a year of productivity for UK business. We have witnessed an array of regulatory changes from the Government this year and now is the time for businesses to make the most of the new opportunities presented to them and focus on what they do best – running their companies to drive economic growth and job creation.
“As a challenger bank, we are committed to helping the country’s smaller businesses succeed by offering flexible financing solutions. Businesses need confidence to make important investment decisions. Next year there will be continuing uncertainty about some big issues – Brexit, devolution and property market intervention and regulation.”
Devolution opportunities and challenges
On the Government’s commitment to create a ‘devolution revolution’: “While devolution is still some way off, we are beginning to see the plans take shape and this will continue to be fleshed out in 2016.
“If the appropriate amount of economic support is provided at a regional level then there is an opportunity to create thriving local environments that could help stimulate business growth. However, the approach taken may vary from region to region, meaning that some SMEs may benefit more than others.
“Business rates are one of the biggest costs our SMEs face and their payment forms a critical part of financial planning. Plans to allow local councils to set business rates, introduces a certain level of uncertainty, as levels may vary from region to region. Businesses are left with a conundrum of save or spend at a time when investment is critical. We hope 2016 brings more clarity and certainty on how these plans will impact on the nation’s SMEs.”
Business appetite for growth
On business appetite for growth: “With the referendum on European Union (EU) membership due to take place before the end of 2017, the ‘Brexit’ debate will have an increased impact next year
“Research we carried out earlier this year revealed that UK SMEs are building up their cash reserves, driven by the perceived need for greater ‘cash buffers’ and concerns about the volatility of the economy, with SMEs holding more than £230,000 on average in current accounts.
“The UK has been viewed as a haven of political and economic stability but this perception may shift. Uncertainty over EU membership, together with other global political developments, could result in SMEs holding on to more cash in 2016, rather than investing it, and it could dampen business appetite for growth. In order to encourage SMEs to invest in their businesses in 2016, we need a period of steady economic growth and a context of increased certainly over the future political environment.”
Capital requirements impact
On the impact capital requirements has on banking competition and the housing market: “Capital requirements are higher for standardised banks than for internal ratings based banks as they are based on two different models. This means that challenger banks, such as Hampshire Trust Bank, must hold more capital against their loan book than the bigger players do.
“This makes it harder for challengers to compete in certain areas of lending, therefore reducing choice for the consumer or business customer. Implementing a more proportionate and balanced capital model would enable us to provide more support to businesses, helping them to grow and in turn drive the economy forward.
“In 2016 we would like to see the Government and EU regulators creating a more level playing field so challengers can truly compete.”
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