Growth strategy update – August 2015

Trans Capital AssociatesIn this series of articles we seek to provide a quick reference point on all the up to date news and data that impacts on SME Growth Strategy.  This follows hard on the heels of recently published data from the Bank of England.

Growth in the UK economy

The ONS recently confirmed that GDP for the period April to June 2015 was up by 0.7%.  This follows on from an increase of 0.4% in the first quarter of the year.

In its report published on 5 August 2015, The Bank of England has increased its forecast for UK growth this year to 2.8% from the May prediction of 2.5%.


The Governor said that the rapid fall in Consumer Price Inflation is the most striking development in the UK in the last year!  He suggested in his speech that the economy could return to negative inflation in the coming months due to the continued fall in the price of oil.  It is expected to rise to just 0.5% by the end of 2015.

Interest rates

The minutes of the recent Monetary Policy Committee meeting have just been released.  To many commentators surprise, the committee voted 8- 1 in favour of keeping rates on hold at 0.5%.  The Bank of England’s Governor made the point in his speech that a rate rise is drawing ever closer.  Analysts are seeing this as confirmation that rates will not now rise till 2016!

The strength of Sterling

The pound fell following the Banks announcement, on the basis that the data showed interest rates would stay at their record low for longer.  In the last three months the Pound had risen in strength by some 3.5% against a basket of currencies, stifling export demand for UK products.


The Banks report showed a slowing in employment growth, and it believes that the jobless rate will stay at 5.6% in the three months to the end of September.

However, the ratio of vacancies to unemployment was around pre-crisis norms, and business surveys of recruitment difficulties had been rising in recent months and were now around or above pre-crisis levels.

This data suggests that the level of slack in the labour market was greatly reduced given the significant falls in unemployment since the summer of 2013.

Overall the Committee’s judgement was that the margin of spareeconomy was around 0.5% of GDP.

In a separate briefing the Office for National Statistics reported that unemployment had increased by 25,000 in the quarter ending June 2015 in comparison to the previous quarter.


The Bank of England’s Credit Conditions Review to the end of June shows a Growth in the stock of lending to UK businesses as a whole taken up in 2015 to date.   However the report also confirmed a fall in June 2015 of £5.5bn in outstanding lending!

This is the biggest drop since the Bank started collecting data in 2011

The survey suggested that the overall level of demand for bank lending from small and medium-sized enterprises, however, remained subdued.

Net lending to SMEs by participants in the Funding for Lending Scheme Extension in 2015 Q1 was £0.6 billion.

According to respondents to the Survey, Credit was more widely available for large Companies than for small firms. The Bank’s Agents reported that credit availability, despite a gradual improvement, remained tight for small companies.

The Business Bank was criticised by the Alternative funding providers for dragging its heels with the promised referral scheme in situations where the main banks were unable to help! 

Business confidence

The latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) says Business confidence has improved for the first time in a year, with the clear General Election result providing some certainty for the economy. However confidence is still well below the all-time high seen a year ago!  Chronic skills shortages and a fall in investment expectations are leading to increased uncertainties in the medium term.
Key findings for Q3 2015:
• There are still no signs from businesses to raise employee salaries.
• A trend over the last year has shown businesses making short-term capital investment decisions, despite planning to invest less over the coming months
• Spare capacity however has reached its lowest level since early 2008, which should provide a small boost to productivity – and signal that an interest rate rise could be drawing nearer
• Skills shortages are becoming even more of an issue, with a lack of people with non-management skills more of an issue than at any time since before the financial crisis


All in all an improving position for the SME business with an ambitious growth strategy. However we believe this is still an environment that demands the utmost caution and attention to detail when creating and implementing these plans.

If you have any comments on this article or would like to discuss any aspect of it please contact me at

John Thompson is Managing Director and founder of Trans Capital Associates.

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