2017 in Review and Looking Forward to 2018

This is it! The end of 2017 has arrived and what an interesting year it has been, for Akoni, for business and for the country as a whole.

Brexit has been at the forefront of the news for the entire year and we imagine it will continue to be so for 2018. How could it not be? It is a huge change that this country is going through and nobody can tell what the results will bring for the economy and for the individual. Facing the unknown has never been an easy task for humanity and our instinctive reaction is often fear and despair. But like many times before, an uncertain future, involving hardship, has often resulted in greatness and prosperity. We are watching the developments closely, and in particular the decisions made that affect business.

While the majority of predictions about the UK’s prosperity in light of Brexit have been negative, business in the UK has continued to grow with the notorious entrepreneurial spirit of Britain not disappointing.

Below we go into more detail on:

  1. Some interesting and encouraging numbers on the UK economy relating to businesses
  2. An overview of Akoni’s successes this year – we have had an exciting year, which we are eager to tell you all about.
  3. Two focus areas for Akoni: Charities and UK Tech Start-ups
  4. Akoni’s insights for the year ahead

 

  1. 2017 for business:

 Although confidence levels among Britain’s SMEs has suffered amidst the Brexit turmoil, entrepreneurship has not suffered. In 2017 SMEs in the UK accounted for:

  • 51% of all private sector turnover with a total combined turnover of £1.9 trillion
  • 60% of all private sector employment with a total of 16.2 million people employed
  • at least 99.5% of the businesses in major sectors.

Investment in UK PLC has been hampered since the 2016 Brexit vote but that hasn’t stopped the business population in the UK increasing – by 4% since 2016 – reaching a record of 5.7 million private sector businesses early this year. These numbers are published by the government each year in January. In a few weeks the numbers for 2017 will be released and we will likely see a further increase in this regard.

However, we are also seeing that the UK economy has slowed down over the past year, with the International Monetary Fund calling Britain a ‘notable exception’ to an improving global economic outlook.

 Nevertheless, we at Akoni strongly believe that SMEs are significant contributors to the UK economy, as seen in the above figures. Therefore, we will continue to support SMEs and charities as the bedrock of economic growth.

  1. 2017 for Akoni: highlights

 Over the last year as our business has gone from strength to strength so has our team, and as the year draws to a close our number of team members has already doubled. We have a group of talented and motivated individuals, each in their own field, from various backgrounds, contributing valuable resources to the Akoni endeavour.

 

Throughout the year we took part in various events, had the chance to speak and present the Akoni proposition to vast and fantastic audiences, were selected for prestigious industry competitions and have been mentioned in major news publications.

Here are Akoni’s finest moments of 2017:

 

  1. Akoni’s focus areas

As we look to build on the success we have had to date, there have been a few sectors of the business community that we have been focusing on and we wanted to highlight some of our key takeaways for these communities.

  • Tech Start-Ups

At Akoni a key focus for us, along with assisting SMEs, is working with the start-up community to help these new businesses to reach their full potential by utilising their cash reserves. With an increase in co-working spaces (notably WeWorks but also Plexal and Rise London (the latter for the Fintech industry)), accelerator and incubator programmes often in collaboration with large industry corporates (CO:CUBED and HighTech XL to name a couple) and national led initiatives like London & Partners, the UK feels like an exciting place to be starting a new tech venture. And although there have been mixed reviews about the health of the UK economy, we have been particularly encouraged by what we have seen within these various ecosystems, including collaboration between incumbent tech start-ups in various industries.

Given Akoni’s specialism, we are seeing a number of fintechs growing in the UK, with the aim of giving SMEs more control of, either their existing assets (like Akoni), or providing easier access to funding sources (like Funding Circle and Capitalise) to allow the UK SME market to hopefully achieve even better returns than noted above. In addition, these new Fintechs are also providing sources of capital for the start-up industry, beyond typical VC investment.

With all this being said, we are excited for what 2018 holds for all tech start-ups.

  • Charities

2017 has been another year where charities have been in the spotlight. The response by charities and the public in donating to charities, in the wake of incidents at Grenfell Tower and the Manchester Arena bombing, as well emergencies beyond our shores, has shown that the charity sector in the UK is still huge force for good and plays an important role in society.

With that important role comes accountability and the focus in 2017 charity governance remained a hot topic. The continued scrutiny of the role of Trustees, and use of funds raised, together with the release of the Charity Governance Code outlining standards charities, should aim to points for a need and appetite for improved governance.

What is certain – the voluntary sector is a vital cog in the wheel of our economy and improved governance can be seen as a positive moved for the sector.

Brexit is going to have an impact on the charity sector in the UK. Aside from the £250m+ direct funding UK charities receive from the EU, the impact on the economy will likely put a squeeze on public pockets which could make fundraising harder. The value of the pound will also impact on those charities who operate overseas.

GDPR legislation, continued focus on governance and uncertain political times will also impact on the non-profit sector, but collaboration across the sector, innovation in fundraising and communications, and embracing digital technology in all functions of the organisation, are opportunities to be grasped in 2018.

Charities have faced turbulence in the past and have always found ways to raise funds and continue their important work. We look forward to playing a role in this and helping charities to maximise their income.

  1. Looking ahead to 2018

 2018 will be a critical year for the UK economy where we may see one out of three scenarios:

  1. A bespoke agreement with the EU, which will likely see a stronger pound, reduced inflation, employment growth and a return to economic prosperity.
  2. A hard Brexit which would create a difficult scenario because of the uncertainty around it. In this instance, it seems likely that inflation will rise and the pound and economic growth will likely weaken, whilst unemployment rises.
  3. The PM faces a no-confidence vote by the government, leading to an election with the possibility of seeing labour come into power. This would understandably be quite a shock to the economy, at least for the first year of the new government.

Looking at current reports, it seems likely that interest rates will go up in February following the next Bank of England meeting, particularly if inflation remains around 3%. Unemployment will probably remain reasonably low and wage increases won’t be drastic either. When it comes to overall economic growth, the UK will not see as much growth as will be the case for the rest of the world. While we cannot speak about a recession just yet, the UK economy will face one of its most challenging times and the uncertainty around which of the three above mentioned scenarios will unfold, does not assist the economy with getting back to its expected level, that being the 4th or 5th largest economy in the world. But when it comes to economic forecasting they say that there are two types of economists: Those who cannot forecast and those who don’t know that they cannot forecast. In that same spirit, we at Akoni choose to remain positive.

We very much look forward to the events of next year and what possibilities they will open up for us and for business in general. We cannot help but mention Open Banking coming into effect from January 2018 and how this will change the landscape of finance for the better, allowing SMEs to leverage new types of financial services to their advantage. We are full of hope and optimism that next year can be a great one and that this country’s entrepreneurial spirit will catapult us into a fantastic era of innovation.

           

Akoni helps businesses make the most of their cash. Register free at AkoniHub.com and follow us on Twitter

Neither Akoni or its advisors or officers authorised to make any express or implied representation , warranty or undertaking as to the accuracy or completeness of this update. Furthermore, the writer expresses his /her own opinion and not an investment advice.  

 

What does Brexit mean for the tech sector so far

The tech sector was a major voice in favour of the UK remaining part of the EU. There were fears that an exit from the European Union would cause investment to shift to tech companies outside the UK, uncertainties about the status of EU nationals working in the UK, the acquisition of new talent from the EU and tech companies choosing to have their headquarters elsewhere.

We would like to look at where we stand today with regards to the tech sector and the developments of the Brexit negotiations.

1. Investments

 2016 saw a record high in investments, with more than £ 6.7 billion being invested into UK tech companies, leading Europe in merger and acquisition activity. While investment did slow down after the June 2016 referendum, the fall wasn’t as drastic as expected and was not necessarily attributed to the vote on Brexit, seeing as there was a general fall in tech funding, not just in the UK.

Today the UK remains top of the list when it comes to capital invested by quite a large margin to European countries such as Germany and France. Nevertheless, this margin is shrinking and the UK is the only country where more founders say it was harder to raise investment in 2017 than 2016.

The recent budget announcement included a large amount of government investment into the tech sector, as an attempt to tackle possible losses due to Brexit.

2. Tech companies relocating

The continuing uncertainty regarding trade deals between the EU and the UK, mean that existing UK based companies consider relocating to Europe if the UK leaves the single market. European founders, on the other side, also no longer see the UK as an attractive base for their companies’ headquarters. But is that really the case?

The European tech scene is evolving and beginning to build its own ecosystem independent from what’s going on in the UK, US or elsewhere but that certainly doesn’t remove the UK as a major player in the global tech scene. UK tech companies will continue to have advantages, such as London fintech companies being located in the world’s biggest financial centre, with direct access to a huge b2b market that London offers.

3. EU nationals working in the UK

 After much insecurity regarding EU tech workers’ rights to remain in the UK, the recent reciprocal deal agreed between the EU and Britain certainly caused a sigh of relief in all sectors of business, not least the tech sector, with almost 200,000 EU citizens contributing to UK tech.

EU citizens’ rights to live and work in the UK have been guaranteed including the rights of a range of family members to move to the UK. This of course makes it easier on employers, who up until now did not know, which of their employees would be able to continue working for their companies and how much they would need to re-staff their offices. It also adds to more certainty for new potential talent to be recruited before the March 2019 deadline.

Another concern of the tech sector was the amount of time an EU national could live outside the UK, before losing settled status. Originally this was set to be only 2 years and has now been increased to 5. For tech companies this is a big improvement as they regularly second staff across a global network.

To sum up…

 While the tech sector was not a fan of Brexit, the actual results seen at the moment are not as bad as expected. The deal guaranteeing rights of EU citizens in the UK, is a major break-through in favour of the future of the UK tech sector and while leaving the single market may be considered a disadvantage, there is plenty of room left for positive development of the UK tech sector, still seen as a world leading hub for technology.

 Akoni helps businesses make the most of their cash. Register free at AkoniHub.com and follow us on Twitter

SME’s growth and significance post Brexit

Contribution of SMEs to the UK Economy

SMEs are a large and integral part of the UK economy, where they account for 99.9% of all private sector businesses. The following stats illustrate the significance of SMEs for the economic well-being of the UK.

In 2017, SMEs accounted for

  • 51% of all private sector turnover with a total combined turnover of £1.9 trillion
  • 60% of all private sector employment with a total of 16.1 million people employed
  • at least 99.5% of the businesses in major sectors

In addition to these, total business population in the UK has been continually increasing – by 4% since 2016 and 64% since 2000 – reaching a record of 5.7 million private sector businesses in Jan 2017.

Roadblocks for SME Growth

Despite the significant growth in number of SMEs, that growth does not come easy. Today, SMEs face many challenges including uncertainty created by Brexit, competition from large chains and digital players, the necessity to keep up with the ever-changing innovative landscape, expansion and development considerations, such as funding, and tackling the productivity problem.

A Yougov survey of 1000 SMEs suggested SMEs have negative confidence levels for their own companies, industries and UK economy in general. There are multiple factors contributing to this, main one being Brexit and the uncertainty surrounding it. We have a separate section focusing on Brexit, so I’ll leave this for later. Now, let’s focus on the rest.

Competition is not a new challenge for SMEs. In different shapes and forms, all businesses face competition. The key here is being able to differentiate against the competition, whether that be superior customer service, higher quality products and so on. Efficiently managing your cash holdings and maximising your return could help you sharpen your competitive edge or build one by having extra to invest in projects in line with that goal.

Keeping up with the pace of technology and digitalisation is another major challenge. Longitudinal Small Business Survey of 2016 found that 39% of SME employers had innovated in the last three years, either through the introduction of new or significantly improved goods or services, and/or the introduction of new or significantly improved processes. Considering 64% of the innovations were by companies in information/communications, for which innovation is a must to survive, there is a long way to go for SMEs in general.

This leads to the other challenge faced by most SMEs: roadblocks for expansion and development. Obtaining traditional financing has always been problematic for a large proportion of SMEs. This problem, in fact, made crowd-funding and peer-to-peer lending as popular as they currently are.  However, it is still a work in progress that requires more to open up to such alternative channels and digital solutions in general.

Most UK businesses have issues with productivity and find that problem particularly difficult to tackle. The key to productivity is developing the capabilities to be flexible and lean in order to adapt to the ever-changing landscape. This can only be attained through investments in the growing digital economy and innovations in products and processes. The result will be not only increased profit margins but also the ability to adapt and change your business model as necessary, where the latter might deem even more important for long term survival.

SMEs in post-Brexit UK

In an environment, where the hopes for a soft Brexit are close to zero, the implications of a hard Brexit on UK SMEs raises a lot of question marks. So far, the impact of the decision has been both negative and positive depending on whether you have an export or import perspective. Resulting from the devalued sterling, exporters enjoyed improved returns and UK attracted more tourists since it became a cheaper destination. However, importers are highly likely to see a negative impact on their bottom lines, if they haven’t seen this already.

As deemed highly important for the UK economy’s well-being before Brexit, SMEs are also crucial post-Brexit

1. Cash is king

Cash is key for overcoming a period of uncertainty. For many SMEs, Brexit made it impossible to plan for the future. This might mean your business has not been investing as much as it used to, leading to accumulation of cash in your balance sheet. Do you know that your cash can yield 5-10 times more if invested effectively? For hassle free cash management, Akoni can help you.

2. Access to single market

Losing access to the single market might mean losing access to 500 million potential customers and 26 million businesses in addition to losing access to the diverse talent pool. Depending on your scale, these might be critical or less important, however being able to address these issues is important for the UK economy. People are key for most start-ups and SMEs. Therefore, investing in areas to make it appealing for talent to work for your company despite Brexit is highly important. This is another area where the extra earnings on cash can be channelled.

3. Long standing relationships with banks

Brexit might also mean the obligation to form a relationship with another bank from scratch. This could be time-consuming, taking anywhere from a couple of months to years. For your deposits, Akoni offers you a shortcut, where you can build your relationship with us – in an amount of time that is significantly less than the above – and utilise our existing relationships with our panel banks.

There is no doubt that the coming few years will be interesting to watch. However, with difficulty comes opportunity.

Benan is responsible for Akoni analytics and business development and can be contacted at benan@akonihub.com 

Akoni helps businesses make the most of their cash. Register free at AkoniHub.com and follow us on Twitter