CHICKEN AND EGG
The current economic climate presents something of a ‘chicken and egg’ situation. On the one hand, businesses and consumers are waiting for positive news and an air of optimism before they have the confidence to do things… but the good news stories can only happen once they do…
Despite the many stories of gloom, however, there are some real success stories out there and for well run businesses, some great opportunities to grow, particularly by acquisition. Whilst many business owners may not consider themselves to be potential acquirers, there are many advantages to purchasing another business, whether it be growing turnover and profitability, increasing market share or purchasing additional know how and expertise. And, whilst funding can certainly be a significant issue, there are various ways in which this can be tackled and overcome, even if this is not necessarily traditional bank funding. Vendor finance is common and there are various alternative sources of funding available which could be explored.
TIME TO ACQUIRE?
It has to be said though, that there must be ways in which government and bank policy can create the conditions for growth, and help to give businesses the confidence necessary to make such decisions. Research conducted by member firms of the CFN suggest that a significant number of businesses would consider acquisitions if tax breaks were available, or if there was more medium and long term certainty over their finance facilities. Which is why the CFN are lobbying the government to try and remove the obstacles to growth and investment. (read more about this here)
The current tax regime for investing in plant has been hardened by the recent reduction in Annual Investment Allowance. And for businesses acquiring shares in a company there is virtually no tax relief at all, until the business is sold. To us, this does not seem to be consistent with an objective to stimulate growth. We would strongly argue that a change in policy and focus might encourage investment, and help businesses take the plunge to make these decisions and get the economy moving again. If you agree, please complete the CFN survey and help us to bring these issues to the fore to help turn the tide back in all of our favours…
The 2 min survey can be found here
Chris Bidgood, Director LEES