The impact of the global financial crisis of 2007-2008 and the subsequent recession in the UK is still fresh in many peoples' minds, so it's unsurprising that many business owners are worried that Brexit may affect their access to funding. The UK is actually in a very different situation than it was in the run-up to the 2007-2008 crisis, however, and the chances of us experiencing another 'credit crunch' as a direct result of Brexit are much lower than you might think. However, it's still essential to consider your financing plans carefully.
The 2008 to 2013 recession was caused by a range of factors, including the global 'credit crunch' – a reduction in bank lending as a result of the banks struggling to access liquid assets. One of the main causes of this 'credit crunch' was the sub-prime mortgage crisis in America. Lenders in the USA had been selling mortgages to people who couldn't afford them, and had then sold these debts onto other companies. When the USA raised interest rates in 2007, many homeowners defaulted on their loans, which caused a large number of lenders to lose substantial amounts of money. The impact was felt around the world and borrowing became more difficult. This, in combination with other factors, caused the UK to fall into recession, something that neither the UK government nor the country's financial services providers were adequately prepared for.
However, the Bank of England has recently confirmed that the UK's core financial system is currently in good shape and that the nation's financial institutions are well-prepared for the challenges that Brexit could bring even on a No Deal basis. That's partly because they have had more than three years to prepare for the different scenarios that could occur when we eventually exit the EU, and partly because lenders have been subject to tighter regulations since the recession took place.
Preparing For Brexit – Why Businesses Should Follow Suit
It's not just the government and financial institutions that need to be prepared for Brexit, however; businesses of all sizes need to ensure that they're ready too. While experts believe that finance is unlikely to be more difficult to come by after Brexit takes place, re-examining your operations, projections and business plan now could help you to face any challenges that arise from our exit from the EU more effectively, and take advantage of the opportunities it brings.
After reassessing your situation, you may want to access new forms of finance to enable your business to thrive. For example, if you're planning to purchase new equipment soon, you might want to use asset finance, so you can save your available cash for emergencies. Alternatively, if you want to improve liquidity, invoice financing could be an appropriate solution. Whatever your situation, however, taking obligation-free advice from an expert, without delay, will help you ensure you have a well-designed, post-Brexit funding strategy in place.
Image source: Pixabay