We are now over six weeks on from the result of the EU referendum and are still no clearer what the United Kingdom’s exit will mean for our future trading relationship with Europe – and therefore what the impact will be for SMEs in the North East. After the initial turbulence in capital and currency markets things have settled down, although the Pound continues to struggle against the Dollar and Euro. With so much uncertainty until an exit deal starts to materialise, we may well see some market volatility over the next 12 months at least.
The decision to exit the EU may have an impact on funding available for businesses. In the short term, the recent interest rate reduction may mean that some business owners think they may have access to cheaper bank lending, however the unprecedented period of low interest rates we have seen for the last seven years means it is unlikely the recent cut will have any material impact on business lending.
The EU has played a significant part in the North East SME funding landscape over recent years. This is currently through the Finance for Business North East funds that supported many businesses from 2010 to 2012, when bank finance was almost non-existent. Since then the seven funds have continued to be a major source of capital for North East business. These funds are underpinned by EU funding – from ERDF and the European Investment Bank – as will be the planned successor funds colloquially known as JEREMIE 2.
Current indications are that JEREMIE 2 will still be delivered in the North East LEP area (with Tees Valley being part of the British Business Bank Northern Powerhouse fund). However it is possible that the referendum result could impact on the life of these funds.
It’s definitely not all doom and gloom though, as funding is available to SME businesses to support growth. The Finance for Business North East fund managers have a £17m extension available in the North East for 2016 which they are well on with investing, and there have been recent announcements by Business Durham about their plans for a £20m investment fund to launch in 2017. The next few months should also see more information becoming available on JEREMIE 2 and the Northern Powerhouse funds.
If you are considering looking for funding for your business, it is more important than ever to seek advice. Tait Walker are hosting two seminars on funding after Brexit, in September. Please contact Kirsty Ramsey to express interest in attending.