Luke Davis, CEO of IW Capital:
In 2018, the number of new businesses registered in the UK grew by 6% compared to 2016, the year that Britain voted to leave the EU. This growth, revealed by Companies Houses, flies in the face of negative Brexit rhetoric as we are due to leave. Investors are continuing to be optimistic especially when it comes to small businesses and start-ups where Brexit could offer a great opportunity with adaptability being key to success. Advisers should be taking advantage of this trend as many are looking to get on with business regardless of any potential for a no-deal Brexit.
This report demonstrates how the ongoing media furore surrounding Brexit does not represent entrepreneurial attitudes on the ground across the country. There is a temptation to follow the crowd when it comes to trends in investment but this is rarely the best course of action. It can be that those going against the current tide of fintech heavy investment and diversifying could be at an advantage. The UK continues to be a hot bed of new business ideas and ambitious forward thinkers. The fantastic range of SMEs looking to grow and scale as we approach 29th March is testament to Britain’s attitude to starting businesses and forging our own paths, as people and as a country as a whole.
Building Brexit resilience has been a keen topic of discussion for the investment community, and these new business attitudes display a robust and ambitious private sector, destined for success in or out of the European Union. Progressive business leaders will look to other opportunities to scale internationally beyond the EU, so now is an exciting time both for the UK’s entrepreneurial economy and entrepreneurs. International scalability is one of the key things to look out for in a small business or start-up as this presents fantastic opportunities for future expansion.
Exports are a key part of the UK economy with billions of pounds coming in from a wide range of sectors. These exports come from a wide range of sectors, from a robust creative arena made up of world class business, to future facing Artificial Intelligence. Growth coming from creative industries such as fashion and film show that whilst tech and finance are very popular, there are huge number of other, more traditional, opportunities available. As well as traditional businesses and manufacturing, innovative technology is set to be one of the key growth sources for exports. Innovation from small businesses, especially technology based firms, will likely be the leaders of the increase in exports to a more global market.
Technology and those businesses that qualify as ‘knowledge-intensive’ have received a huge amount of support from Government initiatives such as the Enterprise Investment Scheme and this has been reflected in the number of start-ups. At IW Capital, we saw more deal flow than ever in 2018, with more investors and more opportunities for both entrepreneurs and investments. Small businesses are the most adaptable and nimble in response to change and people will always find a way to do business with these firms, to whom Brexit could be a fantastic opportunity.
Investors are becoming more and more sophisticated and as well as looking for great returns, are now focusing much more heavily on the social impact of their investments. A growing number of the investors I talk to are looking for companies that will make a difference in the world, whether that be through altruism or innovation. Overall, there looks to be an increase in the conscientiousness of investing, especially in small companies. If advisers can strike a balance between businesses that offer a strong business model and growth along with the ethical side of their endeavours, this appears to an area of significant growth in the future. It’s not hard to see why either with such a media focus on environmentalism and conservation. Many investors are beginning to see their next venture as a legacy investment and a way to leave their mark in a positive way which is great news.
So far, we have seen strong deal flow in the investment into SMEs through both EIS and our debt fund offering and this looks likely to continue. Brexit and the prospect of no-deal is not really a feature in our discussions and isn’t slowing investment into the businesses we work with. Business will happen regardless of the outcome and people won’t wait around forever to see what happens before making key decisions such as investments.