- 11 Sep
UK Economy Grows Helped By The Services Sector
The UK economy grew by 0.3% in July 2019 (see BBC News), helped by the dominant services sector. The services sector apparently now accounts for 80% of the UK economy and is a segment that is highly suitable to the use of invoice finance - as are growing businesses.
Growth In UK GDP
These growth figures should see the UK economy avoiding a technical recession in Q3 2019, a recession being defined as two consecutive quarters with reductions in GDP (Gross Domestic Product - a measure of economic output).
Economic Growth Is Good For The Invoice Finance Sector
This brings two pieces of good news for the UK's invoice financing sector.
Funding Fast Growing Companies
Firstly, use of invoice finance is closely associated with growing businesses. Our research has consistently shows a close link between this type of funding and fast business growth. Often turnover growth can outpace traditional forms of business finance, such as overdrafts and business loans, as they do not normally increase in line with turnover.
However, with invoice financing, the more invoices you raise, the more funding the financier delivers against those invoices. In this way there is a direct link between the size of your business, and the amount of funding released as cash flow finance. This can allow your cash flow to keep pace with growth levels that you would not otherwise be able to sustain.
In practice, this means that as you raise an invoice for a sale, you get the majority of that cash available to use, immediately. You don't have to wait 30, 60 or more days to get the payment through from your customer. You can use that cash to pay for more raw materials, running costs - or (particularly in the case of services companies) - staff payroll. The funder can even help by taking over the management of your staff payroll, if required.
Funding Services Sector Companies
The second piece of positive news for receivables financiers is that the services sector is doing well. There are many services businesses, such as recruitment companies, using this type of funding in the UK. Often the simple nature of their trade, evidenced by documents such as timesheets, can make these sectors highly suitable to invoice funding. According the the UK Finance figures for Q4 2018, services sector businesses account for 27.4% of their members clients, the next biggest segment being manufacturers, which account for 25.5% of clients by number.
Whilst Brexit continues to cast a shadow of uncertainty over UK businesses, it is good news that some key parts of the UK economy are experiencing growth. There remain a wide range of UK invoice finance companies with plenty of spare capacity to provide alternative funding to UK companies.