Telling the truth about SME life today

American Express reviews the economic condition of UK business at home and abroad

Each month as part of our SME Economic Corner feature, we ll be hearing from an executive at a professional services or financial firm to determine what their thoughts on the latest business developments are and what the economic condition of the UK marketplace is.

A lot has happened in September. We had the launch of a new £5 note amid cries for contactless, new investment opportunities, and a rant from trade secretary Liam Fox, which left a bitter taste in the mouths of entrepreneurs as he suggested they?re too “fat and lazy” to bother with international trade.

With all of that going on, Real Business spoke with Alan Gillies, VP of UK sales at American Express Global Corporate Payments, to gauge his thoughts on the enterprise landscape.

(1) A new £5 note has been released, described as more secure and durable than ever before. What impact do you think this will have on SMEs?

The news that the polymer £5 note, which was issued on 13 September 2016, claims to be cleaner, more secure and stronger than paper banknotes looks to be good news for SMEs.

They will also provide enhanced counterfeit resilience, which is a definite plus. SMEs should be aware that paper £5 notes can be spent as usual until 5 May 2017, after which they will cease to be legal tender.

(2) With that in mind, a survey found that a third of UK shoppers think cash will be obsolete by 2020. What trends are you seeing in that respect, and do you think cash will still be around in five years?

The world of payments is rapidly evolving, it was only two years ago that cashless payments overtook notes and coins for the first time. Contactless card payments are now being used in everyday consumer and business transactions.

However, there’s still a role for cash for SMEs, in particular those in retail, as figures from 2015 highlight that around 1.5m UK adults remain unbanked.

(3) To businesses that haven?t taken heed of card payments yet, what advice do you have

Payment processes might seem like a low priority for some busy SMEs, but card payments offer a real opportunity to improve the overall performance of your business. In today’s world of contactless and mobile payments, for the customer it’s all about convenience.

The more payment options offered to customers, the easier it is for them to shop with you. In particular, card payments also offer a wealth of data that allow businesses to track spending and negotiate better rates with suppliers.

With this in mind, it’s important that you take the time to consider different payment options that fit with both your business and your typical customer.

(4) What trends are you seeing in terms of SME money management?

We ve seen an increased desire from SMEs to fully explore all options available when it comes to managing finances. Advances in payment technology are revolutionising the payments process with increased security, speed, efficiency and cost effectiveness.

Automated expense management processes are also of interest to SMEs as these systems are a great way to unlock savings and manage payments efficiently. Whilst some SMEs are concerned with the potential startup costs of implementing an automated expense management, the advance of cloud-based technologies is making it cheaper for companies of all sizes.

(5) Following Brexit, there have been numerous multi-million pound investments made and investment funds opened. Meanwhile, Pure Gym has announced an IPO, which suggests leaders needn?t worry about the UK’s existing and future economic climate. Is that the case, or should companies act with caution?

In recent years, we ve seen a number of events or issues that have impacted the economic condition of Britain, some of which were overnight, so it is important to be sensible in your approach with business planning.

That’s not to say you shouldn?t take risks. By building a strong foundation for your business and operating with a measured approach where cash flow is managed consistently and effectively, this means not only you can take calculated risks when you want to grow your business, you can also weather the storm when the economy hits a rough patch.

(6) What patterns have you seen with regard to SMEs making overseas investments?

Today’s business world is becoming increasingly globalised and competitive, and for those SMEs willing and able to expand operations, international trade offers attractive opportunities for growth and perhaps a way to balance the volatility of reliance in single markets.

Research conducted by the Economist Intelligence Unit on behalf of American Express earlier this year found that British companies are highly optimistic about trade growth with the US, with 83 per cent expecting to increase trade with the US over the next five years.

In addition, international trade volumes continue to grow, and exports and imports of goods and commercial services now account for just under a third of world GDP, up from 20 per cent in 1995.

Although Asia and in particular China have driven growth in recent years, in 2015 economically developed countries accounted for the highest share, with Europe alone claiming approximately 60 per cent of the increase in world trade.

This, combined with an optimistic outlook, presents a positive economic conditionin which SMEs can establish trade links abroad.

(7) Should UK businesses do more to engage in exports?

There’s no denying that many SMEs encounter barriers to trade. Most commonly these barriers are to do with costs, exchange rate losses and concerns over the payment process.

For example, I mentioned Economist Intelligence Unit study found that the top challenge for 32 per cent of companies looking to trade with the US was around ?making payments?, with issues chiefly arising from currency fluctuation, process inefficiency, limited payment visibility and bank fees.

However, technology and innovations in FX payment solutions are rapidly lowering these barriers, simplifying the payment process and granting added layers of security to businesses doing business abroad.

In addition, SMEs which modernise their business models for the international market can benefit from improved overall long-term business health, since companies which diversify tend to boast greater resilience and longer commercial lifespans.

With benefits such as these all SMEs should be considering whether they have something to bring to the global marketplace.

Tune in monthly for more from our ongoing SME Economic Corner campaign, when we’ll be asking industrial leaders the most salient SME questions at that time.



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