Credit Management November 2023

NEWS ROUNDUP
Being in your 40s is better
than being in your 20s
PEOPLE aged 20-24 have
the lowest resilience
scores in all kinds of
areas, from savings and
surplus cash to being on
track for retirement.
Figures from the latest Hargreaves
Lansdown Savings & Resilience
Barometer suggests that people aged
40 are at their peak in terms of having
enough emergency savings and
surplus cash, and being on track with
their retirement savings.
It shows those who are still working
over the age of 60 score well for
savings and life insurance, but have
one of the lowest levels of surplus
cash – only second to those in their
20s. It shows that people aged 20-24
have the lowest resilience scores in
almost every measure.
Sarah Coles, Head of Personal
Finance, Hargreaves Lansdown, says
that while your skin and bones may
testify to overall deterioration, your
finances are likely to have gone from
strength to strength: “The Barometer
found that when we start out in our
adult life, we have the worst of all
worlds financially,” she explains.
“We’re earning less on average,
we haven’t had the time or cash with
which to start saving or investing,
we spend a larger proportion of our
income on the absolute essentials,
and we may also have debts to pay.
It’s why overall 20 somethings have
such low resilience – particularly
those in their early 20s who may
still be studying. At this stage only
15 percent have enough cash left at
the end of the month to be resilient,
just 29 percent are on track with their
retirement savings and 31 percent
have enough emergency savings.
“As we enter our 30s, we earn
more, but we also tend to hit some
of the more expensive milestones in
life. The average first time buyer in
the UK is 32, and on average women
have their first child just shy of their
31st birthday, and men just before
they are 34, so it’s an expensive time.
It’s one reason why those aged 30-34
score worst of all for their use of debt
– with only 16 percent passing the
resilience threshold – because too
many of them are using it to make
ends meet. Similarly, only 24 percent
of this age group are resilient when it
Bibby says Bank lending retreat presents
significant threat to the UK economy
BANKS appear to be retreating from
lending to small businesses, according
to new research from independent SME
funder Bibby Financial Services, and
creating a significant threat to the UK
economy.
Data from BFS’s latest SME
Confidence Tracker report reveal
that while almost half (43 percent) of
UK SMEs say their need for external
finance has increased compared to six
months ago, 54 percent say it is harder
to access finance.
Worryingly, more than two-thirds
(67 percent) believe banks are less
willing to lend to them today, increasing
to 71 percent for SMEs with turnover
between £1m and £5m. Of those using
external finance sources, two-fifths
(42 percent) say incumbent lenders
have reduced funding availability
between March and September.
Theo Chatha, Chief Financial Officer
at Bibby Financial Services thinks
the findings are worrying: “It will
undoubtedly hamper the UK’s economic
recovery, placing further pressure on an
already besieged SME population. Data
reflects a potential turn in the UK credit
cycle during a cost-of-doing-business
crisis not seen on this scale
for decades.”
Against a backdrop of dogged
inflation, sustained energy costs and
high interest rates, the deterioration
in access to finance is an additional
barrier for SMEs who are calling for
further support. Two-thirds (65 percent)
want to see greater tax incentives,
and 57 percent are asking the next
Government to improve access to
loans and grants.
Findings are supported by data
from BDRC’s SME Finance Monitor
which found success rates for credit
applications among SMEs fell to 46
percent in Q2, a significant decrease
on the 74 percent seen pre-Covid.
“Though banks today are better
capitalised than they were during the
Financial Crisis, economic conditions
coupled with regulatory and accounting
initiatives look to be driving tougher
lending criteria.” – Theo Chatha
“Though banks today are better
capitalised than they were during the
Financial Crisis, economic conditions
coupled with regulatory and accounting
initiatives look to be driving tougher
lending criteria,” Theo adds.
“This will have a significant impact
on SME finance, both in terms of the
level of funding SMEs have access to,
and the profile of businesses banks are
comfortable to lend to. Unaddressed,
this situation will intensify, causing
a further rise in the number of
insolvencies over the coming months
– something the Bank of England has
warned of.”
Notwithstanding the stark findings,
some optimism remains among SME
owners and decision makers with 63
percent expecting sales to grow over
the coming months. Regarding the
need for external finance, 38 percent
require funding to manage day-to-day
operations, and almost half (49 percent)
say they need finance to fuel growth
and expansion.
“Though traditional lending sources
for SMEs seem to be drying-up,
the reality is that there are more
independent options available for SMEs
than ever before,” Theo concludes. “Gone
are the days when banks need to be the
first and only port of call for businesses
looking for funding to survive, thrive
and grow.”
Brave | Curious | Resilient / www.cicm.com / November / PAGE 8