Steve Bottomley, head of HSBC Invoice Finance, said that the slow down of payments to invoice finance clients in the Midlands indicated that industry in the region was in difficulty.
Up to 50,000 jobs across the West Midlands automotive supply chain have hung in the balance with BMW’s pull out from the Rover Longbridge plant.
And CBI regional indicators last week revealed that the strength of sterling has knocked the confidence out of West Midlands industry, with business optimism and exports in decline and output trailing behind the national average.
Bottomley said his factoring services could see ‘a real slow down already’ in sales invoices coming in from Midlands clients.
Factoring houses are a popular financial alternative among small to medium sized businesses, who give control over of their sales ledger for access in return for funds against debtors and a debt collector with clout.
He said: ‘The West Midlands more than other region is getting squeezed – and that’s even before present conditions really begin to bite.’
He argued that there are ‘a lot of good businesses in the West Midlands’, but what they desperately needed new markets and an external weakening against the Euro.
He said: ‘Businesses in the South are growing well, while the North is doing very due to a successful move to a more balanced economy from its traditional industrial base.’
He argued that businesses would have to become more efficient if they were to adapt to the strength of the pound, which would make them highly competitive when economic conditions improve.
He added: ‘But, whether businesses can sustain an overvalued sterling against is another question.’
However, he pointed out that there are many of his small to medium size manufacturer clients who either solely supply the UK market or trade outside Europe do not view the poun’s strength as an issue.
‘Factoring is a very good market weather vane’, he claimed. ‘We spot before others when companies can pay suppliers or when payment starts to slow down.’ A factors access to invoices within 30 days of a sale gives the industry a more immediate picture of what happening to businesses, he argued, than Government departments or banks providing traditional overdraft facilities.
Sudhir Junankar, CBI Associate Director of Economic Analysis, said: ‘There are worrying signs that the manufacturing sector is taking a turn for the worse ‘our survey suggests that sterling’s strength could now bring the manufacturing recovery to a premature end.’
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