While the tabloids have squeezed every last drop of juice from the seemingly dry topic of Brexit, the decision to leave the European Union finally feels real.

After three long years of political and economic uncertainty, UK businesses face the reality of fending for themselves. 31st January 2020 marks the start of a new chapter for the UK economy as the looming threat of credit crunch stirs fear.

So, what does Brexit mean for our economy, and how can SMEs grow in an increasingly uncertain political climate?

Join us as we explore the future of the UK economy after Brexit and offer top tips to help businesses prepare for a potential credit crunch.

What Is a Credit Crunch?

Before we dive into the nitty-gritty, let’s clear up some confusion around what a credit crunch would look like for UK businesses.

While the term ‘credit crunch’ is often used interchangeably with ‘financial crisis’ and ‘recession’, a credit crunch refers specifically to a decline in lending activity following an economic downturn.

When borrowers are hungry for cash and lenders reciprocate by opening their wallets with high-rate credit, the two can find themselves in a stalemate. Borrowers require funds to dig themselves free, and lenders require certainty that their customers won’t default on repayments.

The ‘crunch’ reaches breaking point when businesses downsize to avoid going under, and institutions hold onto their cash to cut their losses. The only route to economic freedom is to grow the economy from the ground up and incentivise more spending.

Will a No Deal Brexit Have an Impact on the UK Economy?

The short answer? Yes.

For better or for worse, we live in turbulent times. The UK is stepping into uncharted waters as it forges a plan to bounce back from years of political turmoil.

While the immediate impact of Brexit on the UK economy remains unknown, a recent survey by the Bank of England suggests business lending will experience the sharpest decline since the 2008 financial crisis.

Will There Be a Credit Crunch in the UK?

Since the first EU referendum on 23rd June 2016, business lending has plateaued. Repeated setbacks and empty promises have left the British people in the dark and financiers are waiting for the fog to clear before parting with their cash.

In the third quarter of 2019, the first decline in business lending since the 2008 financial crisis triggered the start of a downward spiral for UK businesses.

As with any major political event, it will take time and a great deal of patience for the country to find its feet in 2020. Although experts believe business lending will continue to fall over the coming months, they may be proven wrong.

If there’s one thing the Brexit debacle has taught us, it is that nothing is guaranteed.

While the last three years have been an enormous distraction for governments, businesses and the people of Britain, the next few months could give business owners the breathing space they need to steer our economy in the right direction.

Could clarity and closure be the very thing we need to move forward and avoid the looming credit crunch?

How to Negotiate Brexit?

While the anticipation of Brexit gave business owners plenty of time to dwell on the “what-ifs” of severing European relations, no one really knows what a post-Brexit Britain looks like.

The key to surviving 2020 and minimising the effects of a potential credit crunch is cooperation.

If you’re a business owner, don’t let the future of your company rest in the hands of big banks. SMEs require a helping hand from financial institutions who understand their individual needs and will stand by their side when the going gets tough.

Instead of viewing Brexit as a time to hunker down and shelter from the storm, lenders can combat the threat of a credit crunch through intelligent investments.

Times have changed since 2008. Cutting-edge risk assessment and forecasting technologies can help financial institutions understand the marketplace and invest in a brighter future for Britain.

While the overwhelming theme of Brexit is about pushing people apart, 2020 should be about pulling people, businesses and governments together to understand the needs of the nation.

Overcome Uncertainty with Lendflo

As the reality of Brexit and its impact on the UK economy comes into the picture, how can your business adapt?

Here at Lendflo, we’ve made it our mission to support SMEs with our straightforward approach to cash flow management and single invoice factoring.

Enjoy instant approvals and receive funds in seconds with our smart digital platform. We integrate our financial models with your existing accounting software to guide you towards a brighter and more stable future.

Don’t let big institutions harm your business. We unlock the power of machine learning to understand your individual needs and offer fair lending rates to help you grow.

Check out Lendflo today.

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