Mid-tier businesses are ‘lifeblood’ of the economy
Covid-19 has affected businesses of all stripes, in all locations. But it doesn’t sound the death knell for the UK’s small to medium-sized businesses (SMEs). Many are more agile than their larger, more established counterparts and have pivoted their businesses to more prospective areas. They have accelerated tough but necessary decisions, making use of government schemes – depending on the sector – and positioned themselves well for the post-lockdown environment.
Our relationships with business-owning families provide us with an insight into the health of the economy. Our approach differs from that of banks and corporate finance houses advising in this space who follow the businesses and transaction flow for fee-earning opportunities. We focus on the family or entrepreneur behind the business. It not only brings us closer to key decision-makers but also to what makes a business tick.
In terms of clients, while not our exclusive focus, our sweet spot sits with companies where a family is ‘entwined’ with a growing business. In many ways, it is these businesses – often new economy companies – and not the big multinationals that form the lifeblood of the economy.
As advisers to families, we are party to the private, long-term strategic discussions about businesses across various sectors. It means we often get a good feel for the way the wind is blowing. Over recent weeks, markets have bounced back - perhaps quicker than many thought probable a few months ago. Whether or not this is sustainable or reflective of the economy as a whole remains to be seen, particularly as it is largely due to government stimulus.
There will of course be many businesses that don’t survive by virtue of being in the wrong sectors at the wrong time. Unsustainable business models have found themselves without the support and funding to continue. On the other hand, new business models have accelerated to create jobs and investment opportunities. Arguably, though, these are both inevitable outcomes accelerated by Covid-19 rather than the result of the pandemic itself.
Equally, we are constantly on the lookout for opportunities for our many entrepreneurial clients looking to re-invest in these companies. Access to this deal flow gives us visibility as to the health and activity of the economy.
Looking forward, technology companies and any that support remote working or learning will thrive. Sectors like tourism, hospitality, travel or live entertainment continue to suffer gravely, as supply has drained from the market. This looks set to remain the case for some time to come. Only the fittest, most agile, and best positioned in those markets are likely to endure. The survivors may well emerge even stronger in the longer term.
Richard Hill is a Partner and Chief Executive of Stonehage Fleming’s Corporate Finance & Direct Investments business.
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