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Why Uber tribunal ruling puts spotlight on alternative finance

The outcome of the Uber tribunal case regarding the rights of contractors could have a major impact on the SME sector. At a precarious time, the prospect of a greater financial burden puts a spotlight on alternative finance.

Notably, the rights that the tribunal ruled that Uber has to offer its contractors include holiday pay, minimum pay and a workplace pension. If the decision affects the small business sector in the way many believe it will, business owners face some tough decisions about contractors whose employment could exacerbate the already significant strain on capital and cash flow.

The pressure being felt by SMEs regarding the provision of workplace pension schemes is already well documented – auto enrolment for all its benefits, is coming at a price. At the same time, the costs relating to the likes of minimum wage, cybersecurity and apprenticeships are also being highlighted as a potential small business development decelerant.

This is why the discussion quickly moves on to alternative or non-bank finance. Meeting the financial demands of auto enrolment, minimum wage legislation, cybersecurity, etc. at a time when the market is beset with uncertainty is a challenge for a large number of small companies. A lack of trust toward and the continued cautiousness of traditional lenders highlight the role of invoice finance, asset finance, peer-to-peer lending and crowdfunding.

The introduction of legislation that obliges banks that refuse to offer finance to small business to refer them to alternative lenders is undoubtedly a landmark moment, and given the current condition of the market, a very timely one. New research from the EEF, the trade body for the engineering and manufacturing sector in the UK, shows that its members are shrinking spending plans, while the Asset Based Finance Association has published data that show the UK SME industry is saddled with unsold stock worth £5 billion.

The proclamations that the fallout from Brexit was all but behind us seem increasingly hollow and misguided as uncertainty continues. It is in this environment that SMEs must operate and develop, and given the seemingly unrelenting pressure on capital and cash flow, the role of alternative finance looks set to be increasingly important.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.

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