How crisis has become the norm for the UK’s small businesses, Tide chief
Economic crises have rocked the UK’s smaller firms over the past three years – now they’re becoming par for the course, boss of small business banking firm Tide tells City.A.M.’s Charlie Conchie
Small business banking has played a strangely starring role in the national drama of the past three years.
When Covid first began to rip through the economy in 2020, lesser known loan shops took centre stage and dished out bumper cash to small businesses. Splashy lending became something of a cause for the nation to throw their weight behind.
London-based small business banking firm Tide, then three years old, was among the lenders to rush to sign up to the temporary taxpayer-backed bounce-back loan scheme. Now, looking at another recession, soaring energy costs, and darkening economic skies, chief Oliver Prill wonders whether crisis has become the norm for small business owners.
“We’ve not seen radical change in the last 12 months. Clearly, there’s pressure [for small businesses]. “However, before that there was pressure from Covid. Sometimes it’s sort of the question to say ‘what is actually the norm?’”
While three years of “permanent crisis” is yet to rear its head in a wave of defaults, he says, the prevailing mood among Tide’s small business ‘members’ is not a positive one.
“There is of course a lot of exhaustion right now in the small business community, and we’re definitely picking that up,” he says.
For Prill though, who joined Tide from German credit shop Kreditech in 2018, perma-crisis has become par for the course.
Tide’s customer base has swelled to 475,000 under his charge and more than doubled in 2020 as small firms scrambled for new banking platforms through the pandemic. The firm’s product base is looking to absorb the full suite of small business needs from current accounts, to accounting software and invoicing.
A full banking licence is not the goal though, says Prill.
Tide is now eyeing expansion in India – where it already had a dedicated team of engineers due to struggles hiring onshore talent because of Brexit – as well as a launch in Prill’s home market of Germany.
But while growth has been strong for Tide, it has not come without its challenges.
Like some of its fintech peers, Tide has weathered stinging criticism from some quarters over a lack of due diligence when dishing out covid support and the wobbly performance of its covid loans since then.
While Tide’s portfolio was comparatively small – it dished out some £60m or 0.1 per cent of the overall lending – 26 per cent of those had defaulted by the end of March 2022.
Prill though is quick to put the troubles in the wider context of BBLs lending. “With the actual numbers we did, it made virtually no impact on Tide’s overall numbers,” he says. Tide has been forced to justify its position despite his protests, arguing it was not allowed to prioritise based on firms’ ability to pay.
Prill also downplays the schemes’ impact on Tide’s growth. Rather than the rapid route to customer growth that some suggest, Prill claims the bounce back loan schemes were “the biggest inadvertent retrenchment exercise” in the country as customers rushed back to the big high street lenders.
For their part, small businesses now are likely less concerned with the source of their cash than whether their own business will be around to borrow at the end of the year.
The last three years have seen the total population of small firms in the UK shrink by around 400,000 since 2020 after years of sustained growth, according to government figures.
While Prill stops short of suggesting the roll-out of further tailored support schemes for small businesses to cope with the current economic climate, he says ministers cannot hobble small firms further with “adverse actions”.
Moves by Jeremy Hunt to hike taxes on dividends in November, for example, drew the ire of both Prill and the small business community he says Tide “represents”.
“It’s not because people are making money, that’s the main way you’re getting paid. If you’re a company owner, you set up a company and then you pay yourself dividends because it has a tax rate,” he says.
A cut to the rate, a boost for R&D tax credits and greater relief for upgrading energy infrastructure would now be top of the wishlist in the Autumn budget, he says.
Internally though Tide has its own priorities for the next 12 months. Prill has not ruled out a shift onto the public markets in the longer term but says international expansion for now is top of the agenda. Domestically too it is looking to scoop up as much of the business lending market as it can domestically.
For its small business customers looking out at another crisis, they’ll be hoping a rising Tide lifts all boats