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Business Development & Marketing Finance General HR, Redundancy & Trade Unions

The Good Business Charter may be the dawn of a new era

Good Business Charter for new decadeA new form of accreditation launched at the CBI conference in November, the Good Business Charter aims to promote a more responsible way forward for capitalism, business and the economy as the new decade begins.
Businesses can sign up to the new voluntary code, but they will have to provide evidence that they are following the ten principles enshrined in the Good Business Charter.
The Good Business Charter, which is supported by the Confederation of British Industry (CBI), the Trades Union Congress (TUC) and managed by an independent not for profit organisation, has been funded by Julian Richer, the founder of retail chain Richer Sounds.
Early last year Mr Richer handed over control of his company, Richer Sounds, to his employees, transferring 60% of his shares into a trust.
Launching the initiative at the CBI conference, the current Director General, Carolyn Fairbairn, said: “Without successful, responsible, passionate business, creating wealth and opportunity across the country and working in close partnership with government.
“… Business has always been about profit but it’s also been about so much more. It’s about making a difference. Creating jobs, services, products, ideas, opportunities.
“This is a time to talk about and even more importantly — demonstrate – that profit comes with purpose.”
To become accredited, participants in the Good Business Charter Scheme will have to undertake to pay employees the real living wage, give workers a voice in the boardroom, commit to prompt payment of suppliers, treat their customers fairly, agree not to engage in tax avoidance and show efforts to reduce their environmental impact including sourcing materials ethically.
The full list of ten principles can be found on the organisation’s website.
There has been mounting evidence for some time that both customers and investors, not to mention employees, want to see businesses behaving more ethically and in particular paying far greater attention to their environmental impact.
There is no better time for businesses to change their practices than the start of a new decade.
The Good Business Charter offers businesses a way of demonstrating their social responsibility and may be the dawn of a new era.
I wish you a happy new year and good fortune for the coming decade.

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General

Season's Greetings

We wish you all a very happy Christmas and a prosperous New Year
happy Christmas

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Business Development & Marketing Finance General

Addressing the UK skills shortage must be high on the new Government’s to do list

skills shortageBusinesses’ difficulties due to the UK’s skills shortage were high on their list for prompt Government action in the run-up to last week’s General Election.
The skills shortage was said to be inhibiting SMEs’ efforts to compete in global markets, particularly in areas related to digital and new technology.
A quarterly study by the BCC (British Chambers of Commerce) published in November found that 73% of firms that attempted to take on extra workers faced recruitment difficulties in Q3, up from the 64% recorded in Q2.
The skills shortage was compounded, according to Grant Thornton, by a low take-up of the cash available to businesses from the apprenticeship levy with almost half of eligible businesses having not yet spent the money available to them for workplace training.
This week, the Evening Standard carried a letter from Andrew Harding, chief executive – management accounting, at the Chartered Institute of Management Accountants, urging the new Government to review national education and skills policies, in particular the apprenticeships programme in order to address the skills shortage.
Added to all this is the rate at which EU workers have been leaving the UK, with Labour Market figures published in early November revealing that there had been a 132,000 drop in the number of citizens from other European Union countries working in Britain. Later in the month, the BBC reported that EU net migration to the UK had fallen to its lowest level for 16 years.
Yesterday, the latest ONS (Office for National Statistics) report revealed that in the three months to October UK unemployment fell to its lowest level since January 1975.
So, the numbers of people available for work are rapidly shrinking due to a combination of factors, including the uncertainties over immigration policy following the UK departure from the EU, the much-publicised failure of the apprenticeship scheme and the shrinking pool of available UK citizens with the right skills available for employment.
Yesterday’s employment statistics prompted Tej Parikh, chief economist at the Institute of Directors, to argue “”With some strains now appearing in the labour market, the new Government must push ahead with its plans to revamp the UK’s skills system, while initiatives to drive up business productivity should also support stronger wage growth.
“Businesses are eager for the details behind flagship policies like the National Skills Fund and reform to the Apprenticeship Levy.”
For almost three years the Government has been so wholly focused on the Brexit issue, while pressing domestic concerns have been ignored.
Now that the General Election is over with a resulting clear Government majority, it is urgent that the skills shortage is given a high priority among the many pressing concerns of businesses.

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Business Development & Marketing Finance General

Purpose oriented leadership gives employees a reason to be engaged

purpose oriented leadershipPerforming tasks to order is not enough to motivate 21st Century employees and instead they need purpose oriented leadership to understand the “why” of their organisation.
The purpose needs to be defined and made meaningful in a way that simply stating “making a profit” or “increasing sales” do not.
Generally, workers will perform more effectively if they believe in what their company is doing and how it is contributing to the common social good. This has been described as having a higher-oriented purpose. 
But this means that the most successful leaders need to be able to communicate their vision and to have good narrative skills in order to do so.
Amazon founder and CEO Jeff Bezos, for example, has banned PowerPoint in executive meetings. Instead, he believes that “narrative structure” is more effective because human brains are wired to respond to storytelling.
good example of effective purpose oriented leadership is Gerry Anderson the president of Detroit-based DTE Energy, which supplies electricity and gas to South Michigan customers.
An article in the Harvard Business Review describes how, after the 2008 Financial Meltdown, Anderson realised that DTE employees were not very engaged and could not seem to break away from tired, old behaviours.
He commissioned a video that “showed DTE’s truck drivers, plant operators, corporate leaders, and many others doing their job and described the impact of their work on the well-being of the community — such as on factory workers, teachers, and doctors who needed the energy DTE generated”.
These stories effectively demonstrated DTE’s statement of purpose: “We serve with our energy, the lifeblood of communities and the engine of progress.”
Purpose oriented leadership is becoming ever more crucial for engaging employees in 21st Century business.
A PwC study reported in Forbes magazine in 2018 revealed that millennials who have a strong connection to the purpose of their organization are 5.3 times more likely to stay but only 33% of employees drew real meaning from their employer’s purpose.
Similarly, new data collected by PR Week shows that customers view purpose-driven brands as being more caring and, as a result, are more loyal to them. It reported that 67% of respondents said they feel companies with a purpose care more about them and their families and ~80% of respondents said they’re more loyal to purpose brands, while 73% said they would defend them.
I have mentioned in previous blogs that there is a growing shift, among investors, consumers and employees, towards more ethical businesses, partly, but not only, down to the rising concern about climate change.
Clearly, business leaders are going to have to think more deeply about the purpose and goals of their organisations and to define them more specifically. They also need to communicate the purpose and goals if they are to survive since this involves nurturing loyal employees and customers.
 

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Business Development & Marketing Cash Flow & Forecasting Finance General

VUCA – protecting your business when nothing is predictable

VUCA uncertaintyVUCA is an acronym devised by the US military to describe an environment of Volatility, Uncertainty, Complexity, and Ambiguity.
But it doesn’t only apply to conflict zones. At the moment, and for the foreseeable future, it could equally well describe the climate in which business is operating.
For UK businesses the predominant uncertainty has been the situation, arguably since June 2016, when the country voted by a narrow margin to leave the EU. Since then, there have been three years of VUCA which won’t end tomorrow when we know the outcome of today’s General Election.
In the meantime, the UK economy has been sluggish, with the latest data from the ONS this week indicating that there had been almost no growth, a derisory 0.7%, in the third quarter of the year.
However, there are other influences that have combined to make uncertainty the new business norm, including a rise in nationalistic sentiment and population, trade wars between the US and China and also those between Japan and S Korea, all of which have led to a slowdown in the global economy.
Longer-term influences are the rapid pace of automation and AI development and, increasingly, worries about the future of the environment, which are influencing both consumer and investors in the direction of more ethical and responsible behaviour and decision-making.
Given the headwinds, VUCA is likely to get worse and will affect businesses for a long time to come.

Can businesses turn VUCA into a positive?

Despite its reference, VUCA offers terrific opportunities to entrepreneurs and adaptable businesses although exploiting them tends to be at the expense of those businesses, normally large ones, that rely on stability and predictability.
The website  vuca-world.org re-imagines the acronym as Vision, Understanding, Clarity and Adaptability and several business writers, among them Karen Martin and Sunnie Giles, both writing for Forbes, make the point that ultimately dealing with uncertainty is down to the creativity, agility and skill of people in an organisation.
Giles suggests that businesses need a change of mindset, so that they can react to fast-moving changes.
These include “moving from hierarchy to self-organisation”, “democratising information”, “speeding up interactions” and using “simple rules to make quick decisions, rather than perfect analyses.”
Of course, there will need to be effective and flexible leadership and a sound knowledge of the business situation at any point in time, which makes such things as management accounts and cash flow monitoring, as well as sound knowledge of customers’ changing behaviour and requirements even more crucial.
I would argue that it is often SMEs that are in the best position to deal with a VUCA climate as very often they are flatter organisations where there has to be a good deal of multi-tasking when the numbers of key employees are fewer than in larger, more hierarchical organisations.

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Business Development & Marketing Cash Flow & Forecasting Finance General

Sector focus – changes in consumer spending and attitudes?

consumer spendingIt will be interesting to see the analysis of consumer spending once the Christmas and peak holiday buying season is over.
Data throughout the year has indicated that people are less willing to splash out on so-called “big ticket” items, whether online or on the High Street.
Whether this is being caused by a change in attitudes to consumption or to increasing worries about job security and income is not yet clear. Consumption assumes spending on basic needs and then discretionary spending on goods and services including leisure.
Influences on consumer spending
Clearly, consumers’ confidence in their current and future financial situations are a key driver in the willingness to spend at least in the short term.
It is influenced in part by the changing costs of expenditure on such things as housing, fuel, food, clothing and travel costs, which are monitored annually by the Consumer Price Index (CPI), where the weighted average of prices of a basket of consumer goods and services indicates the level of and changes to the rate of inflation in the economy.
This has left less for discretionary spending.
An indicator of spending on capital goods is this year’s fall in the purchases of new cars, attributed by the Society of Motor Manufacturers and Traders to weak business and consumer confidence, economic uncertainty and confusion over diesel and clean air zones.
There has also been a reduction in consumer spending on both the High Street and online which has contributed to the closures of High Street retailers, and reduced profits of online retailers such as Asos, whose profits were reportedly down 68% in the year up to October, altbough   Asos attributed this to IT problems in its warehouses.
A study by the card machine provider Paymentsense at the start of the year predicted that over half (56%) of UK consumers were planning or considering cutting their spending over the coming year by cutting back on purchases of goods like new clothes (31%), sweets, crisps, cake and chocolate (27%), and switching to less expensive toiletries (18%). This was closely followed by spending less on jewellery and holidays which require a flight (both 17%).
This is not surprising given that research by KPMG and the Recruitment and Employment Confederation (REC) showed that the number of permanent job appointments fell in November as growth in the demand for staff fell to a 10-year low.
Employment in the manufacturing sector also fell for the eighth month in a row and the pace of job losses was the steepest since September 2012 according to the latest IHS Markit/Cips monthly snapshot.
It would be interesting to see how many people (mainly women) have lost their jobs in the ongoing carnage in High Street Retail.
At the same time, the Office for National Statistics (ONS) has reported that average household financial debt had risen 9% to £9,400 in the two years to March 2018. The biennial study showed that personal loans accounted for £35bn of total household debts, £32bn is from student loans, £25bn is hire purchase, and £22bn is on credit cards, while the remainder includes £3bn of overdrafts. Much of this, it has been argued, is due to increased living costs, such as rent, council tax and other bills.
It is fairly certain, therefore, that worries about the future and job insecurity are influencing consumer spending currently.
Having said all this, however, the recent Black Friday sales saw an average 7% increase in sales compared to last year.
This could be seen as a change in consumer spending to waiting to buy until prices are, allegedly, reduced.
It will take more than a year to determine whether a longer-term change in consumer spending habits is taking place, however, there are other factors at play.
Concern for the environment and global warming have risen to the top of the agenda, in particular for younger consumers, which has encouraged people to think twice about buying fast fashion and disposable and other plastic items.
Buying second-hand has been re-branded as “pre-loved chic” and the demand for longer-lasting household products such as fridges, washing machines and the like has prompted the EU to regulate that manufactures must stock spare parts for ten years for such items.
Then there have been the movements encouraging people to buy from local independent retailers as well as the rise of local groups specialising in helping people to repair household items such as small kitchen appliances.
Guy Moreve, CMO of Paymentsense, said “…. our study reveals that instead of aspirational health or lifestyle goals many UK consumers are increasingly concerned about just keeping up as living costs climb more quickly than salaries.
“Another growing trend is ethical consumption, and over 2018 we saw increased awareness and attention to environmentally friendly lifestyle habits such as veganism and sustainable fashion. We feel that this coming year will see continued movement in this area, as more people adopt ethical attitudes.”
Time will tell whether the “shop till you drop” love affair is finally over and there is a sustained change in consumer spending.

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Accounting & Bookkeeping Cash Flow & Forecasting Finance Insolvency

Update – sacked Small Business Commissioner speaks out

Small Business Commissioner sacked - for telling the truth?The now-ex Small Business Commissioner, Paul Uppal, has accused the Government of thwarting attempts to help SMEs tackle the late payment scourge.
Mr Uppal has reportedly blamed Whitehall for pushing him out of a role which, he says, is under-resourced and ignored by government.
He said that his office was met with “radio silence” from civil servants and ministers over his approach to the job and that his budget was too small to tackle the “huge task” of getting big companies to pay small businesses on time.
He also revealed a little more detail about the reason for his sacking, which was “a disagreement over an alleged conflict of interest related to an unpaid, interim advisory role in another government-backed small business scheme”.
The Times, is the only national broadsheet to cover the story, although it has been picked up by the online publication smallbusiness.co.uk.
It seems that The Times is becoming the champion of SMEs, carrying another article on the same day about a poll from the Chartered Institute of Procurement & Supply (CIPS) that found that almost one in six businesses said most payments are settled late. Malcolm Harrison, chief executive of CIPS, said there was a “rotten culture” of late payment. The organisation has been calling for big businesses that are slow to settle invoices to be barred from public sector work.
Another poll out this week from Xero, the online accountancy platform, revealed that a quarter of small business owners believe their company will go bust within 5 years, with 54% warning that late payments posed a risk to their firm.
The FSB (Federation of Small Businesses) has repeatedly said that late payment is the cause of an estimated 50,000 small businesses go under each year because of “pernicious” late payment. This figure might be questioned given that there were 17,454 formal company insolvencies in 2018 however I accept a liberal interpretation to allow for sole traders and companies ceasing to trade.

Does the Government care about or understand the pressures on SMEs?

According to research from the Department for Business, Energy & Industrial Strategy, at the start of 2018 a massive 99.9% of the 5.7 million businesses in the UK are small or medium-size businesses (SMEs). Of these only 0.6% of businesses in the UK are classed at medium-sized businesses.
This arguably makes SMEs an essential contributor to the economy and the provision of jobs.
Yet there has been no word on the appointment of a replacement for Mr Uppal, since I reported in my blog on November 19 the Government’s statement: “An open recruitment campaign to appoint a new Small Business Commissioner will get started immediately.”
Allegedly Fiona Dickie, the Deputy Pubs Code Adjudicator, was to provide oversight in the Small Business Commissioner role until early November, pending the appointment of an interim commissioner.
However, there has been a deafening silence from her, the General Election notwithstanding.
It has to be asked why an unpaid, voluntary advisory role for Mr Uppal was deemed to be a conflict of interest with his official position?
I have asked previously and I repeat my question: has the Government been successfully lobbied by some large corporates to roll back this initiative? Was he becoming too successful?

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Finance General

December Key Indicator: Cars v Public Transport

public transport needs investmentEnvironmentalists advocate the use of public transport instead of cars as this will reduce carbon emissions and help combat climate change.
Achieving this is not only about changing people’s attitudes but will involve a significant shift in government strategy and investment to make public transport as convenient as cars.
This is an issue for urban and rural locations outside London, which has a relatively high usage of public transport and arguably offers an excellent network buses, tubes and trains that make it very convenient for the public.
Arguably, efforts to reduce car use in London have been helped by the introduction of the congestion charge and both the Low Emission and Ultra Low Emission Zones (LEZ). Indeed, other cities, such as Bristol, are said to be considering similar restrictions.
It is certainly the case that New Car Registrations have been falling drastically in the last two years.
According to figures published by Autoexpress, the UK’s new-car market suffered a significant decline in October 2019, with 6.7 per cent fewer registrations than in October 2018.
But I do not believe this is due to changing attitudes or any improvement of public transport infrastructure, but instead think it is down to the congestion of cars clogging up roads and falling consumer confidence as reflected by a drop in spending on capital items.
The Urban Transport Group research is claiming that significant shifts “are changing the face of transport and travel in city regions” as reported by Citymetric. As one example, it reports that more people now commute into central Birmingham by rail than car, with growth in rail use also appearing in other locations including Huddersfield (by 91 per cent), Coventry (by 143 per cent) and Newton-le- Willows (by 120 per cent).
However, the picture of changing travel patterns is much more mixed and nuanced than the above would suggest and one of the most comprehensive analysis of travel patterns is the annual Government publication, the National Travel Survey (NTS).
Its most recent annual report published in November and covering the year to the end of 2018 says: “The average number of yearly trips made by people living in England have increased each year from 2015 to 2018. The 986 trips people made on average in 2018 was the highest since 2009.”
However, it also finds that the increase is mostly accounted for by an increase in walking trips and also that between 2002 and 2018, average trips, distance and time have decreased. Cycling trips have also increased by 50% between 2002 and 2015, it finds.
It also finds that the proportion of households without a car has fallen from 48% in 1971 (based on the Census) to 24% in 2018 while the proportion of households with more than one car increased over this period, from 8% to 35%.
Nevertheless, as the report points out, the devil is in the detail, of which there is a great deal: “the many factors [for the change] might include changing demographic patterns, changing patterns of trips, and the impact of new technologies influencing the demand for travel, for example the increase in online social networking, the capability for home working and online shopping.
On public transport, however, the picture is mixed with an increase in rail trips and distances per person and a decrease in local bus use.
Surprisingly, commuting trips have also decreased in recent years which the survey suggests is due to workers travelling to work on fewer days per week, a growth in trip-chaining (where people combine two or more trips for differing purposes), a growth in the number of workers who do not have a fixed usual workplace and a growth in working from home, and part-time and self-employment.
Is it time to rethink public transport provision?
Both rail and bus transport were deregulated in the mid-1990s, leading to such services being contracted out to private providers.
Arguably, particularly with bus services, this has led to a massive decline in rural bus services because the provider companies are businesses and not interested in uneconomic, loss-making routes. As local authorities have been ever more cash strapped, many have had to reduce or cancel subsidised, loss-making rural routes, leaving rural dwellers and businesses with little option but to use their cars.
According to Better Transport, the campaigning group, “Since 2009, well over 3,000 local authority supported bus services have been cut or reduced”.
However, reasons given by respondents in the NTS for not using public transport more include:

  • Rising ticket prices;
  • Poor customer service;
  • Rush hour inconvenience;
  • Delays and unreliability.

Clearly, it is time to revisit public transport infrastructure if we are to reduce car usage and combat climate change.