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Banks, Lenders & Investors Business Development & Marketing Finance General Turnaround

The pros and cons of an infrastructure boost post pandemic

infrastructure boostThe UK Prime Minister has signalled a massive infrastructure boost to help the country’s economy to recover post pandemic.
The details and plans for allocation of money are likely to be fleshed out in the autumn but in a speech at the end of last month he indicated that more than £5 billion would be spent on infrastructure projects, many of them in northern and central England as part of his pledge to tackle the imbalance between London and the South and the more deprived regions.
The projects will include spending on hospitals, roads, railways and schools, including what are called “shovel-ready” projects to help businesses and individuals to recover and address the expected mass unemployment.
Business directors should be planning now to take advantage of the proposals, especially those in the construction and tech sectors that are likely to be recipients of the government money.
I know of at least one company, supplying a unique range of thermally efficient, environmentally-friendly products to house builders, which is already well-placed to grow post-Coronavirus to supply its Passivhaus compliant insulated foundation and walling systems.
The government initiative does however highlight some issues that are associated with ambitious plans that are announced without thinking them through.
In his speech, the Prime Minister promised to simplify the planning system and regulations to speed up the process.
Unless some thought and care is put into how the infrastructure boost is carried out there is a risk that the initiative will undo what little progress has been made to reaching promised environmental targets.
For example, while improving the road infrastructure is needed in some parts of the country, it is likely to increase the numbers of vehicles on the roads and in turn will contribute to an increase in CO2 emissions and global warming.
In fairness, the PM did also promise to “build back greener and build a more beautiful Britain” with a commitment to plant approximately 75,000 acres of trees every year by 2025. He does like his promises.
It may also be the case that ambitious infrastructure plans fail to meet the objectives of creating a large numbers of jobs. It is likely that businesses will be looking to find ways of reducing their dependence on labour investing in and more automation and technology-driven ways of working.
These are points highlighted by the economist Joseph Stiglitz who argues that there are infrastructure spending risks but also acknowledges that “well-directed public spending, particularly investments in the green transition, can be timely, labour-intensive (helping to resolve the problem of soaring unemployment) and highly stimulative”.
It is clear, however, that directors will need to find innovative ways of delivering the proposed infrastructure while at the same time also promoting their “green” credentials.
#infrastructureboost #economicrecovery #construction #techinnovation

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Banks, Lenders & Investors Business Development & Marketing Finance General Turnaround

Is commercial property investment no longer a safe haven?

commercial property a safe investment?Commercial property pre-pandemic was considered one of the more secure options for money by investors, particularly by pension fund managers.
But the consequences of changing consumer behaviour, the aftermath of the pandemic lockdown and the retail High Street revolution would suggest a pause for thought and perhaps a rethink.
While the most obvious sector of business related property to be in trouble is retail it may prove not to be the only one.
Retail has been hit by a significant move to online shopping that has been building for several years, but it is also beset by what has been called an archaic rental collection system, whereby rents are payable quarterly.
The most recent Quarter Day was on 24th June (Midsummer Day) and it has been estimated that in the region of just 14% of retailers were paid their rent that day.
It was no surprise, therefore that Intu, owner of some of the UK’s biggest shopping centres, such as Lakeside and Manchester’s Trafford Centre called in the administrators the day after the Quarter Day.
Intu had been struggling even before the lockdown as a result of a list of store closures announced throughout the year so far, including well known names such as Warehouse, Oasis, Monsoon, Quiz, Pret A Manger and others. It has been estimated that in excess of 50,000 jobs have been lost in the sector so far.
The lifting of lockdown in retail is not likely to help to restore the High Street’s fortunes given the restrictions and limitations shops have had to impose to ensure customers are safe from infection.
But commercial property is not only about retail.
Lockdown meant that many businesses had to close their offices and again, they have only been able to re-open amid considerably changed circumstances for safety reasons.
Not only this, but many previously office-based businesses have discovered that their employees can work efficiently and often more productively from home and have therefore they have been reviewing their business models to enable employees to carry on working remotely.
Where they have a need for some employees to be in the office at least some of the time, they have introduced rigorous sanitisation measures, abandoned such practices as hot desking, installed safety screens at more widely-spaced desks and introduced flexible working so that employees no longer have to arrive or leave at the same time. Much of this is aimed at helping staff avoid travelling on crowded public transport but it is  also a recognition that flexibility is benefitting both employers and employees.
The trust issue assumed by management has also largely been allayed; indeed staff have tended to work harder at home than they did in the office with few companies experiencing any loss in productivity. I would argue that requiring staff to work in the office was never a trust issue but more one related to the egos, status and security of managers who need the reassurance of having staff on hand; nothing to do with employees’ ability to work.
Inevitably, the successful experiment will mean that many businesses no longer require such large commercial premises and will terminate leases as soon as possible to downsize the space needed.
Indeed I know of two large professional firms who were about to move into larger offices in the City when the lockdown hit, fortunately for them they hadn’t signed the lease and have since decided then no longer need larger premises since everyone has worked perfectly well from home.
Furthermore less space will be needed as the recovery to pre-lockdown levels is looking unlikely.
Earlier this year McKinsey produced a paper full of advice for private equity and investors in commercial property about the radical changes they would need to consider for the future.
“Many will centralize cash management to focus on efficiency and change how they make portfolio and capital expenditure decisions. Some players will feel an even greater sense of urgency than before to digitize and provide a better—and more distinctive—tenant and customer experience.”
And this was just the start!
It went on to suggest that commercial property owners, especially in B2B environments, will have to change their behaviour and “engage directly with tenants. They should follow up quickly on the actions they have discussed with tenants. Not only are such changes the right thing to do—they’re also good business: tenants and users of space will remember the effort, and the trust built throughout the crisis will go a long way toward protecting relationships and value.”
However, the report does suggest there will be some commercial property niches that could benefit from the pandemic upheaval, such as commercial storage, and in time there may be others.
There is no doubt that the nature of the commercial property market is changing, but it is perhaps premature to predict its demise.
#commercialproperty #safeinvestmnent #propertymanagement #commerciallease
 

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Business Development & Marketing Cash Flow & Forecasting Finance General Turnaround

Business triage involves allocating limited resources to achieving realistic outcomes

Business triage prioritises the most urgentBusiness triage refers to the process of prioritising work in a crisis when there is more work to do than resources available to do it. The aim of triage is to maximise the outcome and minimise the damage by being realistic about what can be achieved with limited resources.
It is more commonly understood in the medical context, usually in response to prioritising treatment of casualties following disasters or other emergencies.
According to Investopedia, in a business context, “Triage helps companies by enabling them to attend to emergencies quickly, but it also poses risks, as it tends to involve the elimination of certain time-consuming steps that are normally part of the workflow”.
While business triage is normally associated with decision-making and action a crisis, its principles can also be applied to all forms of transformational change.
In my last blog I advised directors that now is a good time to conduct a strategic review of businesses in order to prepare for a resumption of activity as the Coronavirus lockdown eases.
The review may well have revealed processes, and products or services that are no longer viable as well as potential future opportunities and you may be considering re-organising your business to reflect this.
For some of you this may be urgent and you will be embarking on the business triage process to determine the changes you need to make to reduce overheads, perhaps your workforce, and to re-organise the whole business process.
The warning about the risks involved is therefore timely.
If cash flow has plummeted and staff have been furloughed your business may have been relying on reserves, CJRS (Coronavirus Job Retention Scheme) and CBILS (Coronavirus Business Interruption Loan Scheme), but reserves may be running down and furlough schemes are being phased out. And, sooner or later the loans will have to be repaid.
These are all important considerations for business triage as you prioritise cash flow by reducing overheads, perhaps by make some staff redundant much of which may be necessary to survive. Once survival is guaranteed then you can consider future plans but for the moment it is important to be mindful of the costs involved, particularly, but not only, of redundancy.
The aim of the business triage process is to emerge as a leaner and fitter organisation, more resilient and more efficient, with processes targeted on the most profitable parts of your business.
Many directors have some tough decisions to make and these will require judgement about priorities and affordability such that they may need to bring in others with the experience of making such decisions.
Both a failure to make decisions early and a failure to make the right decisions may mean that your business won’t survive.
#Triage #Businesstriage #Decisionmaking

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General

As businesses resume operations it’s a good time to take stock with a strategic review

a strategic review helps your business move forwardI would normally be recommending a strategic review of your business at this time of year, when activity slows down for the holiday season.
This year, of course, things are very different because of the pandemic lockdown but as you resume business activity my advice remains the same because a strategic review will help you to identify the resources, costs, opportunities and capabilities that will help your business move forward.
It may be that carrying out a review will help you identify new products or directions in which you can take your business as in a changed economic landscape innovation is likely to be a key to future success.
A business needs to be sustainable and profitable so firstly you need to identify the resources that are already available to you and these can be divided into physical resources, human resources, intellectual resources and financial resources.
To use the example of a manufacturing business, physical resources would include equipment and inventory and manufacturing plant, but also the premises, if the business owns them. However, over time for all their longevity such assets as manufacturing plant can become obsolete or inefficient and it is important to plan for when their lifespan will run out and for updating them perhaps with automation to improve efficiency.
Human resources will include existing employees and their skills, perhaps suppliers with whom you have a long-standing relationship, the board of directors and shareholders if any. Do you have the right skills and capabilities in the organisation to help it move forward, perhaps even in a new direction?
Intellectual resources include any processes or products that are already protected by patents, anything emerging from research and development or perhaps potential demand for a new but related product identified via marketing activities or customer research. The talent within your business could also be potentially an intellectual resource.
If you have identified a new product or direction for the business it is important to establish as far as possible how much it is likely to cost and where you may need to invest to turn it into a reality so current costs are an essential element in the equation.
If reflections during lockdown or insights following a strategic review give you ideas for a new direction you will need to know your business’ financial position to fund working capital and afford any investment so forecasting your cash flow is imperative as your reserves may be have been depleted by the lockdown and you may need further finance.
Doing your homework now while business activity is still quiet could make all the difference to a successful business development.

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Directors should be mindful of future investment and changing values post pandemic

future investment and changing valuesBusinesses planning their post-pandemic strategy are likely to be seeking future investment to shore up their balance sheets but directors will need to be mindful of the changing values of stakeholders and in particular those of their customers who in turn are influencing investors.
Before the immense disruption caused globally by the onset of the pandemic, climate change, global warming and the need for a more sustainable form of economics were a major preoccupation.
That preoccupation has not gone away.
While physical attendance at a second summit on ethical finance by international delegates from Government officials, financial institutions, consumer goods corporations, supply chain intermediaries and conservation organisations planned for Edinburgh this month has had to be cancelled, it has now been replaced by a virtual summit.
And this month, the UK’s Investors Association published a paper on the future of investment in which it, too, identified the importance going forward of ethical investment highlighting:
…“Increasing importance of sustainable investment. There is growing customer emphasis on the material impact of sustainability issues on financial returns, notably among institutional clients, as well as a more prominent focus on setting non-financial objectives (for example, to invest in companies and projects that have specific social or environmental benefit).”.
The focus and emphasis among investors is very much on CSR (corporate social responsibility), or its replacement ESG (environmental, social and governance) which is becoming the criteria for oversight of behaviour and values and holding companies to account.
Changing consumer values have been highlighted by others, including the retail “guru” Mary Portas, who has been promoting what she calls the “kindness economy” where, she argues, that shoppers may now be more alert to how businesses treat them, their workers and the planet.
Former BoE (Bank of England) governor Mark Carney also referred to this growing awareness in an article in the Economist last April, where he said that “fundamentally, the traditional drivers of value have been shaken, new ones will gain prominence” and where “public values help shape private value”.
These are issues that company directors will need to be mindful of when formulating their post-pandemic business plans, especially if the plans involve securing future investment.
Returning to pre-pandemic “normal” is not likely to be enough for business survival as the desire among both investors and consumers is for more ethical values and this has not been eroded by the pandemic.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General Turnaround

What lessons can be learned from the 1930s New Deal for post pandemic recovery?

New Deal and unamploymentThe New Deal was a series of measures introduced by President Franklin D Roosevelt to help the US economy recover from the Wall Street Crash and subsequent Great Depression.
It introduced a string of measures to better protect workers from ill-treatment and the consequences of unemployment and to better regulate banks and financial institutions.
As noted in the Encyclopaedia Britannica “Opposed to the traditional American political philosophy of laissez-faire, the New Deal generally embraced the concept of a government-regulated economy aimed at achieving a balance between conflicting economic interests”.
Perhaps one of the best-known Acts was the Glass–Steagall Act of 1933, which separated commercial from investment banking.
But the New Deal measures were also designed to stimulate and revive economic activity in agriculture and business, founded on the economic theory, as propounded by the UK economist John Maynard Keynes, that massive Government spending should be used to promote recovery and that spending cutbacks only hurt the economy.
Over the 20th Century the economic theory pendulum has swing back and forth between government regulation and a market driven laissez-faire economy with the later particularly being adopted by Margaret Thatcher.
The economic response to the Coronavirus pandemic and its consequences have opened the taps to flood cash into the market in a way that even Keynes would be impressed. Chancellor Rishi Sunak’s initiatives to protect businesses, employees and other vulnerable groups are similar to the measures introduced in the early days of the New Deal.
But as lockdown measures are eased what other measures might the Chancellor adopt to stimulate the economy?
Similar to that adopted in the 1930s, the Government is considering a spending spree on what are called “shovel-ready” projects, particularly the construction of infrastructure (roads, railways, internet, schools, hospitals and other projects) that will get some people back to work quickly.
Other ideas used then and being considered now are how to get consumers to resume spending, although this should be more than just re-opening retail, leisure and hospitality businesses.
With so many people losing their jobs or worried about their economic future, there is a real concern that consumers won’t spend. Perhaps despite other short-term initiatives that were not used in the 1930s such as a reduction in VAT (Value Added Tax) on consumer products, a reduction in NI (National Insurance) contributions for employers and employees, and training people for the future.
For businesses, particularly, some reduction in Business Rates, or even a revamp which has long been called for, and more flexible repayment of the Coronavirus loans (CBILS) may help but the landscape has changed and it would appear unlikely that we shall return to a pre-Coronavirus level of business. None the least due to the number of redundancies that are coming, and perhaps just as bad, the likely prospect that the purchasing power of fiat currencies will reduce significantly despite any artificial manipulation of inflation data.
While it is often said that a recession can be the best time to start a new business, as companies ranging from General Motors, Burger King, CNN, Uber and Airbnb did, it is arguable that the post-pandemic economic damage will be so severe that more even more radical New Deal-type of measures will be needed.

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Protecting your business from technology post-pandemic

technology comes with risks as well as rewardsLast week one of my blogs highlighted the growth opportunities to businesses of adopting new technology post-pandemic.
However, businesses, like consumers, can also be vulnerable if you do not take steps to understand and control the adoption and use of software and technology in your company.
Already, reports have emerged of new scams specifically related to Coronavirus. They have resulted in consumers being promised delivery of products for which they have paid but which subsequently discover do not to exist.
Then, there have been the scams to remote workers related to fake contacts from alleged payroll departments and internet service providers asking for personal information, according to TSB Bank.
But in a business context, while digital technology has been embraced to make it easy to continue to work during the pandemic lockdown, in the future how and what technology is used needs to be carefully considered and integrated with business processes going forward.
The temptation may be to “start to build resilience in their businesses by complementing product-focused models with scalable and stable digital alternatives” such the remote hosing of data and the use of third party software tools and AI as explored in an article in information age on potential business technology opportunities.
The article suggested that there will be an increase in B2B initiatives to adopt “smart and quick ways to slash costs and monetise existing assets”.
But the essence of business is competition and this suggests increased opportunities for industrial espionage and hackers unless you take considerable care to protect your business.
Those unfamiliar with the technology are likely to be vulnerable through their lack of knowledge or understanding. Tech is a highly specialised area where few directors are knowledgeable about its vulnerabilities and drawbacks.
Companies will need such specialists and ideally someone in-house to be sure their systems are robust and protected from such potential threats.
You should carry out due diligence on your digital service providers and protect yourself with robust legal contracts although for many online providers this may be impossible such that small businesses in some instances might be advised to avoid certain providers.
Using AI, “smart” cloud storage and other digital technologies to improve efficiency and cut cost has many benefits but only if such systems have back-ups and tight security controls as protection.
 

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The future of global sea freight transport post lockdown

sea freight faces a difficult futureThe words “new normal” have become something of a cliché in predictions for a post pandemic world but there is little doubt that global sea freight transport is likely to be very different for some years to come.
Even before countries started closing their borders and taking other measures to protect citizens from Coronavirus the sea freight industry was facing pressures.
Much of the pressure relates to concern by the IMO (International Maritime Organisation) about the industry’s impact on the environment and specifically its use of sulphur oxides which is harmful and is considered to be the cause many premature deaths.
From January 2020 the IMO had imposed new emissions standards designed to significantly curb pollution produced by the world’s ships which will be no small feat given estimates that more than 90% of the world’s trade is carried by sea.
To achieve this target, it proposed to ban shipping vessels using fuel with a sulphur content higher than 0.5%, compared to the present upper limit level of 3.5%.
The challenge is immense since the commonly used marine fuel has a sulphur content of around 2.7%.
The move is generally predicted to be likely to add to shipping costs.
However, an even more significant factor has come into play with the advent of Coronavirus which has highlighted individual countries’ vulnerability to their dependence on global supply chains.
As a result, there have been calls for a revival in UK manufacturing and the onshoring of the manufacture and processing of critical products, such as medical supplies and pharmaceuticals, among others.
At the same time, there have been calls from more than 200 top UK firms and investors who demanding that government deliver a Covid-19 recovery plan that prioritises environmental initiatives that tackle climate change and propel a “green” economy.
It has been argued, notably in an article in the Economist, that globalisation was “in trouble” even before the pandemic took hold.
Then, argues Prof Richard Portes, professor of economics at London Business School, “Once supply chains were disrupted [by coronavirus], people started looking for alternative suppliers at home, even if they were more expensive.
“If people find domestic suppliers, they will stick with them… because of those perceived risks.”
While inevitably there will be a need for global sea freight transport once things return to ”normal” it would seem likely that the volume of freight moved by sea will be considerably reduced.

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Tech offers growth opportunities post lockdown

groth opportunities post pandemicIt is likely that there will be many growth opportunities for companies to embrace the use of technology after the Coronavirus lockdown.
Many organisations and businesses have had to switch to a remote way of continuing to provide their goods and services and this has affected everything from medical consultations to teaching, even more online shopping and whole offices now remote working.
Having discovered that it is possible to function in this way it is likely that many will carry on doing so when restrictions are eased and this will provide growth opportunities for tech companies.
Among the beneficiaries already have been providers of online tools including conferencing facilities, such as Zoom, Microsoft Teams and Skype, productivity and project management tools like Asana and Trello and online collaborative and co-creation tools like Miro and MURAL.
But for all their benefits there are also caveats in terms of speed and reliability of broadband, security and protection from intrusion or hacking.
Particularly in the area of providing public services such as health care or education there are also concerns about democracy and the uses to which authorities could put all the data that is gathered, as the writer and activist Naomi Klein has pointed out in a recent article
Security is also likely to be an issue for businesses, not only regarding online financial transactions but also in building resilience into their supply chains.
Ernst and Young has identified growth opportunities in a recent report that also advises directors on how to address some of the potential concerns.
It identifies opportunities for companies to embrace technology:

  • New and more efficient ways of working and living means growth opportunities for companies including the tech companies that provide improved and more secure infrastructure for customers;
  • Retrofitting by design for those organisations that have adapted during the pandemic but plan to continue using their new working processes in the future;
  • Reimagining the seemingly impossible, such as the provision of robotic support to the healthcare sector.

But for the most innovative companies there are likely to be growth opportunities for updating business processes in some instances in products using technology, some of which have yet to be imagined.
The EY advice to directors of all businesses when planning the way ahead is:

  • Challenge all legacy technology, frameworks, infrastructure and how things have been done in the past;
  • Encourage new ways of technology-driven work to drive flexibility, efficiency and productivity;
  • Invest in both personal and business research and development, innovation and learning about technology;
  • Hire people with technology skills, including software engineers, developers and data scientists;
  • Grow the organization’s ecosystem and establish alliances with innovative companies, entrepreneurs and start-ups;
  • Innovate and automate now for the future.

All of the above should provide growth opportunities for imaginative companies in the years ahead.
 

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Banks, Lenders & Investors Business Development & Marketing Finance General

Is it time to stop propping up traditional so-called UK Key Industries?

UK Key industries of the futureThe main UK Key Industries are often still considered to be aviation, aerospace, steel and car production.
As a result of the Coronavirus pandemic and subsequent lockdown the UK Government is working on a plan, called Project Birch, to provide short term bail-outs to those companies “considered strategically important” to the national economy.
However, how to define strategically important? Is it in terms of their contribution to UK GDP (Gross Domestic Product), or to the number of jobs they account for, or to their ability to be viable and profitable businesses that can operate in more normal times without state aid?
It would be reasonable for a Government to consider a business to be strategically important in terms of employment during a crisis, such as now, especially given that some of the above-mentioned Key Industries are in parts of the UK where there is traditionally high unemployment with few alternative job sources, especially when whole communities are dependent on a major manufacturer.
This would apply to the car industry in the North East and to the Steel Industry in South Wales.
However, given that many are foreign-owned, there is little certainty that their owners will invest in them for the future benefit of UK, and often their commitment to keeping them open is in doubt, as previous negotiations for Government help have already demonstrated. It is therefore questionable whether they should be regarded as UK Key Industries in the medium and longer term.
According to the ONS (Office of National Statistics) the UK Key Industries today are in the services sector, including banking and finance, steel, transport equipment, oil and gas, and tourism: “the services sector is the largest sector in the U.K., accounting for more than three-quarters of the GDP”.
So, as former Treasury minister and architect of the Northern Powerhouse project Jim O’Neill has warned, any short-term bail-out of the UK Key industries identified in Project Birch as strategically important must be linked to strict conditions: “If the lion’s share of the equity is simply going to preserve jobs at any cost, that’ll ultimately just add to our weak productivity problem,” he said, in an article in CityAM.
It is a point echoed in an article in the Financial Times about the UK’s “age-old” problem of identifying winners and losers. In my view there are still far too many zombie and borderline insolvent businesses in the UK; most of them have been propped up by lenders not wanting to write off their debt, not because they will contribute to the future of UK PLC.
My blog on Tuesday focused on the opportunities for business innovation that are likely to come post-Coronavirus as a result of changed priorities for consumers and investors towards a greener and more sustainable economy rather than a largely consumer-oriented one.
Perhaps in orchestrating an economic recovery it would be wiser to focus on stimulating and investing in new and innovative businesses and in re-educating and training the workforce for the future and not leaving them untrained and propping up the past.
Identifying new potential UK Key industries, such as pharmaceuticals, innovative technology and the manufacture of sustainable new products is imperative for our future prosperity instead of propping up ailing industries simply because they employ large numbers of voters.

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Business Development & Marketing Cash Flow & Forecasting General Turnaround

Directors should plan for innovative UK manufacturing to revive their businesses post-Coronavirus

UK manufacturing innovation UK manufacturing was in dire straits even at the onset of the Coronavirus lockdown, with the CBI (Confederation of British Industry) reporting output dropping at its fastest pace since 1975 in the first quarter of 2020.
As it progressed the pandemic and lockdown revealed many weaknesses in the global supply chain, most notably in the availability of PPE (Personal Protective Equipment) for frontline health and care workers.
However, it is often said that in disaster there are also opportunities and many businesses demonstrated their agility in switching their usual production to manufacturing both PPE and sanitising equipment, for example.
But, as attitudes change, so the opportunities for innovation increase and it is a good time for directors to start planning strategies for not only producing essential supply chain elements within the UK but also for devising new products to fit the new agendas.
The UK Government has announced two initiatives aimed to protect UK business and promote innovation, Project Defend and Project Birch.
Project Defend aims to identify and protect vulnerabilities in business supply chains, with project leader Liz Truss recently describing three aims: reducing the use of suppliers from countries seen as “unreliable partners”; encouraging UK manufacturing; and, stockpiling key items such as medicines and components.
Project Birch is a short term initiative whereby the Government will “temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance, ensuring the majority of insurance coverage will be maintained across the market” potentially until the end of the year.
Meanwhile support for a recovery plan with projects that support the environment has been given added impetus with a letter to the Government from 200 businesses urging it, among other things, to drive investment in low carbon innovation, infrastructure and those industries that support sectors covering the environment, increase job creation and recovery.
All this should encourage UK manufacturers to think in terms of innovation rather than striving to recover their existing operations.
A report by McKinsey in 2019 in the context of post-Brexit UK business and supply chains identifies several key issues directors should consider when planning their strategy for the future. Their findings are relevant in the current post-Coronavirus recovery context.
The key issues for directors, it says, will be to: redefine their sourcing strategy; revisit their footprint; review inventory build-up; and, crucially adjust their product portfolio to exploit their capabilities and experience.
I know of at least one company, supplying a unique range of insulated, environmentally-friendly products to the construction industry, which is already well-placed to grow post-Coronavirus as the Government seeks to stimulate the economy, jobs and housebuilding. Build Homes Better proposes to use its technologically advanced products to build environmentally and energy efficient housing based on its rapid building system. Check them out at https://buildhomesbetter.co.uk/
The time has never been better for a revival in UK manufacturing with innovative solutions for both new products, developing a greener economy and for strengthening the in-country supply chain.

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General

A complex jigsaw puzzle for directors in planning a post-coronavirus retail strategy

the retail strategy jigsaw puzzle As more restrictions are relaxed, allowing increasing numbers of retailers to re-open, directors have many issues to consider when planning their retail strategy for recovery.
Given that High Street retail was already in serious trouble, directors need to address a number of complex questions to assess their chances of survival and develop their retail strategy for reopening, short-term survival and growth.
This will include understanding and meeting the interests of many stakeholders including customers, staff, suppliers, landlords, investors and regulators.
Reducing overheads is likely to be key, given the need to include social distancing measures that will inevitably limit numbers in-store at any one time, thus reducing the number of transactions that can be achieved in any working day. This raises the question of whether or not the business is viable as it needs sufficient revenue to cover the cost of staffing, utilities, rent and related premises expenses while also generating profits.
Customer behaviour and changing attitudes are also likely to be a key factor that will determine retail strategy.
Even before the lockdown there was clear evidence that shopping online was increasing dramatically where those retailers that had introduced online with delivery or click and collect were generally surviving rather better than those that had not. Research by the accountancy and business advisory firm BDO has indicated that online sales rocketed in April by 109.6% compared to last year, although this did not factor in the loss of high street sales caused by the lockdown.
However, there has been much talk of a “new normal” post-Coronavirus and Mary Portas, the retail guru, has highlighted this in her suggestion that post lockdown will bring a “new era of shopping and living” which she calls the kindness economy in which shoppers will search for brands that reflect their values. Environmental and ethical concerns were already becoming increasingly important before the coronavirus pandemic and they will almost certainly continue to be a growing factor.
In addition, consumers will have less disposable income given the likely job losses although it is not yet clear how disposable income will be deployed if restrictions remain for mass events, leisure, travel and holidays. Certainly, being confined to home has encouraged a shift in consumption and again it is not clear if these will be permanent such as surviving without spending on disposable fashion, for example.
Accessibility to high streets may also change now that people are being encouraged to walk and cycle more and drive or use public transport less. Will this impact on shopping habits with shoppers making fewer, and more considered, purchases, not least because they will have to be carried home if not bought online?
All these considerations will weigh heavily on directors planning their future retail strategy and will likely mean convincing shareholders, lenders and suppliers to think long-term for a return on their investment.
The question is, can directors fashion all these competing interests into a retail strategy to ensure survival and growth in the future?

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If remote working becomes the new normal businesses must pay attention to GDPR

GDPR and remote workingRemote working has enabled some businesses to carry on throughout the coronavirus lockdown but have they paid enough attention to GDPR (General Data Protection Regulations)?
As more businesses open up with the easing of restrictions a combination of more stringent safety measures in workplaces and a realisation that they can carry on successfully with remote working may lead many to adopt remote working as part of their normal business practice.
GDPR was brought in in May 2018 in the UK to strengthen data protection for individuals. It imposed significant financial penalties, as much as 4% of a company’s annual turnover, for breaches and failures.
However, research by the IT support company ILUX, among 2000 remote workers during lockdown revealed that one in ten believed that their expected working practices were not GDPR compliant.
A combination of these workers using their own IT equipment and inadequate IT support from their employers at a time of crisis was partly to blame for this.
If businesses are intending to continue using remote working for all or part of their workforces, they will need to revisit a number of practices that affect GDPR.
Some will perhaps require a significant outlay, but it is arguably money well spent if the alternative is a massive fine for non-compliance.
Ideally, remote workers should be supplied with business-owned devices, not home computers, phones and/or tablets, preferably connected to the business’ intranet.
All devices should have the latest patches applied, to ensure security vulnerabilities or other bugs are fixed, as well as anti-virus, anti-spam and web protection. This should apply not only to devices but also to network security such as device encryption, firewalls and web filtering.
In addition, the business should revisit its GDPR guidance for secure working for employees and advise them on how best to maintain their IT security, including passwords and replacement policies and best practice including using multi-character passwords, two-factor authentication, and not re-using passwords.
GDPR security for remote workers also includes keeping laptops, mobile phones and tablets securely locked away when not in use and not allowing family members or housemates to use, or see, anything work-related. The same applies to removable devices like USBs, which should also be checked first for malware before use.
Any personal data remote workers need to access for their work and then stored on a USB or in printed form should also be locked away securely when not in use.

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Business Development & Marketing Cash Flow & Forecasting Finance General Insolvency

Are you prepared for the next crisis?

crisis preparationFinance may be a primary consideration but it is not the only cost to a business in preparation for a crisis.
Being ill-prepared can damage the relationship with customers and employees, and ultimately, if the crisis is badly handled, it can damage the business’ reputation.
Complex, fast-moving threats to organizations can happen at any time, so being prepared for a crisis is about having the right people having been trained with communication tools and strategy in place ahead of an inevitable yet unforeseen event.
Business management consultants Mossadams produced a useful cost management guide to dealing with a crisis in April 2020, which sets out six elements to pay attention to. These are strategy (covering a customer analysis, product mix, recovery plan and financial forecast), assessing operating models, the trade-off between risks and opportunities, a situation analysis and a financial analysis.
According to the Harvard Business Review “When companies seem ill-prepared in the face of a crisis, the first question people ask typically is, “Where was top management?”
Ideally, it advises, boards should dedicate a block of time each year to better understand and prepare for major threats to the business.
It advises that boards should have both a strategy and a core team at board level trained and ready to deal with the crisis itself, as exemplified by the UK Government’s Cobra (Cabinet Office Briefing Room) group.
Of course, for a business facing a crisis the key is to take control of the messages and immediately review finance. While directors might worry about a hit to profits, in fact they should first and foremost have a plan in place for controlling expenses and for protecting and managing cash flow. Of course, ahead of the event it is wise to build up some financial reserves and to avoid taking on debt wherever possible. The less outside funding a business has to sustain when dealing with a crisis, the better.
Part of preparation for a crisis, however, and arguably as important, is the way it handles its messaging and nurtures the relationships crucial to its continued existence.
Stakeholders, customers and employees are likely to be panicked and worried about their future so communication is essential, not only to keep people informed and reassured in the present but also to protect the business’ future once the crisis is over. Indeed, critical to any crisis is to plan for emerging from the crisis so that the business does not remain in crisis mode.
In a crisis, everyone becomes acutely aware of the behaviour of others. This is therefore a key factor for reassuring stakeholders.
In this context, it really is a case of leading by example, so, perhaps it would be unwise for a business to pay out dividends to its CEO, when others are having their working hours cut or suppliers are receiving fewer orders because a business is scaling back activity..
The lesson is that preparation for a crisis is infinitely preferable to being faced with reaction without it.

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Cash Flow & Forecasting Finance General Uncategorized

What is the difference between a Depression and a Recession?

recession and depressionBoth a recession and a depression are characterised by an economic decline but the difference between them is down to the length of their duration with depressions lasting years.
An economy is defined as being in recession when there have been two consecutive quarters in which growth as measured by GDP (Growth Domestic Product) has contracted.
This is usually caused by a reduction in business activity and consumer confidence, such that businesses may start laying off employees and cutting back on production and on investment as their focus shifts almost entirely to their cash flow and balance sheet.
In the most recent recession, in 2008, the precipitating factor was a liquidity crisis that began in the USA where banks had lent what was perceived to be too much money on what came to be seen as risky mortgages on which borrowers then defaulted. This resulted in a loss of confidence in banks, which declined to lend to each other which in turn led to a liquidity crisis.
Recessions are much more frequent than are depressions, indeed, according to an article in Business Leader in March this year: “In the past 100 years, there have been dozens of recorded recessions (both national and international) – compared to just one depression in the same time period.”
The last depression was in the USA beginning in 1929 and lasting for a whole decade. While not strictly defined, a depression is characterised by very high levels of unemployment such as 25%, a dramatic fall in international trade such as by as much as two-thirds, and prices falling by more than 25%. They are also characterised by significant declines in stock market values and a large numbers of bankruptcies.
There has been some speculation that the Coronavirus pandemic could precipitate a depression given how much economic activity has ceased as a result of the lockdown rules imposed by many countries. However this is simply speculation and the short term nature of its impact is unlikely to be the sort of once in a one hundred years event that causes dramatic and long term economic collapse.
The IMF (International Monetary Fund) has warned that the situation could provoke a recession as severe as in 2008 but none of the serious pundits are predicting a depression.
In fact, some economists argue that a repeat of 1929 could not happen because Central banks around the world, including the USA’s Federal Reserve, are more aware of the importance of monetary policy in regulating the economy and will therefore step in with support and stimulus packages to forestall this.
 

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General

The Phases for dealing with a pandemic involving Zoonotic diseases

dealing with a pandemicIn 1999 the WHO (World Health Organisation) devised a blueprint based on Phases for dealing with a pandemic, subsequently updated in 2005.
It set out six Phases, to provide a global framework to aid countries to prepare for a pandemic and plan their response.
The first three Phases cover animal transmission escalating to domesticated animals and eventually germs spreading to humans defined as a Zoonotic disease. These initial phases also deal with the preparation, capacity development and response planning activities, while the last three Phases deal with the response and mitigation efforts when a disease transmits from human to human.
Phase 4 deals with verified human-to-human transmission of an animal or human-animal virus and its ability to cause “community-level outbreaks”.  Phase 5 deals with the human-to-human spread of the virus into at least two countries in one WHO region and the sixth Phase is the Pandemic Phase where virus transmits from human-to-human in at least one other country outside the region identified in Phase 5.
These are relatively straightforward definitions, but how different governments, businesses and people react to them is another matter altogether.
As has been clear during the current Coronavirus Pandemic state-level reactions for dealing with a pandemic have varied widely both in the state measures adopted and how stringently they have been implemented, with countries like South Korea at one extreme imposing a strict lockdown and restriction on movement from fairly early on when there were just a few cases, to Sweden, which has imposed relatively few restrictions and no lockdown.
However, the disparity in various state reactions to dealing with a pandemic has arguably informed the way both citizens and businesses have reacted. In the UK much of the initial focus was on the economic impact with the Chancellor introducing a wide range of financial support measures for both businesses and employees. However, some argue that the initial infection control was not as stringent as it might have been.
Scientists at Harvard university have mapped the behaviour of people in response to a Pandemic and also identified similar Phases of reaction to those set out by the WHO.
Initially, their research found that in the case of a severe Pandemic, the initial reaction by people when they become aware of a risk is to overreact. They become hypervigilant, pause “normal” behaviour, and “take precautions that may be excessive, may be inappropriate, and are certainly premature” – such as panic-buying toilet roll and other supplies as happened in the early stages in the UK. This, they say, is not the same as panic.
The scientists argue that this is entirely appropriate early in such a crisis because it means people then become able to cope with the crisis.
However, the alternative reaction is denial or even anger and in the early Phases inaction as a response is counter-productive since people don’t take precautions. Examples include those, such as in Michigan, USA, who protested against lockdown measures.
Michigan epidemiologist Sandro Gales has identified five Stages of reaction to a major disaster: starting with self-preservation, moving through group preservation to blame setting, justice seeking and finally “renormalizing” which can mean adaptation to the threat.
These are similar to the five Stages of grief: denial, anger, bargaining, depression and acceptance as identified by Elisabeth Kübler-Ross who also found that a lot of people get stuck in one phase or another and some take a long time to reach acceptance of the situation.
How well a country copes with a crisis, therefore, depends on how its leaders manage both individual perceptions as well as vested interests such as those of business. This is improved by radical transparency when they don’t know the answers but their honesty about what they do and don’t know and what they are doing will help reassure everyone that they are doing their best.
The fact is they will make mistakes but so long as they make the best possible decisions based on expert advice and the information available then they will convey confidence that they will eventually find a way through the crisis. There is no doubt that many with the benefit of hindsight will seek to hold them to account but there are lots of armchair warriors and very few leaders who stand up and take difficult decisions.
Understanding and managing the different Phases of a Pandemic and the different stages of reaction to a crisis are particularly important as they inform what messages to convey, where people may misunderstand messages such as when restrictions, as now, are being eased while at the same time there is a need for maintain a level of vigilance.
Perhaps we shall know the Pandemic is over in UK when we see the House of Commons packed with MPs given that so many are classified as vulnerable being over 70.
 

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Business Development & Marketing Cash Flow & Forecasting Finance General Insolvency

Potential Coronavirus pandemic business winners and losers

winners and losers in business after lockdownGiven the slight easing of Coronavirus-related restrictions a week ago, some businesses are in the very early stages of preparing to return to “normal” but which businesses are likely to emerge as the winners and losers in the future?
The Insolvency Service is now publishing its figures monthly and the April figures were released last week. They reported that “numbers of companies and individuals entering insolvency in April 2020 broadly returned to pre-lockdown March levels for most insolvency types” and their figures showed that total company insolvencies in April 2020 had decreased by 17% when compared to April 2019, with a total of 1,196 company insolvencies of which the majority were CVLs (Company Voluntary Liquidations). These numbers suggest no influence in insolvency from Coronavirus yet.
The figures come with a warning, however, that the operation of courts and tribunals had been much reduced, HMRC had reduced enforcement activity and there were likely to have been delays in documents being provided to Companies House by insolvency practitioners.
There is some illuminating data from Cebr (Centre for Economics and Business Research) which showed lost output figures, which include 50% in construction, 58% in wholesale and retail, 79% in accommodation and food services, and 81% in arts, entertainment and education. Communication and information, however, is down just 7% and professional and scientific activities are down just 10%.
Perhaps worse are the UK Composite PMI figures which are an indicator of health for manufacturing and service sectors and reported 13.8 in April, down from 36 in March which in turn were down from 53.3 in January. A reading of above 50 represents expansion and below 50 represents contraction where the lowest figure in the last three years was 49.2 in July last year when industry was gloomy about Brexit.
Of course, there is a long way to go before the picture becomes any clearer and the above is just a snapshot at a specific point in time.
Nevertheless, there are some clues to possible future businesses winners and losers and some of this depends on how deep-rooted the changes are in people’s behaviour as we emerge from the crisis.
Clearly, the lockdown has particularly affected the travel, holiday, retail and hospitality sectors as well as theatres, cinemas and the like. The question is whether these will be able to survive for much longer despite the various financial support packages, especially when they still have rents and other overheads to pay.
Similarly, commercial landlords may be affected as it has become clear that many businesses can operate with employees working remotely. According to the BBC last week “Many companies are struggling to pay the rent with 63% collected within 10 days in March and early April compared with 94% a year ago.” It also reported “Office and retail landlord Land Securities has said less than 10% of its office sites are being used as people work from home. This is unlikely to lead to a closure of 90% of offices but it highlights scope for huge cost reduction by businesses
In the meantime, such a rent burden is a major factor for the survival on many businesses and most likely will result in many companies going bust.
Another potential longer-term loser may be the cruise industry. Will people feel comfortable taking holidays on a large ship in a confined space in close proximity to hundreds of others?
While there may eventually be some recovery in the travel and holiday sectors once countries open their facilities and airlines are permitted to resume operations, the question is whether they will ever return to their pre-pandemic volumes since this will dependent on consumer confidence as well as affordability given the likely increase in travel costs and the fact that many people will lose their jobs.
To an extent, also, there is a question mark over the viability of airlines if they have to introduce some social distancing measures and cannot cram their cabins to maximum capacity.
The weaknesses that have been exposed in the global supply chain may also have a negative impact on freight transport.
But this last gives a clue to potential future winners among the business winners and losers.
It is possible that manufacturing may be brought back to UK and more stock will be stored here as a result of the exposed supply chain issues, which may well boost various types of local production and by extension the construction industry which will have to build the greater capacity that will be needed. Indeed, this in turn may benefit those parts of the country that were devasted by the closing down of industry during the Thatcher years.
Similarly, the UK’s pharmaceutical industry and research may become a winner as the search for a Coronavirus vaccine continues, not to mention worries about its availability if one is ever devised, and the Government has already announced £93m to help speed up the construction of a not-for-profit Vaccines Manufacturing and Innovation Centre in Oxfordshire.
The lockdown has also exposed the amount of pollution that had been generated previously and may bring an upsurge in greener energy production.
According to the Guardian last week, “Britain’s biggest green energy companies are on track to deliver multibillion-pound windfarm investments across the north-east of England and Scotland to help power a cleaner economic recovery.”
Another loser is likely to be the car industry as I cannot see as many cars being needed in a future if more people work from home and unemployment rises.
Finally, given the exhortations for people to find alternative ways of getting to work, such as cycling or walking, as lockdown is eased it is possible that another winner could be bicycle manufacture and the retail outlets that provide both bikes, accessories and aftercare.
There will undoubtedly be business winners and losers but the scale of fallout will only emerge when the future becomes clearer. The above are just some preliminary suggestions.
 

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Business Development & Marketing Cash Flow & Forecasting Finance General

How will work patterns change once Coronavirus restrictions have eased?

work patterns changingWhen working life resumes properly once Coronavirus restrictions have eased people may find that their work patterns are substantially different from previously.
While, sadly, some SMEs will not have survived others may find that their agility and perhaps new innovations introduced during lockdown will have given their businesses a new lease of life for the future.
Those who have shown consideration for their employees, suppliers and customers will have built up a level of goodwill that will stand them in good stead for the future.
I shall examine in another blog those businesses, sectors and processes that may benefit from the changed landscape but in this blog I am focusing on the likely changes to business work patterns and the relationships between employers and their stakeholders.
Because, of course, employers are also people, they will have discovered that they and their families are no more immune to the health risks of the pandemic than any of their employees.
This may well result in an increase in empathy between people at all levels and result in closer and more considerate working relations.
Indeed, an article in Forbes highlights this among the many beneficial changes in work patterns likely to be the result.
It identifies key positives that could result including increased support from businesses for employees: “Companies have been forced to consider employee wellbeing more holistically—in terms of not only the physical, but also mental and emotional wellbeing.”
Employees may find that their employers are much more aware of their different family responsibilities and more understanding of the ways family and friends are critical to life and happiness.
At a more basic level, if employees are to return to their workplaces, their health and workplace safety will be a high priority, suggesting an end to hot-desking, for example, leading to safer workspaces.
Desks could become spaced out, partitions could go up, cleaning stations stocked with hand sanitizer and antibacterial wipes will become the norm, and workers may seek out new places for focused work.
At a more basic level, safe travel to work may mean more people cycling or walking and less use of public transport, which is something that employers may have to take into account.
Dealing with the crisis, Forbes argues, could result in more effective leaders, especially those who “communicate clearly, stay calm and strong, demonstrate empathy, think long-term and take appropriate decisive action.”
Arguably, it says, relationships with teammates will also be stronger and closer after people have faced a common enemy.
New work patterns will also allow for more diversity and flexibility where businesses have discovered that it is perfectly possible to run effectively with employees working remotely, perhaps also having discovered new skills and strengths among their employees as a result.
Similarly, the new “normal” may have made it clear how few physical meetings are actually needed compared to pre-pandemic working life. This may well lead to employees’ work patterns involving far less bureaucracy and offering more opportunities for them to innovate and suggest ideas for future development.
It may also lead to greater use of new technology based on the new skills learnt while in isolation lockdown at home.
Savvy SME owners will be those who assess the good things that have come out of the crisis and incorporate them into more flexible work patterns for those valued employees who have stuck by them in difficult times, to the benefit of both the business and all those who work in it.
 

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Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery

Is it likely that there will be a permanent change in people’s behaviour post lockdown?

post lockdown behaviourHow people’s behaviour might change post lockdown is something that may be crucial for SMEs in planning ahead.
While it may be a long time yet before the Covid-19 lockdown is removed completely, following the Prime Minister’s briefing at the weekend, the process of relaxing the lockdown restrictions is now underway.
Despite the financial support that has been provided to businesses and workers it is becoming clear that we shall not return swiftly to a pre coronavirus level of business for some time and before we do many businesses will not survive, especially if the recovery takes a long time and the post lockdown landscape is substantially different.
Much depends on businesses’ ability to recover, on how long it will take them to recover and on how much people will change their behaviour as a result of the crisis.
A key to business survival is communication by leaders to deliver the information and direction everyone needs when a large scale crisis hits. While they are unlikely to know the answers, leaders reassure everyone by sharing facts and the rationale for decisions in a way that allows them to change direction as the crisis unfolds and more information is available. Essentially they need to be agile.
A PwC investigation of leadership behaviour during a crisis suggests “When disaster hits, an all-hands-on-deck, everyone-to-the-rescue reaction is understandable — but such good intentions will most likely lead to a chaotic response.”
The website emergency cdc emphasises the importance of clear, simple messaging from the start: “Because of the ways we process information while under stress, when communicating with someone facing a crisis or disaster, messages should be simple, credible, and consistent.”
Messages should be repeated, be supported by a credible source and be specific, it says, and should offer a positive course of action.
To this extent, this is exactly what the UK Government has done with its repetition of the simple message “stay home, protect the NHS, save lives” and its daily briefings reiterating the message as well as giving updates on the numbers of cases that justify the advice.
That it has been doing its job, perhaps almost too well, is indicated by the findings of an Ipsos Mori poll in early May that “two-thirds (67%) of Britons say they will feel uncomfortable going to large public gatherings, such as sports or music events, compared to how they felt before the virus.”
However, things become more difficult as the messaging changes, especially when it becomes more nuanced as we are seeing with the change of message to allow for a partial relaxing of the lockdown rules.
The proposed new message “Stay alert, control the virus, save lives” has already been rejected by the UK’s devolved governments (in Scotland, Northern Ireland and Wales) as being too vague as well as being perhaps premature given the continued high numbers of positive diagnoses being reported. Indeed, the Evening Standard last night reported confusion over the “back to work for some” message that led to commuters being packed on the London Underground.
The packed tubes may be linked to other reports that the country’s transport infrastructure is operating at only 10% of its former capacity post-lockdown. The biggest four trades unions have united to warn that people should not be going back to work without adequate safety measures in place and despite the troubles in the High Street retail sector, the British Retail Consortium has also warned against allowing shops to open without clear and adequate safety and social distancing rules.
In addition to any return to work message, different age groups are interpreting the message differently with many young adults going out to meet each other while older age groups remain at home.
The longer that the return to post lockdown normality takes then the more likely it is that people will change their behaviour permanently.
It is becoming clear that it will take quite a long time before everyone will do all those things that they did before Covid-19 appeared so a return to normal is a long way off.
Therefore, it is highly likely that there will be a permanent change in many people’s behaviour post lockdown.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery

Is it time to introduce more resilient business systems for post-lockdown?

business systems need to become more resilientJust in time (JIT) business systems of supply for everything from supermarket stocks to manufacturing components and raw materials have been the dominant model for some years.
While it offers huge benefits, including less storage space needed and less capital tied up in stocks, the disruption caused by measures to contain the coronavirus pandemic has revealed some major flaws in the model.
When such an integrated global supply chain breaks down as has happened recently the impact on business is considerable where shortages of stock have arisen due to road, sea and air freight grinding to a near-halt.
Indeed, JIT relies on many different components arriving on time often from myriad sources such that any one item can bring all production to a halt. The current situation has magnified the vulnerability since all the different supply chains will need to be fixed before production can resume..
Systems resilience describes a system’s ability to operate during a major disruption or crisis, with minimal impact on critical business and operational processes and the pandemic has revealed that in many cases it has been sadly lacking.
While many businesses have ceased to operate as a result of the pandemic, thus reducing demand for some categories of stock, there will come a time when those that survive will need to resume, and where different business systems may need to be developed to make the production more resilient and perhaps protect it from future similar shocks.
So now is the perfect opportunity for businesses to consider how to make their business systems and models less vulnerable in the future.
Firstly, this will take a change of mindset away from profit at all costs towards sustainable profits that factor in risks and resilience rather than simply focusing on cost reduction. The profit at all costs mindset has many short comings, not just vulnerability but safety also and was a causal factor behind the Piper Alpha Disaster that led to 167 oil rig workers dying.
It is also interesting that the US investor Warren Buffet, of Berkshire Hathaway, has sold his firm’s entire holdings in the four major US airlines in the belief that the post-pandemic world is likely to be very different, saying “We will not fund a company … where we think that it is going to chew up money in the future.”
Buffet is widely respected for his investment skill over the decades, so it is worth paying heed to his decisions.
As part of the longer-term thinking about business systems, companies will also need to improve their balance sheets to help withstand future shocks like the banks have been forced to do since the Global Financial Crisis of over ten years ago.
However, business should also, in my view, consider the benefits to be gained from nurturing relationships with reserve suppliers as well as perhaps maintaining larger reserve stocks of those materials or parts they need to sustain productivity during interruptions to supplies.
It may be that this will mean larger onshore storage facilities than they have been used to, but while this might mean lower profits and lower dividends for investors in the shorter term, it will provide greater security for the business and its owners in the medium and longer term.
The so-called “new normal” is likely to be very different for businesses and economies as the restrictions on movement are gradually lifted and it is likely to be a considerable time before we get there, but arguably this is an ideal time for businesses to rethink their business systems and prepare for a more sustainable future on many levels.
 

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Accounting & Bookkeeping Banks, Lenders & Investors Cash Flow & Forecasting Finance General

Has the Coronavirus lockdown exposed the weaknesses of many business models?

business models weaknesses exposedRobust business models should be based on a clear proposition with a plan for profitable activity.
Each model is essentially a road map of how money will flow from activity.
Business models are a financial expression of the company’s business plan in a way that summarises the strategy, funding, organisation and processes used to achieve objectives.
Given that unforeseen roadblocks and successes will occur, business models should be reviewed regularly and adapted depending on new circumstances and new information.
Tools for refining the model are also useful, such as a SWOT analysis to identify Strengths, and Opportunities to be exploited and Threats and Weaknesses to be avoided.
While arguably, few businesses and especially SMEs, will have had plans to cope with the coronavirus pandemic, it has affected most businesses in ways that were not foreseen. The lockdown has also exposed how little resilience they may have built into their business models to protect from such a crisis.
To a large extent, the situation has exposed a lack of financial resilience but it has also highlighted a lack of character among leaders. The behaviour of leaders in particular will be remembered by those who deal with them, whether employees or other stakeholders.
It is alarming how many directors have been paralysed by the situation and not taken calls or failed to answer with awkward questions, often hiding from the fact that their problems will not go away.
While leaders may not know the answers, they should be visible, they should be looking for the answers and telling everyone what they are doing to find them.
The government is a good example of leaders trying to communicate, I leave it you to decide whether or not their messages are believable or they are doing a good job of leading in a crisis.
James Ball, writing in the Guardian, provides an excellent illustration of two examples of flawed business models, Uber and Deliveroo. At a time when it might be expected that their services would be more in demand than ever as people are required to stay at home and preserve social distancing, he points out that they are not structured to make a profit, but instead rely heavily on growing rapidly, not growing sustainably.
“This is the entire venture capital model,” he says. “….This is a whole business model based on optimism. Without that optimism, and the accompanying free-flowing money to power through astronomical losses, the entire system breaks down.” Indeed, this reinforces my view that the Silicon Valley approach to venture capital has parallels with a giant Ponzi scheme by using new investors’ money to provide returns to early backers.
Will Hutton also looks at business models and considers how the economy might recover from the lockdown in a more sustainable way: “equity investment: the venture capital and private equity industries must transmute themselves from their default role as predators and asset-sweaters to long-term, patient investors”.
I believe the short-term, profit-driven motives of early investors looking for a return before their investment makes a profit is a flaw in most companies’ business models and has contributed to the weaknesses that have been exposed by the measures that have been needed to contain the pandemic.
Some might say ‘buyer beware’ in a world where animal spirits and greed drive behaviour but this argument exposes a lack of character among leaders who should show courage and moral fibre.
Perhaps it is time for a bit more moderation and longer-term thinking in the construction of business models for the future.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance Insolvency Turnaround

The latest insolvency statistics for the first quarter of 2020 don’t tell the whole story

insolvency statistics not the whole storyAstonishingly given the news coverage of a financial fallout due to the Coronavirus pandemic, the latest insolvency statistics for Q1 January to March 2020, show a decrease both when compared to the previous quarter and to the same quarter in 2019.
The figures, published by the Insolvency Service yesterday, showed a total of 3,883 company insolvencies with the majority again being in CVLs (Company Voluntary Liquidations).
This was a decrease of 10% compared with the last quarter of 2019, October to December, and of 6% when compared to January to March quarter of 2019.
Construction continued to have the highest number of insolvencies, followed by the wholesale and retail trade and accommodation and food services.
While these insolvency statistics cover the period before the lockdown due to the Coronavirus pandemic was imposed a drop in insolvencies is still surprising given that economies in the UK and EU had been slowing in previous months.
There is more clarity, however, from the latest Begbies Traynor Red Flag alert figures published on April 17.
They reported their highest-ever numbers of businesses in significant distress at 509,000 with the impact of the lockdown showing 15,000 more businesses in significant distress (3%) compared with Q4 2019. The vast majority of these, they found, were SMEs with under 250 employees.
There is even more concern in the Red Flag figures for businesses in critical distress, which Begbies Traynor regards as a precursor to falling into insolvency. They reported a 10% increase in the last quarter alone, although, as they note, “creditors have been held back from taking court action due to the lockdown”.
The most notable increases, they report, are a 37% increase in bars and restaurants, 21% increase in real estate and property, 11% increase in construction and 8% increase in both general retail and manufacturing.
All this is despite the various financial support measures of grants and loans announced by the Chancellor who has sought to help businesses survive the pandemic.
Having said that, loans need to be repaid and many are concerned about the future prospects for businesses and for some industries that may take some time before they return to normal, not least the Banks who understandably might be reluctant to lend to those who are unlikely to repay their loan. This might explain the numbers of businesses that have been turned down.
In the middle of an unprecedented situation like the current pandemic it is difficult to draw conclusions from trends or make meaningful assumptions about the future number of insolvencies but there is no doubt they will rise significantly.
Historically the rise has been an indicator of the country coming out of a recession although most recessions have been ‘V’ shaped where some are predicting a ‘U’ or even an ‘L’.
Clearly much will depend on for how long the lockdown continues and we should prepare for many companies, particularly those relying on travel, events, hospitality and an already-struggling High Street, to disappear altogether as Warehouse and Oasis have most recently done.
Much will also depend on consumer confidence and spending power – and how many people have lost their jobs but clearly economic and business recovery will be prolonged and painful.
 

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General

Time for a rethink? The global supply chain and short-term thinking

global supply chain rethinkA time of crisis, such as the current Coronavirus pandemic, exposes the weaknesses of inter-dependency and systems and in this case, the global supply chain.
There is perhaps also no better time to review things and perhaps change from the short term thinking that seems to have dominated economics and businesses, especially in those economies like the USA and UK that rely heavily on the purchase of foreign goods.
It is clear that it will be a long time before life returns to normal and it is not yet clear what that “normal” will look like.
In the previous “normal” it was possible to rely on adequate supplies of raw materials for the production of various types of goods, such as food stocks on supermarket shelves.
But one of the first signs of the disruption to come was the rapid emptying of supermarket shelves as people panicked and bought large supplies of various items, for example toilet paper, hand sanitiser and pasta, in anticipation of the coming lockdown.
Another sign of disruption is the price of oil which has plummeted leaving tankers around the world mooring off-shore waiting for prices to rise before offloading their oil.
There has also been the saga of medical equipment such as ventilators to treat those hospitalised seriously affected by the virus and of personal protective equipment (PPE) for medical workers treating them.
Similarly, as various crops were ripening, it became clear that there might not be enough seasonal workers available to pick them, as many farmers had been relying on seasonal workers coming into the country from Eastern Europe.
All these examples provide lessons in the inter dependence of supply chains that support a “just in time” model of global business.
As Larry Elliot wrote in a Guardian opinion piece in mid-April: “The past 30 years have seen global markets – especially global financial markets – increase in both size and scope. Long and complicated supply chains have been constructed: goods moving backwards and forwards across borders in the pursuit of efficiency gains”, meaning that capital flowed in and out of countries equally quickly and there was no thought of building any capital reserves.
In an era of weak growth since the 2008 global financial crisis, he says, “What this amounts to is a world clinging on by its fingertips, even in what passes for the “good times”.
The global supply chain, just in time model effectively did away with large, local warehousing attached to manufacturing units as much as to food stores. It relies heavily on a continuous supply of materials and ingredients being delivered by a well-functioning international and national transport system.
In the UK, particularly, the manufacturing sector has been shrinking for years as the economy has pivoted to rely more heavily on the tech and financial services industries.
The reasons for the decline in manufacturing are myriad but largely down to the long-term investment needed and short-term expectations of investors of a swift return on their investment.
The lack of planning for a rainy day has also been highlighted. This observation is not just of the UK government that has failed to invest in the storage of equipment supplies but it also applies to businesses that have not built up capital reserves and consumers who do not have any savings.
In fairness, it has also brought out the best of those many businesses that have adapted to survive through agility by quickly re-designing their business models and production lines such as those who are now producing hand gel or selling goods outside their shops, restaurants or pubs.
While a short blog cannot hope to analyse all the flaws of a global supply chain model in detail, it has become clear that there are vulnerabilities both to businesses and to national economies that rely on international suppliers and the short term thinking that has driven it.
The return to ‘business as usual’ that is increasingly being demanded may not be possible given how long social distancing may have to continue. How many businesses will cease trading altogether as a result and how many people will lose their jobs will be major factors when we get round to reviewing our trading relationships.
This could therefore be a good time for businesses, economists and politicians to give some thought to creating more robust, longer-term, and perhaps more locally-based systems for the future.

Categories
General

Five top tips for working at home efficiently and maintaining your mental health

remote working and mental health Many companies have adapted to the Coronavirus lockdown measures by asking staff to work remotely from home, but how do you do this efficiently and also protect your mental health?
Much as we love them, a prolonged period stuck in one place with our families can sometimes be stressful, especially if remote workers are combining working with home schooling their children.
Of course, another complication can be the facilities and space available at home, where cramped conditions can add to the stress of trying to work efficiently while staying healthy.
Here are some tips to help you maintain you mental health and efficiency:

  1. Discipline and routine are important: Creating and following a timetable of tasks and activities gives structure to the day, and on that note it is much easier to get into “work” mode if you can work at a desk or table and if you don’t do it in your pyjamas!

Lists are also useful, not least because if you break down your day’s work into tasks and complete them, there is a great deal of satisfaction and a sense of achievement to be gained by ticking items off when completed.

  1. Variety: You should include other activities and what psychologists call micro-lifts into the structure of your timetable. In the normal working day when you are going into work in an office, you may be in the habit of picking up a coffee on the way in, or maybe have a regular break for a few minutes at the coffee machine at work for a chat with friends. Don’t underestimate the importance of giving your brain a few minutes’ rest.

It is also important to take regular breaks from a screen if your work is mostly being done on a computer/laptop.

  1. A healthy diet: It is tempting to snack more when you are working from home, but this may mean that your diet is less healthy and that is not good for either your physical or mental health.  This relates also to the importance of having discipline and a routine that builds meal breaks based on a healthy diet into your timetable.
  2. Exercise and fresh air: These are also important for physical and mental health albeit they are restricted to the social isolation rules that allow for one hour of outdoors exercise per day. You would be likely to get that during a day at the office, by walking from transport to the office building or going out during your lunch hour. If you are working from home and have children with you, involving them is a great way of treating exercise as a family activity while at the same giving children the opportunity to burn off excess energy.
  3. Try to get at least seven hours’ sleep: Sleep is a major component of mental health and of working efficiently especially when in a time of crisis.

The secret of working at home efficiently is in many ways intimately connected with your mental health.
For many people this will be a new way of working and you may find that it takes a good deal of self-discipline and organisation to maintain your productivity, but if you follow the guidelines in this blog you will find that you can settle into a routine that enables you to carry out your work tasks as well as the other demands on your time that come from being in your home with family around you.

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Uncategorized

Coronavirus Business Interruption survival will need agility not pride

Agility is essential for business survivalArguably, all successful businesses need to exercise agility in a fast-changing world, but never more so than now in the midst of the Coronavirus pandemic.
While there is nothing wrong with having pride in your business, pride is also associated with sticking doggedly to a plan that is not working due to a change of circumstances. Just because you have always done things one way doesn’t mean that way is always right in normal circumstances, let alone in abnormal ones like the current situation. In a crisis everything you do should be challenged and often fundamental change is necessary if a business is to survive.
Business agility is therefore a key attribute for dealing with adverse circumstances, to be creative and adapt to the changing environment. This in particular applies to three main areas: staff, customers and processes.
Social distancing has meant that for some businesses their staff have had to work remotely while others are needed in the office to maintain systems. This has involved setting up new policies to protect staff who need to come into work, while at the same time making it possible for others to work from home and keep in touch. Equipment for remote workers, remote access to central servers, online security, new ways of working together and new forms of communicating have all had to be learnt very quickly. Better this than some companies who simply closed their doors when the big bad wolf began prowling.
There are terrific examples of firms that have adapted by changing their business completely such as restaurants that have switched to offering ready-meals for either collection or delivery, enabling them to keep going after they were forced to close their doors as part of measures to contain the spread of the virus.
Others, among them distilleries, have switched their production lines to manufacture such products as hand sanitisers and engineering firms that now make ventilator equipment for hospitals.
Some clothing manufacturers have switched to producing hospital protective clothing of various types.
A wholesale bakery client has had to replace its traditional hotel and restaurant market and now supplies market stalls, independent retailers and farm shops with its turnover nearly back at pre Coronavirus levels, all in six weeks and very different from their initial assumption that they should cease baking.
Another client, a plant and equipment rental company, now supplies the new Nightingale hospitals when it too had assumed it should close down.
A local pub now sells garden bedding plants from its front gate and has shown far more initiative than the local garden centres that have all closed down.
With consumer behaviour having radically changed as a result of the self-isolation rules, many retailers have massively increased their online presence, although it has to be said that when people are worried about their futures and their finances there will inevitably be a reduction in the purchase of non-essentials even online.
Perhaps the most agile and innovative have been the smaller SMEs, particularly tech support companies and gyms, who have taken their services online, producing regular teaching and remote IT problem solving services to help people. Many have offered a combination of part-free and part paid-for services, which are likely to be remembered by those they have helped once life has returned to normal, however different that “normal” may turn out to be.
As economies move out of the containment phase and some restrictions are loosened or removed altogether, your business will need to remain agile. There is some good advice from Accenture here.
It will not be a case of returning to the status quo-ante and it is too soon to be able to assess how customer and client behaviour will have changed in the medium term, so it may be that your business will have to develop a permanently agile mind-set in order to survive and remain resilient in the face of changes in both consumer behaviour and structural change in industries and the economy.
This may mean changing your business model and plan and paying much more attention to markets and demand.
A prerequisite to surviving a crisis is the ability to overcome the natural feelings that can overtake rational thinking. Emotions such as fear and anxiety relating to the unknown, the unanticipated event, a loss of control and unpredictable outcome are all natural but they need to be suppressed to allow rational behaviour and creativity to emerge as the way of finding solutions and new initiatives for dealing with the new circumstances.
It doesn’t matter that many initiatives won’t work so long as pride doesn’t get in the way and you acknowledge you were wrong and try something different. Paralysis and inaction are the real enemy.
For details and my free guide covering all the government Coronavirus Interruption Support initiatives check out the Online Turnaround Guru website.
While it is fine to have some pride in how you may have steered your business through the early stages of this crisis and survived, it is worth remembering the old saying “pride comes before a fall” so it is worth remembering the lessons we gain from experience. And, while we don’t know what we don’t know, we can always keep looking for answers and keep asking questions.

Categories
Accounting & Bookkeeping Cash Flow & Forecasting Finance Insolvency Rescue, Restructuring & Recovery

Get expert help with cash flow management in a crisis

cash flow crisisIn the current pandemic situation, many businesses deemed non-essential have been forced to temporarily close for a lockdown period and it is clear that many SMEs will have serious cash flow problems when they resume trading.
Unfortunately, the cash flow problem won’t go away even though for the moment it is easy to ignore it by holing up at home.
While it is true to say that all businesses should have plans for dealing with emergencies and reserves for cash flow problems, it is unprecedented to have to deal with a period of no income and it is becoming clear that many SMEs – and larger businesses – do not have sufficient cash reserves to survive a lengthy lockdown.
Many are telling me that they paid their staff wages for the first month in anticipation of furlough support arriving in time to fund a second month but they are concerned about the Government’s promised CJRS (Coronavirus Job Retention Scheme) arriving in time to pay April wages. As for paying other liabilities such as rent, finance and fixed overheads many of these are being ignored since most SMEs rely on income to pay bills.
It is easy to be wise after the event but, as I have said in my blogs over many years, it is crucial for a business to pay attention to its cash flow and to build up reserves to cushion it from sudden shocks. And yes, as an aside, I do hate factoring and invoice discounting since these only help fund growth and no business can guarantee growth such that in a decline they often starve a business of cash.
While the current situation is unprecedented and it is no surprise that you as a SME owner may be very frightened, it is unlikely that you are in the best position to think clearly about the steps you need to take if cash is running out.
In March, the website Small Business said¨” many small businesses could be forced to make difficult decisions in the coming weeks. Depending on their financial position, some small businesses could start to experience cash flow difficulties very quickly …”
Among its tips for dealing with cash flow crises it advises that you should prepare a cash flow report before seeking financial help such as a time to pay arrangement.
It is helpful to get expert advice to deal with your situation and in particular helping produce the information needed to raise finance and for negotiating with finance companies, HMRC and other creditors.
Crisis management when a company is in financial difficulties is about quelling the understandable panic so that you can manage cash flow and take a long, hard look at the financial and operating options for survival and ensuring the business is viable. This is why objective expert help is so important.
As I said in my blog in February this year: “The most likely immediate priority in managing a liquidity crisis is reducing costs while maximising income.
“So, the first step in managing cash is to construct a 13-week cash flow forecast to help identify risks and actions that can be taken to reduce them. It should include income from sales and other receipts and outgoings, both to ongoing obligations such as rent wages and finance and to creditors.”
It is easy to say with hindsight that SMEs should have built up cash reserves when times were less challenging but you are where you are and calling on an expert to help you with cash flow management will give you a better insight into how you might be able to keep your business afloat.
You can find out more about the government financial help available in my free downloadable guide.
https://www.onlineturnaroundguru.com/support-for-smes-struggling-to-deal-with-coronavirus-pandemic
 

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Business Development & Marketing Finance General

How to manage an efficient online conference

online conference efficiencyAs we all adjust to the new realities of working remotely while we self-isolate during the Coronavirus pandemic, we still need to maintain contact with staff, clients, suppliers and others where online conference calls and video meetings are proving much better than the phone.
But how do you avoid an online conference descending into anarchy with people talking over each other?
There are some simple rules that are not so different from those we adopt during face-to-face meetings.
One of the meeting platforms that is becoming increasingly popular during the pandemic has been Zoom, but there are plenty of others such as Microsoft Teams, Skype for Business and even WhatsApp. Security is an issue and all are constantly improving their security measures following concerns about uninvited intruders, in particular for Zoom which seems to have become the most popular platform.
It is important that the chair should host (convene) and be familiar with the technology since each platform has tools to manage the meeting. Like all other meetings, they need an agenda and discipline over time keeping so it is best that those invited know in advance what topics are to be discussed and for how long. It also helps to ensure key contributors are prepared with any presentation material they need to share.
Confirmation of availability is no different to face to face meetings such that once the attendees are confirmed a notice of the meeting in the form of a Zoom or other invite, which for most will request confirmation of attendance and automatically update everyone’s calendar. The invite also includes a URL for automating the login to the meeting but it makes sense to practice setting up meetings so you are familiar with the technology and invitation settings such as the need or not for passwords and waiting rooms which are all features set by the host as part of setting up the meeting. Once mastered this is straightforward.
The notice should include an agenda, with notes and login details.
It makes sense that the organiser as host opens the meeting shortly beforehand monitors participants’ arrival in the waiting area so they can approve attendance although for large meetings I would recommend you don’t use the waiting feature since it will distract you.
Participants can normally attend meetings using any device they wish including via landline phones so organisers should specify if video is necessary with the notice. For team meetings and internal ones of fewer that about 40 participants I suggest everyone should be able to see each other as this reinforces involvement.
Everyone speaking over each other is a problem so the chair may need to manage this as a discipline to master. To help their is a Participant feature allowing each Participant to raise an electronic hand which the chair can see in the Participant’s video feed and invite them to speak.
Again, learning to switch your microphone on and off  or in the case of the host, switching off everyone’s microphones centrally is another discipline we need to learn and is particularly useful for those at home with a noisy background or children in the house.
Taking notes is another discipline which can be done traditionally although most platforms offer a record feature and in some cases the host can allow or not Participants to make their own recording. It makes sense to cover this at the beginning of the meeting.
The chair essentially manages the online meeting or conference like they would do normally but everyone is logged in remotely.
While not being in the same room makes it harder to pick up the non-verbal signals that we take for granted in face-to-face meetings, video meetings are much better than phone calls because you do see everyone’s reactions.
In many ways, an online conference or meeting is no different from any formal workplace meeting, but it does highlight the importance of a strong chair and the need for courtesy, which, of course, should be features of all meetings.
 

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Business Development & Marketing Cash Flow & Forecasting Finance General

How will consumer spending change as a result of the Coronavirus pandemic?

consumer spendingConsumer spending has become much more restricted during the Covid-19 pandemic safety measures, but will it lead to a permanent change?
From March 21, all non-essential businesses in the UK were forced to close, from hospitality, restaurants and fashion retail to car dealerships and holiday travel companies.
At the same time, many businesses have had to furlough staff and a substantial number of people have sadly lost their jobs altogether.
Inevitably the reduction in income through furlough and loss of jobs and restrictions on going out due to most of us being confined at home are having a huge impact on consumer spending.
It is no surprise, therefore that in March, demand for new cars from private buyers fell by 40.4%, while fleet registrations dropped by 47.4%.
According to Essential Retail the food retailers have clearly benefited both in-store and online to the point where they have had to limit supplies of some products and sign-ups of new online shoppers, however the picture for non-essential retail spending is significantly different, even for those retailers with considerable online and delivery capabilities. Purchases have plummeted.
It says: “People are scared to spend money that’s not essential,”
But as the situation continues, it argues, there is likely to be a greater need for certain non-essential items. Examples include exercise and hobby equipment, gardening products and home improvement materials.
The question is whether all this will lead to a more permanent change in consumer spending once the crisis is over.
According to Paul Martin, UK head of retail at KPMG, Covid-19 will precipitate a rapid increase in e-commerce activity that may persist long after the event, not that this has happened yet.
No-one knows yet how many of the currently closed SMEs will survive the current limitations and much will depend on whether such consumer and business activity will return to normal once the restrictions are lifted. But those of you that do survive will be well-advised to develop an e-commerce proposition if you don’t already have one. The rapid growth in our use of online conference facilities for video meetings that in the past were physical meetings could be an indicator of one change to our normal behaviour where the number of daily meeting participants using Zoom has risen from 10 million to 200 million in a month.
A major factor is the possibility that unemployment rates may rise substantially which will be down to two factors: staff reduction by surviving businesses; and job losses due to insolvency, both of which are likely if there is a delayed or slow return to normal activity.
Another unknown quantity is whether consumers will be more selective about what they purchase having discovered how much they can do without while they have been forced to stay home.
Once the pandemic is over, it is also likely that environmental concerns will rise up the agenda again, making people more wary of re-joining the previous “throw-away” culture.
It will be a while yet before the situation becomes clearer but it is likely that the current crisis will have a significant impact on both the mechanisms and the volume of consumer spending.
 
 
 

Categories
Business Development & Marketing Cash Flow & Forecasting General Rescue, Restructuring & Recovery

Nurture your key relationships if you want to have a future after current crisis

key relationships are important for business survivalIt may seem premature to talk about what happens when the Coronavirus pandemic is over but SMEs need to think ahead and nurture those key relationships needed to ensure their business has a future.
Many of you have had to temporarily close your business and furlough staff due to Government restrictions introduced to try to slow the spread of the virus and many or you have seen your income plummet or cease altogether, with a devastating impact on your cash flow.
According to behavioural scientists it is natural to behave cautiously, even timidly, in the face of a threat, in direct proportion to its magnitude and to what is known about it. But amid the daily deluge of media updates, it is important to remember that we will tend to exaggerate the risk so the threat looms large in our minds.
So, it is perhaps natural to invoke a so-called “bunker” mentality in which self-protection overrides all else.
But as a business owner, no matter how dire the current situation, it is important you try to maintain a sense of perspective and remind yourselves that eventually some form of “normality” will return at which point you will want to be able to return to business profitability.
An essential element of this is what you do now, and key to it will be your relationship with employees, customers and suppliers.
In previous pandemic-related blogs I have talked about maintaining regular communication with staff, somewhat like the government’s daily briefings from No 10 to keep us all informed. This communication is key whether you have been fortunate enough to be able to carry on with staff working remotely, or whether you have had to take advantage of the Government’s furlough scheme for the time being.
Similarly, it is critical to maintain a level of marketing to stay in contact with customers and clients.  They may not be placing orders now, but staying in close touch with them, demonstrating concern for their interests and wellbeing, and discussing the future will help prepare for it.
In the same way, understanding the changing needs of customers may have helped you pivot, as those like some restaurants who now provide a take-away service and offer meal deliveries. This engagement will ensure your business pick up quickly when restrictions are eased.
Another of the key relationships that you will need to nurture is that with your suppliers. You will need them if you are to remain in business where non-payment during the lock down may have been necessary if you yourself haven’t been paid but ignoring them won’t be easily forgiven.
There is a salutary lesson in the action recently taken by New Look, whose CEO last week wrote to all suppliers suspending payments to suppliers for existing stock “indefinitely, cancelling orders for its Spring and Summer clothing lines and saying it won’t pay costs towards them.
In fairness, the company had been in difficulties as a High Street retailer due to the changing nature of customer shopping habits in the previous two years and had closed many of its branches.
However, the news was devastating to its suppliers who received such a brutal message, one of whom is reported as saying the action would “devastate smaller companies down the supply chain at a time when they need help the most”. There appears to have been no recognition or understanding in the letter that suppliers would be facing cash flow issues of their own.
A little empathy would not have gone amiss when communicating such a non-payment message to suppliers who will need a level of understanding to show how important they really are despite being unable to pay them and especially when wanting to do business with them again in the future.
Perhaps you could engage with them by discussing ways to limit the damage, either by offering staged payments, if you as a business can afford it, or by reassuring existing suppliers that you value them and will continue to work with them as the restrictions ease and life gets back to normal.
No matter how focused you are on your own concerns and worries at the moment, and I am by no means seeking to minimise their significance, you should also remember that if you don’t nurture your key relationships now you could put your eventual business recovery in jeopardy.
Help is available for SMEs dealing with the pandemic at:
https://www.onlineturnaroundguru.com/coronavirus-sme-support

Categories
Banks, Lenders & Investors Cash Flow & Forecasting Finance Insolvency

SMEs applying for support under the Coronavirus Business Interruption Loan Scheme should read the small print

read the small print in offered helpGrabbing a lifebelt when you are drowning makes sense, but when that so-called lifebelt is a business loan to survive the Coronavirus pandemic, you need to read the small print before signing on the dotted line.
The various government support schemes for SMEs may have made big headlines, not least their claims about making loans available for SMEs, but the devil is likely to be in the details.
No matter how panic-stricken you might be it is worth making sure you know exactly what you are getting into when applying for a loan under the Coronavirus Business Interruption Loan Scheme (CBILS). The difficulty many businesses are having getting through to someone at the bank is an indication of the problem, albeit it is hardly surprising given that banks have run down their SME support teams over the past twelve years.
Before even contacting a bank the first step is to take a deep breath and ensure you know exactly who to approach and what you can apply for. There are ample details about the process on the British Business Bank website here. However, the reality is that banks are likely to prioritise their own customers and among them, their long term ones.
The next step is to prepare a forecast showing how much is needed, what it will be used for and how a loan will be repaid.
Most banks have now undertaken to not pass on their usual loan application fees to customers because the Government has promised to cover the first 12 months of these and the interest payments.
However, you should be mindful of what happens after that in terms of your liabilities. According to the BBB website: “The lender has the authority to decide whether to offer you finance. If it can do so on normal commercial terms without having to make use of the scheme, it will”. This means you may be offered a loan but not under CBILS.
The Big Four banks have agreed that they will not take a personal guarantee (PG) from directors as security for lending below £250,000. However, this message hasn’t trickled down the chain in all cases such that managers are still demanding them. The other issue is that non CBILS loans may be offered in which cases the bank can request PGs and in some instances may want a charge over your home.
Despite there being 40 lenders listed as offering loans under CBILS, in practice most of them are small regional lenders who will not apply to you although they are worth checking out to see if you meet their criteria.
For years I have cautioned those seeking business finance and have advised directors to be extra careful about guarantees so make sure to read and understand what you are letting yourself in for. Indeed, I would also advocate involving your spouse in the decision if there is the slightest prospect of you losing your home. These loans are often sold by ‘nice’ banks to ‘nasty’ ones.
Surviving this dreadful situation is fraught with complexity. Decisions about staff with scope for furloughing them is one area that is complicated since contracts of employment must be honoured – there is a link for some good advice on all this from Acas.
Decisions about delaying payments to suppliers and other creditors is another huge issue, while it may be expedient, not paying liabilities as and when they fall due means that a company is insolvent.
It may be tedious, but you need to consider the possible consequences of decisions taken in the heat of the moment so you need to approach problems in a calm and rational manner and ideally you should discuss them with turnaround and insolvency professionals who have considerable experience dealing with such crisis situations.
Whatever you do, don’t just focus on the immediate benefits of decisions but consider the second and third order consequences of decisions before acting on them, despite this caution don’t delay action, most of it is common sense.
Check out https://www.onlineturnaroundguru.com/ for more tips on survival
 

Categories
Business Development & Marketing Cash Flow & Forecasting General

Why you shouldn’t suspend your marketing during the Coronavirus pandemic

marketingSMEs have had to close, suspend or reduce their activities due to the Coronavirus pandemic and most are looking for ways to minimise their cash out flow however despite the temptation they should be wary of cutting their marketing budgets.
But if your business disappears from the market and in doing so is no longer top of mind for your customers and clients will you be able to regain your position or will others who continued marketing replace you?
Withdrawing from the market may suggest you have gone out of business, as indeed will be the case for many as a result of the Coronavirus pandemic.
While it is understandable that SMEs in dire financial straits will want to preserve cash by cutting back on expenditure, some newly-published research from Opinium, released on March 26 has found that people do still want to hear from businesses of many kinds.
The research revealed that “a very large majority of people in the UK would like to hear either the same amount, or even more, from brands” across a range of categories including the essentials such as healthcare and pharmaceuticals, supermarkets, food and drink and household goods but also from healthcare to fashion and beauty to entertainment.
Of course, many of you have reacted quickly, communicating your actions and in many cases pivoted your business model as a response to the crisis.
One example is a small bakery that has closed its shop and set up an outside market stall so customers don’t need to go inside and a drive-by collection service for other customers who order by phone and don’t want to get out of their car. Another bakery does deliveries to hospitals and essential worker sites.
There are examples of SMEs in the hospitality and restaurant businesses that have been forced to close their doors to the public and have responded in different ways, in the case of some hotels, by offering accommodation to such people as health care workers or the homeless and restaurants that have quickly established food takeaway and delivery services as well as special deals for key workers such as those in the NHS.
Some in fitness, health and beauty have moved online to offer their services remotely to help people in lockdown stay not only fit and healthy but also to be able to look after their appearance.
Of course, all of these will be remembered positively when the crisis comes to an end and it is likely that their business will recover more quickly that those that shut down. Plus, if your business has a website you need to protect its place in the search engine rankings with regular blog posts and ongoing marketing activity.
Perhaps more surprisingly the research found that many people want “brands to talk about something other than the pandemic”.
“This desire for something different is symptomatic of a consumer who is struggling to find their place in a drastically different world”, it says. So, any marketing that can convey some sense of normality is good for your business.
Opinium also asked people what were their preferred forms of marketing communication and top of the list came TV advertising (31%) and e-mails (40%).
While the desire to cut the marketing budget may be understandable when margins are tight, clearly it is far from the right thing to do if you want your business to return after the crisis.
 

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Accounting & Bookkeeping Cash Flow & Forecasting Finance General Turnaround

To Pay or Not to Pay Quarter Day Rent & Business Rates – the latest

Quarter Day RentAs if the pressure and worries SMEs are facing due to the Coronavirus pandemic were not enough, yesterday (Wednesday) was when Quarter Day Rent was due to be paid.
For many, it was also a payment date for business rates although the government has suspended these for a year.
While SMEs may be eligible for suspending the payment of business rates as announced by the Chancellor in his first set of measures to help businesses survive the pandemic, little had so far been said about rent.
However, yesterday, the Government published details of three months’ protection for businesses from eviction for failure to pay rent. While is included in the emergency powers legislation that is due to be given Royal Assent today but we are still awaiting confirmation. There more details here.
Some businesses had already declared their intention to miss paying their Quarter Day Rent, like, for example Burger King, whose CEO Alasdair Murdoch announced on Tuesday that the company would not be paying the rent due on its UK restaurants this week.
According to the BBC, it seems that “Banks have been told [by the government] to be supportive as long as landlords act responsibly.”
It also reported that the government has said shops will not forfeit leases if they do not pay but will have to pay arrears in the future.
This may be the case, but many smaller SMEs have been unsure about what they are supposed to do given the latest set of restrictions enforcing the closure of non-essential businesses and the virtual lockdown of the population. Presumably more details will emerge once the emergency powers legislation has been published.
For many withholding rent may be necessary but there are consequences and you should speak with your landlord since the pain needs to be shared between both of you if you are both to survive. If however you are being pressurised by your landlord, there are a number of surveyors who specialise in negotiating rent reductions. It is wort remembering that your landlord won’t be finding a new tenant in the near future.
Meanwhile, the suspension of business rates is helpful as will be the grants to smaller SMEs.
On top of this bank branches are closing, there are two hour waits on hold in telephone queues and most systems seem to be overloaded.
It is admittedly a massive task to roll out so many measures to help and support SMEs but if you are a business worrying about protecting its future it is very hard to be told to be patient.
To provide more information about business rates and grants, I am maintaining an update on the support available for SMEs in my guide at onlineturnaroundguru.com.
At the current moment on business rates this is the situation:
A one-off grant of £10,000 is available to eligible businesses to help meet their ongoing business costs and applies to those businesses that occupy property that is eligible for small business rate relief or rural rate relief.
There will be cash grants to retail, hospitality and leisure businesses, based on the rateable value of your business property. Those with a rateable value of under £15,000 will receive a grant of £10,000. Those with a rateable value of between £15,001 and £51,000 will receive a grant of £25,000.
All retail, hospitality and leisure businesses in England including covers shops, restaurants, cafes, drinking establishments, cinemas and live music venues and premises used for assembly and leisure. It also covers hotels, guest & boarding houses and self-catering accommodation. Will be given a one-year business rate holiday.
Administering all these will be the responsibility of your local authority and while you do not need to do anything to claim them it may be wise to register your business as paying by direct debit so that your bank details are registered with the local authority  and you should keep an eye on the situation with your relevant authority.
Please be assured that as more details on the various Government measures to support businesses emerge or if anything changes I will update the information as soon as possible.
For more business help please go to onlineturnaroundguru.com.
Above all, if you need help and support I am here for you.
 

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Uncategorized

In a crisis it is crucial that SMEs keep staff updated, especially those working at home

working at homeIn the current Coronavirus-induced crisis people are understandably worried and frightened, for their jobs, their families and their health so it is crucial for SME employers to communicate changes as quickly and sympathetically as possible.
After all, while you as SME owners are currently facing unprecedented challenges to your business and feeling bleak if not panic ridden about your prospects for survival, at some point this crisis will come to an end and you will hope to still have a business.
With all the financial support measures recently announced by the Government, most SMEs do not need to close their businesses or dispense with staff.
I have posted the latest information with advice for SMEs on how to deal with the coronavirus pandemic on onlineturnaroundguru.com and will update as the details become clearer.
While in the short term SMEs may have had to ‘furlough workers’ (see the above advice link for what this means) but eventually staff will be needed back at work.
Staff are most likely to remain loyal if they feel their employer has done their utmost to help and has kept them informed of developments and these days the technology available is so extensive that this is much easier to do – whether it be a conference call or virtual meeting via an online platform to people who are working from home.
McKinsey.com has some very useful guidance for leaders coping with a crisis.
Firstly, it says: “they cannot respond as they would in a routine emergency, by following plans that had been drawn up in advance. During a crisis, which is ruled by unfamiliarity and uncertainty, effective responses are largely improvised.”
It is also crucial, it says, to promote “psychological safety so people can openly discuss ideas, questions, and concerns without fear of repercussions”.
This means dealing with the human tragedy first and foremost with empathy and understanding as well as being transparent about the circumstances.
If the situation means the way the company does business SME employers should discuss the options as soon as possible.
Acas also has some useful advice:
“Where work can be done at home, the employer could:

  • ask staff who have work laptops or mobile phones to take them home so they can carry on working
  • arrange paperwork tasks that can be done at home for staff who do not work on computers.

 
If an employer and employee agree to working at home, the employer should pay the employee as usual, keep in regular contact and check on the employee’s health and wellbeing.
You may be able to pivot your business in such a way that it can keep going, as this London SME restaurant chain has done after the Government ordered all restaurant and pubs to close.
Leon is to turn its 65 UK restaurants into shops, selling meals via both click-and-collect and delivery from Wednesday. Meals will be placed in ready meal-type plastic pouches which are refrigerated and can be heated, stored or frozen at home.
The company’s founder John Vincent has said the move could save Leon as a business but also relieve some of the pressure on the food retail stores: “A lot of people in the industry are just giving up and shutting up shop. But we think this way we can keep 60% of our stores open and keep food production going.”
A good example of a business using agility at very short notice to survive and save staff jobs when It is important to consider the second and third order consequences of any decisions before acting on them while not delaying action.
Check out onlineturnaroundguru.com for more tips on survival
Otherwise please stay safe, you do not need to deal with this alone.

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Business Development & Marketing Cash Flow & Forecasting Debt Collection & Credit Management Finance HR, Redundancy & Trade Unions

Maintaining a positive mindset about your business during the current crisis

maintain a positive mindsetNobody would deny that the current pandemic-induced situation is a worrying time for SME business owners but they should do everything they can to maintain a positive mindset.
It helps to see if there are potential opportunities for either new ways of working or new services that you can adopt, especially if the changes you make demonstrate a concern for the needs of others.
There have been some excellent examples among the smaller micro-businesses that have been remarkably agile in doing this very quickly. Many of these are likely to fall into the category of sole trader/self-employed for whom there does not yet appear to any Government financial help, so hats off to them for their agility.
Examples we have seen is the numbers of exercise and fitness, yoga, Zumba and other classes that have set up to carry on via video in response to the closure of their usual physical venues.  Not only does this mean that they are able to maintain the link with their clients but they have found a way for people to maintain a level of fitness if they do find themselves having to self-isolate.
The same applies to other types of coaching and mentoring, which can be done one to one via Skype and other platforms or can offer training sessions via video for people.
One independent brewery in Scotland has started making hand sanitiser at its distillery and is giving the product free to anyone who needs it. Perhaps not profitable but a good piece of marketing its social responsibility, which may lead to more people trying its main product!
Local pubs and restaurants, too, are demonstrating a positive mindset despite a drop in customers or actually having to close. Many independent restaurants, for example, have switched to producing and delivering ready-meals. Some local retailers have set up outside their shops and others are offering home deliveries of staple supplies such as bread, eggs, fresh meat, fruit and veg.
At the other end of the scale the Co-op has announced that it will create 5,000 store-based posts which will provide temporary employment for hospitality workers who have lost their jobs because of the coronavirus crisis and is simplifying its recruitment process so successful candidates can start work within days.
Of course, many SMEs have more immediate and pressing concerns keeping them awake at night, like how they are going to pay staff if they have suffered a catastrophic drop in customer orders given that there is as yet no sign of when the promised Government grants and loans will be available. In the meantime, staff expect their wages to be paid and most other overheads are having to be paid.
One example of the lack of understanding among many large firms is Funding Circle who were contacted on behalf of a client to discuss a short-term suspension of payments or at least interest only payments, they were not interested and said that they would issue demands on the personal guarantees they hold if ongoing payments were not made in full.
It doesn’t help that many firms have suspended all trading with the stopping of all payments to suppliers and placing new orders.
In these circumstances it will help to talk to an experienced turnaround and rescue adviser who can help SMEs manage their cash flow and assist with the urgent measures necessary to survive.
Remember, a problem shared is a problem halved!

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Business Development & Marketing Cash Flow & Forecasting Finance General Insolvency

Using the Pareto 80/20 Rule as a guide in your business

Pareto 80?20 RuleMany people in business are familiar with the Pareto 80/20 Rule, particularly the idea that 80% of their business comes from just 20% of customers or clients, or that 80% of their profits comes from 20% of orders, or that 80% of their profits come from 20% of products, or even that 80% of their sales are generated by 20% of their sales staff.
Understanding this can influence behaviour such as protecting the 20% that contribute the most or looking at how to improve the lower performing 80%.
Essentially the Pareto 80/20 Rule is simply a way of demonstrating that most things in life are not distributed evenly.
This can apply to everything but focuses on considering productivity as an output of time spent or as a return on investment. It looks at resources, in terms of people, time and cost with a view to optimising the output. Analysis of turnover and profits by customer, market segment and products to produce a pie chart is likely to highlight aspects of the Rule.
The 80/20 Rule is a guide that can be misused, While 20% workers may be measured as doing 80% of the work this rarely means that the work of remaining 80% is irrelevant. Indeed, it may be that 20% contribute to profitable work while 80% are necessary for the 20% to be productive. It does however show where to focus on improvements.
So how can businesses use the Pareto 80/20 Rule to improve their businesses?
To a large extent this is about identifying the processes, systems or activities on which to focus because they have the best potential for a return on the effort.
You might focus attention on customers perhaps with view to selling more to your best customers or to improving sales to the 80% with view to generating the same level of return as the 20%. This might be putting prices up or selling different products or even turning away unprofitable business or customers who are hard work.
You might focus on staff perhaps with a view to measuring and improving their working practices that in turn improve productivity. Can one person be trained to do several jobs? Or should teams be reorganised or shift patterns altered? Sales and delivery may benefit from reorganising those geographical or market segments for which they are responsible.
You might focus on your products and production. Do you reduce the number of suppliers or the stock held or number of products sold. Can one product replace several existing products? Should you outsource the manufacture of components?
The Pareto 80/20 Rule is, in short, a handy guide to where you might focus your attention for improvement, it should not be regarded as a fixed and immutable rule.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General Insolvency

Something for everyone in the Spring budget – but will it be delivered?

Spring budgetWho could envy a Chancellor having to deliver a Spring budget just one month into the job and in the midst of a global pandemic?
The Spring budget came after the early morning announcement of by the BoE (Bank of England) of an interest rate cut from 0.75% to 0.25%. Was this an outgoing Governor stealing an incoming Chancellor’s thunder?
With short term measures to help businesses deal with the Covid-19 consequences and others dealing with the environment, infrastructure, business taxes and addressing regional inequality the Spring budget covered them all.
The headline was a commitment to invest in infrastructure in support of the government’s commitment to ‘level up’ the economy by focusing investment on the Midlands and North: “over the next five years, we will invest more than £600bn pounds in our future prosperity”.
Many worries of SMEs were addressed by the £30bn package of short term measures to deal with the consequences of the Covid-19 epidemic.
They included abolishing business rates altogether for a year for small retailers with a rateable value below £51,000 extended to include museums, art galleries, and theatres, caravan parks and gyms, small hotels and B&Bs, sports clubs, night clubs, club houses and guest houses.
There was also a promise that business rates as a whole would be reviewed later in the year.
Any firm that is currently eligible for the small business rates relief will also be able to claim a £3,000 cash grant.
The Government will also cover up to 80% of a coronavirus loan scheme to cover the cost of salaries and bills and will offer loans of up to £1.2m to support small and medium sized businesses.
£2bn will be allocated to cover firms employing fewer than 250 people that lose out because staff are off sick with the cost of a business having to have someone off work for up to 14 days refunded.
The benefits rules will be relaxed to enable those who currently do not qualify for sick pay, such as the self-employed and gig economy workers, to claim benefits, which will also now be paid from day one of sickness.
Fuel duty was also frozen for a further year, but tax relief on red diesel will be removed over two years albeit with an exemption for farmers, rail and fishing.
In the longer term and over the five years of the parliament, the much-anticipated £170bn spending on improving the transport infrastructure and addressing the regional imbalance was also confirmed.
This will benefit the construction industry and is no doubt part of another statement: “Today, I’m announcing the biggest ever investment in strategic roads and motorway – over £27bn of tarmac. That will pay for work on over 20 connections to ports and airports, over 100 junctions, 4,000 miles of road.”
Similarly, the Chancellor confirmed that more than 750 staff from the Treasury and other departments will move to a campus in the north of England, as well as significant investment on R & D and that at least £800m will be invested in a new blue skies research agency, modelled on ARPA in the US.
Among a host of environmental initiatives, a new tax on plastic packaging is to be introduced, as well as freezing the levy on electricity and raising it on gas from April 2022.
Given the uncertain prospects for the UK’s economy, how many of the longer-term promises will be realised is likely to depend on the Government’s ability to borrow at unprecedentedly low rates so that it remains to be seen how much of the longer-term spending will actually happen.
It also remains to be seen how difficult the processes by which SMEs can claim help for Covid-19 related losses will be and whether the promise to review business rates as a whole will materialise.
The PR spin is already in place such as RBS’s claim today that it will provide £5bn of support for SMEs when in practice the small print refers to this as an extension to existing loan and overdraft facilities.
Notwithstanding any cynicism the Chancellor’s rhetoric was optimistic claiming his budget was aimed at “Creating jobs. Cutting taxes. Keeping the cost of living low. Investing in our NHS. Investing in our public services. Investing in ideas. Backing business. Protecting our environment. Building roads. Building railways. Building colleges. Building houses. Building our Union.”

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General

Sector – business in UK’s North and Midlands

UK's North and MidlandsThe UK’s North and Midlands were once the powerhouse for the country’s economy, with its manufacturing and engineering industries driving the Industrial Revolution in the late 19th Century.
Cities such as Leeds, Bradford, Manchester, Sheffield and Birmingham were the industrial heartland of UK when national economies depended heavily on what they could make and sell, from textiles to steel and heavy engineering machinery.
But as industry in UK declined, the UK economy shifted its focus to services and in particular to the professional and financial services with a lot manufacturing being transferred to countries such as India and China, where production costs were much lower. This was also associated with a shift in the UK economic centre of gravity from the Midlands and the North to London leaving much of the country behind.
Vestiges of industry have survived in places like Sunderland, where the Japanese car manufacture Nissan has thrived and recently increased its commitment by investing more than £50m in its plant that builds the Qashqai model.
According to a “State of the North” research by the IPPR (Institute for Public Policy Research) and reported in the Yorkshire Post  in November 2019, “only countries like Romania and South Korea are more divided” than the UK.
It found that “in Kensington and Chelsea and Hammersmith and Fulham, disposable income per person is £48,000 higher than in Blackburn with Darwen, Nottingham and Leicester”.
In December 2019 various reports by the Centre for Cities highlighted the issues. According to the Financial Times it had found that the economic divide between London and the rest of the UK widened last year.
The FT also quoted ONS (Office for National Statistics) figures that showed that “The UK capital recorded a 1.1 per cent annual rise in output per person to £54,700 in 2018, increasing the per capita gap with the poorest region — the North East — where growth was only 0.4 per cent to £23,600 per head”.
The Centre for Cities research analyses business and employment opportunities across the UK, finding that many northern cities are underperforming, hampered by a need for growth and by being at different economic stages in terms of availability of skilled workers and of infrastructure.
But there have been some signs of hope for the UK’s North and Midlands amid the gloom with the Centre for Entrepreneurs think-tank reporting that Birmingham is now the UK’s start-up capital outside London. The British Business Bank has also revealed that entrepreneurs in the north of England received more loans than those in London.
Business Live recently reported that figures from UK Powerhouse have shown that Stoke-on Trent has the fastest employment growth in the UK.
During the recent General Election much was made of pledges to level up the economy with heavy investment promised for the UK’s North and Midlands.
Among the promises made by the Government is a pledge to get on with the proposed HS2 railway to connect northern cities like Birmingham, Manchester and Leeds to London. It argues in support of this plan that “The Midlands already has the highest concentration of businesses outside London, including international firms such as Jaguar Land Rover, MG Motors, Deutsche Bank, JCB and the 150 year old, West Midlands-founded FTSE 250 engineering firm IMI”.
It has also promised “massive investment” in a new institute of technology to be based in Leeds, and to be modelled on MIT in the US (Massachusetts Institute of Technology) and there are suggestions that parts of the Treasury will be relocated to the North of England.
Whether these promises will be delivered remains to be seen, especially given the more immediate and pressing problems of the NHS demands due to the worldwide pandemic of Covid-19 now playing havoc with the global supply chain and countries’ economies.
Perhaps this week’s budget will provide some clues.

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Business Development & Marketing General HR, Redundancy & Trade Unions

Employing millennials should not be a problem

employing millennialsEmploying millennials should not be seen as a problem but according to some reports in the business press many employers would prefer not to.
The reasons given range from this generation having a poorer grasp of language to being less loyal than older workers, and allegedly having higher absence rates.
Quite apart from the fact that age discrimination is outlawed under equal opportunities legislation, millennials (the generation born between 1980 and 2000) now make up the bulk of the workforce.
While it would be fair to say that employing millennials means bosses need to understand that this age group may view their careers rather differently from previous generations, it is also true that each generation comes with skills and attitudes that are a benefit to their employers. It is also true for many employers that they are customers who need to be understood.
Approximately 10 years ago PwC produced a report that focused on the millennial generation, examining their career aspirations, attitudes about work and level of comfort with new technologies. It predicted that they would make up 50% of the global workforce by 2020.
It also examined the key features that employers would need to understand about this generation: “Millennials’ use of technology clearly sets them apart. This generation has grown up with broadband, smartphones, laptops and social media being the norm, and expect instant access to information”.
This is clearly a benefit for 21st Century businesses.
However, the report continues that employers need to understand that it is a generation whose “behaviour is coloured by their experience of the global economic crisis and this generation places much more emphasis on their personal needs than on those of the organisation for which they work”.
This should be no surprise given that it has been a long time since employees of any age have been able to rely on the “one job for life” career model.
Couple this with having had to make compromises due to the 2008 global financial crisis, such as having to do work that is beneath their skill and education level. Indeed, they are often better educated than previous generations who tend to be more senior people in organisations and they are living with high levels of rent and living costs while at the same time they have been burdened with university debts that were not imposed on those who complain about them. It is hardly surprising therefore that many of them consider their income as derisory when compared to the income of others. Loyalty works both ways.
In addition, they are aware of other factors such as quality of life, environmental concerns, diversity, ethical business and equal opportunities which are becoming more important factors when deciding who to work for.
As older employees reach retirement and the likely restrictions on immigration, employing millennials is not going to be a choice and indeed employers should be looking for the best available skills for their businesses – or the potential to develop them.
It may mean that employers will need to re-think their rigid, hierarchical structures and use a more cohesive, mentoring approach to their management style.
They will need to pay more attention to employees’ training needs and careers aspirations, and to accommodate their increasing focus on environmental and social concerns.
Good workers know when they are being treated well and young people tend to be well able to adapt to a fast-changing world, accordingly employers should focus on helping young people to become good workers as a demonstration that they valued. Employees should no longer be regarded as a burden or treated as being lucky to have a job. It is now the other way round.
Survival in the 21st Century will involve businesses having to adapt rather than expecting their people to adapt.
While most businesses claim that their people are their greatest asset, the reality is only true when their people claim their business is the greatest employer.

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Accounting & Bookkeeping Cash Flow & Forecasting Finance Turnaround

Key Indicator: is the global supply chain too vulnerable to shocks?

global supply chainFor years, businesses have seen the global supply chain as a means of keeping down costs through sourcing goods and services from low-wage countries and importing them often from across the globe.
This may work as a business model for manufacturers seeking to keep their prices as low as possible, and for retailers’ cash management where payment terms and just in time delivery often meant only having to pay for goods after they have been sold. Indeed, stock ties up cash in inventory and storage as well as incurring the cost of warehousing, storage and administering stock, the less stock needed then the less cash needed.
But what happens if events cause a disruption to the smooth flow of the global supply chain causing shortages of finished goods or the essential elements for their production?
The current Coronavirus outbreak that originated in China and is now spreading across the globe provides the perfect illustration of the knock-on effects of such disruption.
According to an Economist article this week, by using a just in time model “multinationals have left themselves dangerously exposed to supply-chain risk owing to strategies designed to bring down their costs”.
Furthermore, it argues that in the last 20 or so years, large multinationals have become much more reliant on China. “China now accounts for 16% of global GDP, up from 4% back then. Its share of all exports in textiles and apparel is now 40% of the global total. It generates 26% of the world’s furniture exports.”
Chinese manufacturing activity fell to 35.7 from 50 in January, according to the PMI index where above 50 is a measure of anticipated growth and below is decline.
Among the industries significantly hit by China’s containment efforts, from isolating regions of the country to closing down factories, have been the electronics, car and clothing industries but they are not likely to be the only ones.
Companies that have already reported significant negative effects have included Apple, Diageo, Jaguar Land Rover and Volkswagen. But the impact is not just on manufacturing but also is on services with BA owner IAG and EasyJet forecasting significant reductions in bookings and cancelling flights.
The reduction in manufacturing output will also hit freight with both shipping and airfreight experiencing lower volumes that in turn impact oil prices that have fallen significantly to below $50 a barrel for the first time since the summer of 2017, according to an article in the Guardian.
Efforts to restrict the movement of people have already caused the cancellation of the Motor Show in Geneva, the Mobile World Congress in Barcelona and MIPIM, the annual real estate jamboree in Cannes.
All this has worried investors with stock markets plummeting around the world, in the case of the FTSE100, down 13% by the end of last week – a decline only last seen during the Financial Crisis of 2008.
Is it time to rethink business’ reliance on the global supply chain?
The current situation with Coronavirus illustrates the vulnerabilities in an over-reliance on the global supply chain and particularly the disproportionate sourcing of inventory from East Asia and China.
However, there are other potential sources of disruption to the supply chain. They include the ongoing tariff wars between China and USA, extreme weather events such as the 2011 tsunami in Japan, and armed conflicts.
Notwithstanding all these factors, arguably the greatest factor is global warming and environmental damage. The mood around the world is changing and people are becoming increasingly worried about this.
The fall-out from Coronavirus may be heightening awareness but demands from consumers and investors for a more ethical and socially conscious sourcing is beginning to concentrate the minds of CEOs on their businesses’ vulnerabilities to the global supply chain.
Indeed a knitwear manufacturer based in Leicester, UK, is reporting an increase in orders from more local retailers in the wake of the coronavirus outbreak.
Will others follow suit?
 

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Business Development & Marketing General Turnaround

Learning to really listen can benefit your business

really listenHow many of us really listen to what is being said to us?
Listening is not the same as hearing and often we can tune out what is being said to us, either because it triggers an assumption or a prejudice, causing us to miss the real point of what is being said.
Being able to really listen, however, is crucial to both personal success and also that for a business particularly, but not only, for those in a customer services role, where it is crucial to really listen and respond appropriately to a customer’s concerns rather than parroting from a pre-prepared script.
How often are we frustrated by the tele salesperson who launches into their script without even pausing for breath.
Indeed, failure to really listen can have a serious impact on the reputation of a business with its clients or customers.
But the ability to listen well is equally important for a boss or manager wanting to communicate a change or an innovation, or to HR when dealing with issues with an employee. Both situations will invite feedback and this is where it is important that the person giving it is actively listened to.
Language can be a very imprecise tool. Every word is loaded with background information which to the listener can mean something quite different to how someone else would interpret the same sentence or word.
Arguably hearing is a passive activity whereas when you really listen to what is being said you are actively engaged in paying attention, considering and seeking to understand what is being communicated, both verbally and non-verbally.
It is possible to improve listening skills by doing some very simple things.
The first is to leave the ego at the door and demonstrate an open and welcoming approach, perhaps by using eye contact if possible and show that you are concentrating on what you are being told.
The second is to remind yourself to keep an open mind and allow other people to finish what they are saying rather than jumping in with a comment before they have finished. Not doing so will convey that you are making an assumption, perhaps based on something in their choice of words that triggers a reaction in you, that may be well wide of the mark and in so doing you are missing something that could be beneficial.
It helps to give feedback, especially if the conversation is on the phone, to ensure that you are clear about what they are saying. It can also help to make notes of key points so that you remember what was said, especially for your feedback and any future action.
Listening is an art that we are increasingly losing in a cacophonous age of social media and sound bites, where the emphasis seems to be on having one’s say and competing rather than really engaging with each other.

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Cash Flow & Forecasting Debt Collection & Credit Management Finance Insolvency

Late Payments putting even more pressure on SMEs in 2020

late payments penalty?The amount owed to UK SMEs in late payments had allegedly risen to £50bn in early January according to research by digital banking platform Tide as reported by CityAM.
It has calculated that the average UK SME is chasing five outstanding invoices at once, wasting an hour and a half every day.
Data from Pay UK, which runs the Bacs Direct Credit and Direct Debit payment services, later in the month revealed that late payments had reached a four-year high last year at £23bn.
Tide’s new £50bn total was considerably higher than Pay UK’s total of £23bn owed to SMEs and I cannot reconcile the two figures.  The Tide research was conducted by Atomik Research among 1,002 SME decision makers from the UK and, it appears, judging by a footnote to the Tide report, that its £50bn figure may have been estimated on the basis of a total of 5.9 million SMEs, as calculated by The Department for Business .
However, the situation puts immense pressure on SMEs, with some having had to resort to overdrafts, cutting their own salaries and personal loans to pay bills because their own are being paid late. This is highlighted by Paul Horlock, chief executive of Pay.UK who has said that for the first time their research has revealed the human cost in stress and anxiety to SME owners.
Rashmi Dube of legal practice Legatus Law and former director of TMA UK wrote in the Yorkshire Post that a third of payments to the SME sector are late, leaving 37% with cashflow difficulties, 30% forced into an overdraft and 20% suffering a slowdown in profits, with considerable knock-on effects to employees as well as business owners.
In an attempt to ensure the Government promises to strengthen the regime tackling late payments, the Labour peer, Lord Mendelsohn, introduced a private members bill in the Lords, aims to bring in fines for persistent late payers, shorten the deadline by which clients must pay suppliers from 60 to 30 days and force all companies with more than 250 staff to comply with the Prompt Payment Code.
Although Private Members’ Bills from the Lords are not generally debated in the Commons the move serves as a reminder to the Government of promises it has made.
Prior to the December election a wider package of reforms had been promised, including improved resources and increased powers, a tougher Prompt Payment Code and Audit Committees’ oversight of payment practices.
One of these promises has at least been kept in part, with the appointment of Philip King as interim Small Business Commissioner following the sacking of Paul Uppal last November over an alleged conflict of interest and pending the appointment of a permanent replacement.
Mr King, who was previously chief executive of the Chartered Institute of Credit Management (CICM), which was responsible for running the Prompt Payment Code, is transferring the administration of the Code to his new office, fulfilling the commitment made by government in June last year to bring late payments measures under one umbrella. This is a useful measure as the  CICM was focused on training income and mainly funded by large companies. Following the move, we can expect to see the naming and shaming of those large companies who withhold payment to their suppliers, many of them SMEs.
Meanwhile In February, another 11 large businesses have been suspended from the Prompt Payment Code for failing to pay suppliers on time. They include BAE Systems (Operations) Limited, Leonardo MW Limited, and Smiths Detection.
However, for many SMEs the wait, in my view, for tougher and more effective powers with real bite beyond the current regime of naming and shaming has been far too long. How many have been forced to give up the unequal struggle in the meantime and fallen into insolvency?
 

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Banks, Lenders & Investors Cash Flow & Forecasting Finance Insolvency Turnaround

Running out of cash – crisis management, the first step in dealing with a cash crisis

crisis management when running out of cashCrisis management when a company is in financial difficulties is about quelling the understandable panic and taking a long, hard look at managing the business’ cash flow and the potential for action that makes the business viable.
Running out of cash is the cause of most business failures where the cash flow test of insolvency applies such that a company is insolvent if it is unable to meet its liabilities as and when they fall due. This doesn’t mean the business should be closed down but it does mean the directors should take clear steps to deal with the financial situation.
The first thing directors need to appreciate is that their primary consideration is to protect the interests of creditors rather than that of shareholders. This is where an insolvency or turnaround professional as an outsider can help by bringing an objective assessment of the personal risk when making decisions and the prospects that turnaround initiatives can be taken to restore the business to solvency.
Initial action by experienced turnaround professionals will focus on the short term cash flow while at the same time they will consider the medium and long term prospects for the business and whether the business model works or needs to be changed. This may be contrary to insolvency professionals who may be interested in justifying their appointment under a formal insolvency procedure.
Any review by professionals will consider how financial situation developed where it often the case that over time creditors have been stretched. Indeed, there are many reasons for the shortage of cash that often leads to a delay in paying suppliers whether this is due to a decline in sales, poor debt collection, bad debts, inadequate credit control, over trading, over stocking, funding investments and growth that doesn’t translate into sales or indeed myriad other reasons.
Guidance from the ICAEW (The Institute of Chartered Accountants in England and Wales) is that at this stage:
Getting cost controls properly in place, insisting all purchases (however small) are signed off centrally by the managing director or finance director, chasing harder to collect outstanding debts, or agreeing new payment terms with creditors can have a quick impact and help ease an immediate crisis.
The most likely immediate priority in managing a liquidity crisis is reducing costs while maximising income.
So, the first step in managing cash is to construct a 13-week cash flow forecast to help identify risks and actions that can be taken to reduce them. It should include income from sales and other receipts and outgoings, both to ongoing obligations such as rent wages and finance and to creditors.
The business also needs to control cash on a daily basis, with payments made on a priority basis with purchases approved by an authorised person who is aware of their impact on cash flow.
This will avoid the risk of returned cheques. It is also advisable to talk to the bank and keep it aware of what is being done to keep things under control.
This is the first step in crisis management when a company is having financial difficulties, but thereafter a restructuring adviser can be invaluable in taking a long, hard look at the business operations, its processes and its business plan to identify areas where performance is weak or unprofitable and whether and how the company can be returned to profitability if these elements are removed.
Getting external and objective help is likely to be necessary and my guide to running a business in financial difficulties is a useful reference.

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Banks, Lenders & Investors Business Development & Marketing Finance HM Revenue & Customs, VAT & PAYE Turnaround

Will SMEs get more help from the Government?

help from the Government?Business pages are always full of articles claiming that SMEs need more help from the Government.
But equally, there have been a number of upbeat and positive reports that suggest the opposite is the case, so what is the truth?
According to the business lender Iwoca, lending to SMEs in deprived areas has dropped dramatically, by 8% between 2014 and 2018. Iwoca CEO Christoph Rieche has said: “It’s concerning that, in many parts of the country, major banks aren’t serving small and microbusinesses with the funding required to help them thrive. SMEs are vital for the health of the economy.”
The figures are borne out by UK Finance, which has revealed that small business loans and overdraft balances from big banks fell by almost 16% in the North West between the end of 2014 and September last year, from £9.8bn to £8.2bn, while loans and overdraft balances in London fell by only 2.3%. Wales saw a 14.2% drop, while Yorkshire and the Humber posted a 10.9% decline.
The CEO of the British Business Bank has also argued that the Government should invest “billions” more in SMEs if it wants to deliver on its promise of levelling up all parts of the UK.
Earlier this month reports in the Financial Times and the Times criticised the Prime Minister for ignoring business groups such as the CBI (Confederation of British Industry), BCC (British Chambers of Commerce) and the IoD (Institute of Directors) in a speech he gave on EU trade negotiations.
An aide (unnamed) later reportedly criticised these business bodies for failing to prepare their members for “a Canada-style free trade deal” and said they were unlikely to get Government attention unless they fulfilled their responsibility to their members.
Another issue high on the SME agenda is the Apprenticeship Levy, which is failing SMEs, according to the FSB (Federation of Small Businesses) leading to a 24% drop in apprenticeship starts since the new scheme was introduced in 2017.
However, there has been some positive news for SMEs, the Ministry of Housing, Communities and Local Government has confirmed that a £1bn of new loans is to be made available to small construction companies, under a loan guarantee scheme.
Let us hope it is not like the Enterprise Guarantee (EFG) scheme that was introduced in January 2009 to replace the Small Firms Loan Guarantee (SFLG) scheme that was introduced in 1981.
While both provided for a government guarantee to underwrite bank lending to SMEs, the SFLG scheme was a key contributor to the grown of the UK economy under Mrs Thatcher’s government through encouraging entrepreneurs. The SFLG repaid the banks as lenders to companies upon insolvency of the but was very different to the EFG that required personal guarantees from directors and only repaid the bank lenders after bankruptcy of directors as guarantors. It is no wonder that the EFG failed. We can only hope that the new breed of young advisers to Rishi Sunak, as the new chancellor read history but I am not holding my breath.
In the meantime, there are other initiatives, many aimed at the regions such as the Midlands where FSE Group has been appointed by the Midlands Engine Investment Fund to manager an estimated £40 million fund for its region’s businesses.
An example of stimulus for SMEs was that reported by Civil Service World who found that the proportion of government spending going to SMEs exceeded 25% for the first time in four years last year, as smaller firms won an extra £2bn in Whitehall contracts.
There are without doubt burning issues for SMEs that need to be addressed, such as tougher action on late payments, reform of business rates and reliable, efficient broadband in rural areas and market towns, on which there has been little Government comment so far. We might however have found a champion in Philip King, the recently appointed Interim Small Business Commissioner, who is promoting the Prompt Payment Code (promptpaymentcode.org) to focus a spotlight on the payment record of large firms.
We shouldn’t ignore the positive signs from Government following its election with a clear mandate and a sense of purpose to make things happen which in turn will rely on a strong economy.
The budget on March 11, may yet contain some real help for SMEs and at least will let us know whether the Government is aware of SMEs and their concerns.
 

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Business Development & Marketing Cash Flow & Forecasting Finance General Turnaround

Sector focus on the UK newspaper industry, regional, national and online

UK newspaper industryThe UK newspaper industry has faced multiple challenges for many years but somehow it manages to survive.
In many ways it is a good example of how agile a business needs to be in the 21st century if it wants to continue, to prosper and to grow.
But arguably the UK newspaper industry is more than simply a business albeit, like all businesses it needs to cover its costs and make a profit.
Relevance is critical to having and retaining readers as consumers of content in what might be assumed to be a traditional supply and demand business. At its most basic, news is about informing readers about what is happening in the world, and in the country and region in which they live and aspiring journalists in training were often told that their purpose was “to entertain, to educate and to inform”.
Nevertheless, to the accountants, newsroom journalists have increasingly been seen as a cost, a drain rather than a contributor to the business’ profits.
Indeed, relevance is often more than simply news or indeed information.
So, costs started to escalate in the early 1990s largely due to the increasing price of the paper, much of which is imported from Canada and to falling circulation.
The development of web offset printing had already eliminated the need for type setters and proof readers and increasingly the focus turned to how to get more from fewer journalists and a near-epidemic of redundancies began, with a shift in the news-gathering model from in-house employed journalists to a mix of less expensive, young trainee journalists in house and freelance columnists.
At the same time, in attempts to retain readership, many papers, particularly the regional and local ones, started to include a great deal more content that could be described as lifestyle, celebrity and entertainment-related, reflecting a perceived change in readership interests.
But it is a tough and competitive business and by March 2018 the UK Press Gazette was reporting a net loss of at least 30 local newspapers in the previous year, while many of the nationals were struggling to make a profit. It said that Trinity Mirror closed more titles than any other publisher, with 12 shut down in total over the year and the collapse of family-owned Observer newspapers had led to the closure of all of its 11 titles.
In the local market, it reported, “Trinity Mirror remains the biggest regional publisher, with a total circulation of 1,598,285 across its 129 local publications.
“Newsquest was the second largest publisher with a total circulation of 1,344,379 across its 118 publications.”
Arguably, the digital revolution has had the biggest impact on the UK newspaper industry.
The majority of a newspaper’s profits come from advertising, and as more and more advertisers shift to online promotion the print and distribution costs of newspapers are significantly impacting profits. Like retailers, the switch to online distribution is taking a long time and the rate of online growth in profits is not sufficient to offset the rate of print related decline.
Nowadays, we take it for granted that our daily, or weekly, paper whether it is local, regional or national, publishes an online edition, which can be updated frequently throughout the day given the intense competition to be first with news developments in an increasingly fast-paced world.
Many national UK newspapers, with the notable exception of The Guardian which relies on appeals for contributions from readers, have introduced a paywall, forcing readers to pay a subscription to read many of their online articles.
The Independent, launched in 1986, and sold to the Russian businessman Alexander Lebedev in 2010 went online-only in March 2016.
According to an article in PR week last year “the Financial Times hit its target of a million paying subscribers a year ahead of schedule … and The Times and Sunday Times have around half a million paying customers, with the majority now digital-only. After years of making substantial losses, the Guardian announced a small operating profit for 2018-19.”
By contrast, over the last 13 years, it said, there had been a net closure of 245 local and regional titles.
There is no doubt that the explosion of social media, has led to arguably shorter attention spans and more impatience generally, not to mention a greater dislocation between where people live and their attachment to the locality and changed attitudes to local and regional papers.
However, the rise in concern about “fake news” on social media and subsequent fact checking services offered by some papers, may well improve readers’ trust in what they read in reputable publications rather than on social media.
In my view it is too early to predict the total demise of the UK newspaper industry, certainly at national level, but I hope also at regional and local level, not least as an antidote to the early-morning commute or as a pause in the daily office pressure for a mid-morning coffee and a quick flick through the paper.

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Banks, Lenders & Investors Insolvency Liquidation, Pre-Packs & Phoenix Rescue, Restructuring & Recovery

Directors’ duties and liabilities survive insolvency – a new court ruling

directors' dutiesA recent High Court ruling on directors’ duties after insolvency has said that they cannot buy assets from their liquidated companies at below market value.
The ruling was made after solicitors for the company’s second liquidator who took over the case, Stephen Hunt, argued that Brian Michie as former owner and director of the construction company, System Building Services Group Ltd, had “unfairly bought a two-bedroom house from the original insolvency practitioner involved for £75,000 less than it was worth, 18 months after his company went out of business”.
The company went into administration in July 2012, and then into a creditors’ voluntary liquidation in July 2013 following which Mr Michie bought the property in Billericay, that was owned by his company, for £120,000 in 2014 from the previous liquidator Gagen Sharma.
The case revolved around whether director’s duties survived the insolvency of a company and specifically those relating to the purchase of assets post insolvency.
Directors have specific obligations where a company becomes insolvent. Under the Insolvency Act 1986 (IA 86), they must act to minimise further potential loss to creditors. Under the Insolvency Act 1986, the directors must recognise their duty to the company’s creditors, including current, future and contingent creditors.
While the case did not involve a pre-pack, where the business and assets of an insolvent company are sold by its Administrator to a new company, in this case the assets were sold by an insolvency practitioners back to the director and it has implications for such a sale since it was argued that the director knew the real value of the assets and knowingly bought them for less than what they were worth known as a ‘sale at undervalue’ which is a breach of the IA86.
Mr Hunt has been quoted as saying that: “This wasn’t a pre-pack case in the normal sense, but it was a predetermined sale of assets back to the director through a company that the insolvency practitioner assisted in forming.
“The moral case for pre-pack sales to directors has often been questioned, but this decision opens up the possibility of a clear legal difference between a third-party sale and one to the existing owners.”
I would strongly advise company directors to familiarise themselves thoroughly with their duties and liabilities.
You can download a copy of my Guide to Directors Duties here.

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General

Key Indicator – the state of UK business activity

UK business activityUK business activity is either in a woeful state, or slowly picking up speed following December’s general election, depending on who you are listening to.
Given the dire insolvency figures for 2019, which I covered in Tuesday’s blog, there is clearly plenty wrong in specific sectors of the economy.
The construction industry, High Street retail and the accommodation and food services were the worst-affected last year but it would be foolish to pretend that any business, from SME to large corporations had an easy time given the global economic slowdown and, more recently, figures revealing that the EU economy is near-stagnant.
Nevertheless, now that the withdrawal of the UK from the EU has passed its first hurdle and that the government has a clear mandate with a huge majority to implement its decisions for the next five years, there are signs of optimism.
The first Lloyds Bank Commercial Banking Business Barometer in 2020 showed a 13-point increase in business confidence, taking it up to 23% in January, the highest it has been for 14 months. The Lloyds barometer calculates overall business confidence by averaging the views of 1,200 companies on their business prospects and optimism about the UK economy.
The most recent IHS Markit/Cips manufacturing purchasing managers index (PMI), for January, showed that the sector has enjoyed its best performance for nine months. Another survey by the CBI (Confederation of British Industry) was also positive in suggesting “the biggest wave of optimism among smaller manufacturers for six years” with 45% of these SMEs reporting that they were more optimistic following the election.
In addition, the Bank of England has kept interest rates at the same level, despite expectations that they would be cut. The outgoing BoE Governor Mark Carney said: “the most recent signs are that global growth has stabilised”.
But much of this is about sentiment where the proof of the pudding will be in increased orders on business’ books and improved cash flow.
On the positive side, productivity (output per hour) increased in January, by 0.1% in the services sector and by 5.7% in construction, according to official figures from the ONS (Office for National Statistics). The results of another survey by the finance firm Together concluded that British SMEs plan to invest £1.7bn over the next two years.
It has to be said that much of this “improvement” is from a pretty low base given that the economy ended 2019 at near-stagnation point, so this is not yet really any indication of a growing economy, although it is a positive shift.
There have also been some encouraging government noises about increasing spending to address the economic inequalities between the North and Midlands and the South which could be good news for Northern businesses. Other government initiatives in the pipeline are likely to benefit the house building and construction industries.
Despite the optimism there is a long way to go before most businesses and especially those involved in farming, fishing and food export, will know the shape of any proposed trade deals, with the EU and with the USA so the short-term for them is not especially encouraging.
The Chancellor, the Foreign Secretary and the Prime Minister have all in the last few days signalled a very hard line negotiating position with the EU over the shape of any agreements which the Government hopes to achieve by the end of 2020. Whether this is a negotiation tactic or a ‘die in the ditch’ strategy we shall find out quite soon.
Concerning input to the outcome there have been some reports that the Government has been ignoring requests from business bodies, such as the CBI (Confederation of British Industry) and the FSB (Federation of Small Businesses) to include their representatives in the forthcoming trade negotiations with the EU.
There are also still the unresolved issues of how the current skills shortage and migrant labour issues will be addressed.
No doubt a level of certainty for some businesses will emerge during the budget, which is due to be announced on March 11. Well at least we shall learn more about the Government’s priorities.
In summary, while it is encouraging that there has been a return to more positive sentiments from UK business leaders, there is a long way to go before we can be confident that they are matched by revitalised UK business activity at home and abroad.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance Insolvency Turnaround

Dire insolvency figures for 2019 – and little respite in sight?

insolvency figures and lifebeltsThe final quarter insolvency figures for 2019 make grim reading, as does the regular Red Flag update from insolvency and recovery firm Begbies Traynor.
The main messages from the latest insolvency figures, published for Q4 2019 by the Insolvency Service at the end of January, were that in 2019 underlying company insolvencies increased to their highest annual level since 2013 driven by a by 8.2% increase in CVLs (Creditors’ Voluntary Liquidations) which were at their highest level since 2009 and by a 24.0% increase in administrations, their highest level since 2013.
Construction, the wholesale and retail trade and accommodation and food services suffered the most, as they had been doing all year.
Begbies Traynor’s Red Flag update published last week also piled on the misery, with findings that a record 494,000 UK businesses are now in ‘significant financial distress’ with property, support services, construction and retail businesses suffering the most. These figures were the highest-ever since the company began reporting its Red Flag research 16 years ago.
Julie Palmer, partner at Begbies Traynor, said: “Currently, we do not know if the failing performance within some sectors is due to short term confidence issues, or more fundamental economic and structural issues.”
But, arguably, the worst insolvency figures could yet be to come.

Bellicose politicians and European stagnation

On Friday night the UK formally left the EU. While this has established a level of political certainty, for business the economic uncertainty continues for at least ten months before our trading relationship with EU has been negotiated.
The negotiation timetable helps us know when we might have certainty about our trading relationship. The first being the end of June as the last day by which any extension to the 11 month transition period can be sought although as things stand the PM has ruled that out. Without an extension the deadline for a Brexit trade deal is the 26th November as the last date for it to be presented to the European Parliament if it is to be ratified by the end of the year.
Notwithstanding the uncertainty of its trading relationship with the EU, the UK can now begin negotiating its own trade deals with other countries.
But whoever heard of a trade deal being formalised so quickly?
Furthermore, this will all take place in the context of stalling economic growth in the EU, particularly in France and Germany as revealed last week:
“Gross domestic product (GDP) in the currency bloc rose by just 0.1% in the fourth quarter of 2019 from the previous quarter, according to the EU statistics agency Eurostat.”
Stock markets were also dropping dramatically, which has been attributed largely to the spread of Coronavirus that has led to a lockdown of much of China.
All this, without taking into account changing consumer behaviour and confidence, partly due to increasing debt levels and to environmental concerns. Perhaps, given the 6% annual increase in personal insolvency figures over 2018, now at its highest level since 2010, there is also a degree of job uncertainty. In retail, for example, almost 10,000 jobs have been lost since the start of the year and 57,000 went in 2019, according to the Retail Gazette.
The Prime Minister and foreign secretary, Dominic Raab, seem set on taking a very hard line ahead of negotiations with the EU. While there are some that take the view that in negotiations it is best to start off taking as hard a line as possible then softening as they progress, given that the remaining countries in the EU clearly have their own problems that they will be seeking to solve the words “rock and hard place” spring to mind.
So, there is a distinct possibility of a hard Brexit, one without a deal although message spin is likely. If this is the case then the uncertainty for business will continue beyond the end of the year until a new normal is established.
We therefore endorse the advice of Eleanor Temple, chair of R3 (the insolvency and recue industry body) in Yorkshire:
“These insolvency figures should be a wake-up call to any director of a company which is finding it hard going at the moment. Anyone in this position should look to take objective advice from a qualified, professional source, to decide the best path forward – and the earlier this is done, the better.”

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

Emotional Honesty at work – mutual respect turns a negative into a positive

emotional honesty and conflict resolution There are many situations in our working life that have the potential to damage relationships with colleagues and managers and it takes emotional honesty to confront them.
Disagreements are inevitable especially where individuals are ambitious and want the best for the business and its goals. There are often many solutions to problems and teams need to learn how to share differing ideas without disagreements being seen as confrontation and in particular avoiding individuals being afraid of others in such a way that they don’t contribute.
Team decision making doesn’t necessarily mean agreement but is should be positive, especially when the team is needed to implement the decision. Sophisticated teams may explore decision making as a form of idea meritocracy by considering the knowledge and expertise of each contributor rather than team democracy where everyone is equal, or worse, where overconfident individuals, bullies or HiPPOs (Highest Paid Person’s Opinion) make the decisions.
Conflicts at work are often rooted in a lack of respect among colleagues. Conflicts are different to disagreements and can make the atmosphere toxic leading ultimately to bullying and other serious issues that damage a team’s ability to work together.
Another area of discomfort is giving feedback on someone’s behaviour or during an appraisal when the appraisee is under-performing. The intention is normally to invite a change in behaviour that leads to a positive outcome. But receiving such messages can promote rejection of the message or even anger hence the need to deliver such messages with both honesty and with emotional understanding.
Dealing with disagreements, a loss of respect and giving feedback all require a level of emotional honesty to confront the issue in a sympathetic way. In addition to individuals learning how to deal with difficult messages the culture of the company is also important. Culture can help avoid individuals being defensive and feeling victimised by removing blame and promoting honest engagement such that everyone moves on after the decision has been made or after a matter has been dealt with.
In an ideal world everyone at work respects each other and values the contributions of others. However, we all have quirks of character and mannerisms that can grate, which is why we need a level of emotional honesty to both acknowledge this to ourselves and to others. This acknowledgement allows us to be constructive when confronting issues. The key is to actively listen and seek to understand others and avoid letting our own emotion get in the way.
If it is necessary to resolve a problem with a colleague or manager, the first step is to remind ourselves and them of their good points and qualities and to start with these at the opening of any discussion.
Emotion should be firmly kept out of the discussion. Expressing anger or frustration makes it hard to really hear the feedback being given. So, an essential element when dealing with disagreement or a loss of respect is to maintain courtesy.
Equally, aggression, both active and passive, during a confrontation gets in the way by becoming a form of bullying; even disengaging from a difficult situation can be done in a way that is construed as emotional bullying when one party gives in or walks away without resolving the underlying issue. This is often how family members deal with conflict and is seen at work when people don’t know how to deal with issues.
It can be effective to establish a connection by sharing a situation where you may have made a similar mistake and not talking down to the person on the receiving end.
Humour and displacement topics can be useful tools for lightening the mood or changing the topic when dealing with awkward situations but it is often necessary to get back to resolving serious issues as burying them tends to fuel resentment.
It is important to remember, too, that people have personal lives outside of work and their circumstances may be a contributing factor where they may be concealing a personal or family situation that is affecting their behaviour or performance at work.
It is not unusual for people to keep outside problems to themselves, believing they have to conform, to be “professional” or to fit in with a so-called “macho” culture.
Whatever the situation or problem, time should be allowed for the person on the receiving end to digest and think about what has been said.
When on the receiving end we need to listen, take notes if necessary and may need time to consider the points made before responding.
Emotional honesty rather than confrontation is the best way to resolve workplace problems. Feedback should be constructive and dealing with disagreements and conflicts should be done in a way that looks for a positive outcomes.
Respect for others is key and if maintained then everyone can benefit from the experience.
 

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Business Development & Marketing Cash Flow & Forecasting General

Retrain to do what? The jobs of the future

the jobs of the futureA national government retraining scheme was proposed in July last year to help those workers whose jobs will become obsolete because of Artificial Intelligence (AI) and automation.
Whether it will materialise following the Brexit mayhem and subsequent election remains to be seen.
Research by Oxford Economics has found that 1.7 million manufacturing jobs have been lost to robots worldwide since 2000, including 400,000 in Europe, 260,000 in the US, and 550,000 in China and that a further 20 million manufacturing jobs will be obsolete by 2030 although most of these will be abroad.
There is no doubt that the future world of work, especially, but not only, in the manufacturing sector will look very different.
The drive towards aver more automation may conflict with concerns for the future of the planet and the environment but both will doubtless mean a radical rethink of economies, especially those that are dependent on consumer activity.
Demographics too will play their part as many of the populations of the developed world age and live longer and birth rates decline.
All this has led to an apocalyptic vision of the future by some, such as Aaron Benanav, a researcher in the social sciences at the University of Chicago, who argues that economies have, since the 1970s, been based largely on industrial production, expansion and exporting as their major economic growth engine and that such opportunities for growth are dwindling as more economies mature.
He argues that no other sector than manufacturing has been identified that can replace this out of date growth engine and that “restoring previously prevailing rates of economic growth will prove difficult if not impossible. Unless we find some way to share the work that remains, beggar-thy-neighbour politics really will tear our societies apart”.
Others, however, are more optimistic arguing that we have not even begun to imagine the jobs of the future.
Business Insider is one publication that has had a stab at imagining the jobs that will be needed in the future. Their list includes GPs, Dentists, Plumbers pipefitters & steamfitters, vocational nurses, construction managers, physician assistants, sales reps, secondary school teachers, tractor-trailer truck drivers, computer systems analysts, construction trades supervisors, service sales reps, software developers, and physical therapists to name just a few.
But these are all existing jobs in the world as it currently is. A global digital company, Cognizant, has gone even further and imagined jobs of the future that may be needed. A small sample from their suggestions includes:
Ethical Sourcing Officers for when corporations want to root their decisions on what is ethical and not what is profitable. The ESO will be in charge of production to ensure that every step of the process is in accordance with the ethical values of the shareholders.
Personal Data Brokers, who will make sure their customers are paid by those companies who use their data. This assumes that consumers will have full control over their personal data
Virtual Store Sherpas, will be the online equivalent of the in-store personal shopper, who will guide consumers through the process of selecting the most appropriate and affordable items and organise delivery.
Man-Machine Teaming Managers, whose job will be to “figure out and combine the strengths of man (cognition, judgment, empathy, versatility, etc.) and machine (accuracy, endurance, computation, speed, etc.) to create the most productive worker team possible”.
A brave new world or an apocalypse? Who knows? But there is no doubt that the future is out there!
 

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Business Development & Marketing Finance General

Running a small business is a juggling act

businessj juggling actA YouGov study has found that small business owners identified most strongly with the analogy of a juggling act when asked about running their businesses.
The analogy was strongest in the North West, in Yorkshire and Humberside, where 63 percent in each region compared themselves to jugglers.
Bookkeeping was rated the biggest chore by 27% of the 1000 respondents, while 42 percent of respondents believed central government added to the hassle for small businesses.
As an analogy it makes sense where dropping one ball can cause a knock on effect such as the consequences of not having contingency plans or missed payments or failure to file Tax Returns.
Among the issues identified in an article in The Economist on the same subject is knowing the right time to take certain steps in a business.   In that sense, it argues, the juggling act is a permanent exercise in balancing a variety of trade-offs. Such as holding high stock levels can help avoid the consequences of being let down by suppliers but it ties up working capital.
Knowing the right time to expand is a major issue: “by expanding too fast, companies risk losing control of product quality and messing up their management structure”.
Another is the tension between centralisation and delegation. A hierarchical structure can lead to a rigid and inflexible business structure and a loss of agility, while delegation of roles can only work if staff are well trained and the business has a clearly-defined set of goals with which everyone is familiar and on which they act in harmony.
Another juggling act is created by the tension between sticking with the core products or services and how much you can diversify away from the core.
“Choosing the right time to expand and diversify, and the right organisational structure to do it, is a matter of judgment. That judgment, and the flexibility to change plans, is what makes a good manager.” is the Economist writer’s view.

So how can an effective CEO handle the juggling act?

Firstly, they should learn to delegate effectively. They should not be trying to do everything themselves. However, this means that those to whom tasks are delegated must be well-trained and know the company’s goals and be suitably motivated and trustworthy when left to carry them out.
The effective CEO will always be juggling priorities but there are ways of managing them although this involves being well organised.
It helps to see a business as a system of systems by breaking it down into discrete and manageable sub-systems or processes with delegation and clear lines of communication to keep track of all the various activities.
Planning and managing time have been covered in previous blogs and are essential to ensure balls are not dropped. It is easy to put off tasks which can turn out to bite you on the backside if ignored. Examples of activities that are often put off are: the collection in book debts, paying suppliers, VAT and PAYE, boring things like compliance, insurance, allocating time for staff reviews, and even speaking with customers; indeed there is much to oversee the trick is not to do it all but have systems and processes in place to ensure each necessary activity is done.
Check lists and using management systems can make juggling easier. This might mean having KPIs (Key Performance Indicators), check lists such as one listing all the month-end accounting tasks, a monthly management report that consolidates information from departments including management accounts, an order management system to track the fulfilment and invoicing orders, a way of monitoring sales & marketing activities and their results. There are myriad sub-systems and processes that can make the juggling easier but they all need to be optimised and integrated as part of the overall business.
It is possible to make the juggling act manageable and efficient in a way that frees up the time of the CEO so they can focus on the future of the business giving them time to develop strategy. To work on the business, rather than be bogged down in the business.

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Business Development & Marketing General

Keep it simple – and polite – if you want a response to your email

response to your emailIt can be frustrating trying to get a response to your email but employing some behavioural psychology can help.
Catching and holding the attention of busy people with perpetually flooded in-boxes can be tricky, so the secret if you want someone to both read and respond to your email is to make it easy for them to read and engage.
Firstly, the email should have an appealing, short and clear subject line that captures the imagination and makes the recipient want to find out more b reading it. Indeed, most of us harvest or scan our email inbox and often only check who the sender is and read the subject header.
Once opened the email itself should be short and above all concise in clear simple language. Beware of information overload, the recipient can always come back for more. While you may have several things you want to communicate, the objective is to get a response so you can expand in a follow-up call or email.
Giving something of value to the recipient can also trigger a response. Perhaps by offering an idea, or suggestion relevant to them or their company. Relevance is also key by demonstrating you’ve done some research as we can all spot the ‘bollocks’ of most marketing messages.
Courtesy is also crucial. Research has shown that polite emails with correct spelling generate a better response rate. The sign-off is also important, for example “Thanks in advance” has been found to generate a much higher response rate then “Best wishes”.
Keeping your message short and simple also signals courtesy, that you understand the recipient is a busy person.
Your last paragraph should make it clear what you are asking for and it may be that you can set up further communication even if your recipient doesn’t respond by using phrasing such as “If I don’t hear anything, I’ll assume you’re happy to ….”.
Finally, the time when you send an email may be crucial. If you schedule your email to land in their inbox at the start of the working day, for example, there is a greater likelihood of its being read and of your getting a response.
Using automated scheduling software can also help, so that if you don’t get a response to your email a reminder email a couple of days later can nudge the recipient’s memory.
To summarise, remember the acronym EAST (Easy, Attractive, Social and Timely) no matter if your recipient has the brain of an Einstein. In this context, another acronym also applies, KISS (Keep it Simple, Stupid).

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting General

What items are top of businesses’ post-election wish list?

post-election wish listInevitably many promises were made during pre-election campaigning but how many will be delivered and what items are top of businesses’ post-election wish list?
There is no question that there are many urgent domestic issues that need tackling and were “parked” during the on-going wrangling over Britain’s referendum to leave the EU.
However, now that the so-called “party of business” has been returned with a solid majority, perhaps businesses will see some action on the issues that have left them feeling that they were overburdened and struggling to carry a heavy weight with little support.
While many business groups have been calling for the closest possible trade alignment with the EU post-Brexit it will be a year – or more – before the shape of any deal is known.
In the meantime, there are plenty of items on the business post-election wish-list that can be progressed.
Perhaps the biggest and most pressing burden needing attention is a thorough reform of Business Rates.  Of course, the loudest cries for this have come from the retail sector, particularly from High Street retailers, but there is no question that the current levels, and the slow pace with which appeals are addressed, is a heavy burden for many SMEs.
However, the Federation for Small Businesses (FSB) leader Mike Cherry, has warned that it could take up to five years to complete a rates review and reform
Arguably of equal importance is the difficulty many businesses have in finding people with the appropriate skills and this has been impeding growth plans.
While the new Prime Minister has promised an overhaul of immigration policy, this will affect how and who firms can recruit. It remains to be seen how the proposed three-tier points-based system will work.
The idea is to fast track so-called Tier One entrants such as entrepreneurs, investors and people who have won awards in certain fields, and Tier Two people, skilled workers, such as doctors, nurses and other health professionals, who have a confirmed job offer leaving the need for less skilled, people such as for as agriculture and manufacturing as a problem. Essentially Tier Three employers will most likely have to show that they cannot recruit enough people from within the UK before other entrants are allowed into the country which may take some time and leave them with short and medium term staffing shortages.
Indeed business organisations such as the Confederation of British Industry (CBI) have said that the current immigration proposals are vague and impeding businesses’ ability to plan for growing staffing levels.
The final and most pressing issue, on which the Government has promised action and investment is the country’s neglected and in some cases crumbling infrastructure, particularly in areas like the North and Midlands.
Whether improving communications such as road and rail links, or broadband connectivity, it is going to require significant financial investment and given the lack of growth and current weak economy it remains to be seen how much money is in the Chancellor’s pot come the first budget in March.
 

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Business Development & Marketing General

If you want more effective meetings don’t use PowerPoint or bullet points

effective meetingsEffective meetings depend on discussion that is constructive and to the point, and on wasting as little time as possible.
It has been calculated that the average executive spends around 50 percent of his or her time in meetings of which at least a third are useless.
This was the finding of a 3M study carried out by Annenberg school of communications, University of Southern California, Los Angeles, in 1989.
Studying effective meetings has been ongoing for years and certainly since the 1960s and there has been a growing body of evidence to support the 1989 findings, which suggests that executive productivity could be much improved.
There is an assumption that using lists or PowerPoint presentations can result in more effective meetings, but in fact, this has proven to be incorrect, as Amazon CEO @Jeff Bezos and subsequently others have proved.
A couple of years ago Bezos banned the use of PowerPoint and bullet point slides in executive meetings requiring instead that everyone sits silently for about 30 minutes to read a six-page memo that’s narratively structured with real sentences, topic sentences, verbs, and nouns.
Once everyone has finished reading the meeting memo then the topic is discussed. It has proved to be so effective that is has since been adopted by other CEOs.

Why does a narrative structure produce more effective meetings that use of PowerPoint?

Storytelling has been a part of human culture since we first discovered the use of fire. Anthropologists and historians argue that fire encouraged people to congregate by sitting around the campfire swapping stories as a way of teaching, warning, and inspiring others in pre-literate societies.
But there is more to it than that.
To be persuasive, an argument has to appeal to logic and reason, and also to emotion, which neuroscientists have found is the fastest path to the brain.
Bezos is quoted as saying: “”I’m actually a big fan of anecdotes in business,” arguing that often there is greater insight to be gained from customer emails than from data.
Basically, the scientific evidence is that our brains do not respond well to, or retain, lists. Our brains respond much better to text and even more so when the text is accompanied by pictures.
So, it should be no surprise that effective meetings are more likely to result from getting everyone to read a well-constructed narrative memo at the start, which gives everyone attending the same, essential information before any discussion begins.
The result is a much more informed discussion in which more people feel able to participate, rather than those “usual suspects” with the loudest voices.
Not only this, but the narrative memo provides an essential historical record of background and context for those who are not attending the meeting.
Ultimately using narrative rather than bullet point lists and PowerPoint slides will cut down on the time it takes to reach collective decisions, thus saving executive time and improving efficiency.
We should restrict PowerPoint for use as a tool for making a sales pitch and recognise those who use it in a meeting as trying to sell an outcome rather than seek to discuss the topic.

Categories
Banks, Lenders & Investors Cash Flow & Forecasting Insolvency Turnaround

Sector blog – The north of England and the future of the construction industry

construction industryThere is no doubt that the construction industry has been having a torrid time in the last couple of years, especially since the collapse of the contractor Carillion with debts of £1.5bn at the start of 2018.
The most recently published insolvency statistics, for the third quarter of 2019, showed a 55% increase in the number of companies falling into administration, continuing an upward trend that had been going on all year.
There is little doubt that the political uncertainty since the UK voted in June 2016 to leave the EU has been a contributory factor to the industry’s woes, which are compounded by a shortage of people with appropriate skills. The skills shortage in the construction industry and its reliance on labour, often as subcontractors, has for several years been mitigated by the use of EU labour, particularly from Poland, but this, too, has been disrupted in the aftermath of Brexit as attitudes to migrants have become less welcoming.
But there have also been knock-on effects from the collapse of Carillion, which are being attributed to the structure of the industry, where major contractors like Carillion were focused on winning projects and managing them, relying on subcontractors to carry not only the responsibility for doing the work but also for taking the financial risk based on exposure to fixed price contracts and poor payment terms.
Indeed, when they go bust there is little left for creditors which highlights the level of credit risk.

Is the situation for the construction industry about to change?

Now that the Election is over and that the Government has a solid majority, hopefully, it will focus on the many pressing domestic issues that had been overshadowed by Brexit, not least the economic imbalance between various UK regions and London.
Indeed, the Prime Minister has already been warned that unless more attention is paid to the North of England particularly, those voters who lent him their vote, they may well withdraw their support equally quickly if they don’t see tangible investment.
In late December and again this week there were some signs that the message had been received and understood.
The Prime Minister had already promised that their trust in his government would be repaid and both The Times and the BBC were reporting that there was the prospect of changes to Treasury rules coming that would allow more cash to be allocated to projects outside of London and the South East, notably on infrastructure, business development projects and schemes like free ports.
Then, on Tuesday, when March 11th was announced as the date for the Chancellor’s first budget, the predictions of Treasury changes were again emphasised:
“In the intervening two months, the Treasury will have to work up a new National Infrastructure strategy that delivers on the plan to rebalance regional inequalities, some of which stem from decisions made nationally on, for example, transport spending.”
While doubts have been raised about the viability of the proposed HS2 rail project to connect London to the North, said to be likely to cost almost three times more than predicted, should this radical rethinking of Treasury rules come to pass, hopefully it could open up opportunities for the construction industry to work on plenty of other big projects in the North and possibly also the Midlands.
The other area that is likely to benefit the industry is a massive house building initiative. While no policies have been announced, Dominic Cummings’ Alternative Civil Service may light a bonfire under planning restrictions that are often blamed as the impediment to achieving previous governments’ targets. I am also sure we shall see more financial stimulus aimed at new owners, again all initiatives that will benefit the industry irrespective of what happens to the economy.

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General Interim Management & Executive Support

Starting the day right helps effective leaders to stand out

starting the day Starting the day right can take as little as two minutes and will make a difference to the rest of your day.
Thought leader @Guy Kawasaki recently highlighted one approach on Facebook, the two-minute routine, based on writing down just three simple statements with which you identify:
 

  1. I will let go of ….
  2. I am grateful for ….
  3. I will focus on ….

The idea is that we all wake up with thoughts swimming round in our heads that crop up to distract us, even if they are only in the background, as the day progresses and that to function at our most effective we need to settle and let go of these thoughts.
There are always massive demands on the time of busy executives and so starting the day with a clear mind and focus is important as is scheduling the day and being able to stick to tasks without distraction.
This simple technique also allows you to acknowledge concerns that are on your mind by considering them and then put them in a box so you don’t obsess over them and they don’t intrude when dealing with other matters. This is also a great tactic for dealing with anxiety albeit the subject of previous blogs.
There is no one way to set up your day, it is simply a matter of finding a routine that prepares you for being productive. Indeed writer John Rampton advocates using productivity tips and creating and sticking to an efficient daily schedule. He says, it is more than just simply making lists. It starts with understanding your “Why”, setting priorities and estimating how long the tasks will take.
The result will be that you work smarter, not harder and ultimately accomplish much more.
Rampton quotes the example of Hal Elrod, author of The Miracle Morning, who argues ““How you wake up each day and your morning routine (or lack thereof) dramatically affects your levels of success in every single area of your life. Focused, productive, successful mornings generate focused, productive, successful days.”
For Elrod starting the day right meant waking at 5am each morning to spend time in silence, meditating, reading and exercising.
For others, as in the two-minute example above, the routine for starting the day may be different, but what they all have in common is that they are quiet times alone to focus and help to declutter the mind before the demands of the day begin.
When I was in the army we had something similar referred to as the 6Ps: Prior Preparation and Planning Prevents Piss Poor Performance. Yes it was still called the 6Ps.
 

Categories
Banks, Lenders & Investors Cash Flow & Forecasting Finance General

Key Indicator – Stock Market behaviour predictable or not?

stock market predictionsAt the start of the new decade predicting stock market behaviour is anything but an easy task.
A year ago, the pundits variously predicted that the year-end valuation of the FTSE 100 would be anywhere between 7200 and 8400 points. In the end, at close of business on 31st December it was in the mid-7000s at 7542 below most predictions but it was still a stonking year.
Over the last year, stock market values, including the UK’s FTSE 100 and 250, have risen an astonishing amount to make 2019 one of the strongest years ever, despite a sluggish global and EU economy, US and China trade wars and Brexit uncertainty.
According to the business news two days ago the Dow Jones industrial average has seen  a rise of almost 25% having reached record highs day after day, the broader S&P500 is up 30% and the tech-heavy Nasdaq has grown 40% in value. The FTSE100 in London is also close to its record high, as is the Dax30 in Germany.
In so-called “normal” times the stock markets traditionally go down when the interest rates go up which may explain the stock market values given the unprecedented period of low interest rates set by Central Banks that have done everything they could to support their countries’ weakening economies in their attempt at stimulating growth or more accurately avoiding recession.
But what is “normal” given that some Central Banks including European Central Bank, Japan, Sweden, Denmark and Switzerland have set negative interest rates?
To make predictions more difficult, this has been going on now for more than 10 years, since the 2008 Financial Crisis, and growth/recovery is still pretty sluggish despite the stimulus.
Usually, over a 10-year period there is a natural economic cycle from “boom” to “bust”, but the “bust” has yet to come, and nor is it being predicted. More of the same seems to be the view of most economists.
However a few pundits, notably the economist Nouriel Roubini, Professor of Economics at New York University’s Stern School of Business, argue that the stock markets are far too optimistic, while the business writer Rana Foroohar, author of Don’t Be Evil: The Case Against Big Tech and associate editor at the Financial Times, predicts that the next crash will be brought about by the concentration of power in the hands of big tech companies like Apple, which have built up huge amounts of debt in their quest for power. She says: “Rapid growth in debt levels is historically the best predictor of a crisis.”

So, why have stock market valuations continued to climb?

In my view, two things have driven the value of companies listed on the stock market.
Firstly, businesses have broadly maintained their profitability by reducing overheads through slimming down management and not reinvesting. This has hidden their decline in productivity because profitability has been maintained. I believe that the cutting out of swathes of management has made many businesses extremely lean but left them without scope for responding to growth, with little experience for investing in new technology and for implementing the changes necessary to remain competitive.
Secondly, the numbers of listed companies have declined leaving fewer in which to invest money. Given that investors want to invest in profitable businesses this has meant that the pool of investable companies has also shrunk driving up the value of those that should be part of an investment portfolio. This distortion is likely to encourage a shift from the growth investment strategy preferred by long-term investors to one of value investment preferred by those with a higher appetite for risk. Indeed, picking winners is difficult as those who backed Neil Woodford will attest.
You could argue that UK based companies exporting abroad with foreign investors have benefited from exchange rates problems due to Brexit to make more locally focussed companies more attractive but this should only be part of a value investment strategy and still leaves the long-term investors looking for fundamentally sound businesses.
It’s possible that once Brexit is under way after January 31, there will be a re-rating because the companies that import from abroad have suffered disproportionately.
It will only take the Central Banks raising interest rates to more normal levels for a major stock market crash to become inevitable.
 

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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?

Categories
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.

Categories
Banks, Lenders & Investors Cash Flow & Forecasting Finance General

Do High Street banks care about their customers?

High Street banks and trustHigh Street banks rely on providing a service to customers yet too often it seems that customers are the last thing banks care about.
Of course, banking is also a business and therefore subject to the pressures and responsibilities of any business to remain compliant and profitable.
However, I would argue that their existence is entirely down to the loyalty of their customers. Yet, customer loyalty is being stretched by the seemingly endless IT problems and closure of branches and ATMs that inconvenience customers, particularly SMEs in rural areas.
Most recently, TSB, encountered yet another IT failure, just a year after the mammoth meltdown which cost it an estimated £366m. To compound the distress for customers, it has just announced that it intends to close another 86 branches, cutting up to 400 jobs over the course of next year.
IT failures have not been confined to TSB, however, and in 2018, the Financial Conduct Authority (FCA), said the number of incidents reported to it had increased by 187% in the past year, 65% of which were from high street banks.
This has prompted a committee of MPs to call for faster action in resolving complaints and awarding compensation, along with more decisive regulatory action, calling the current situation unacceptable.
According to the consumer organisation Which? “Banks and building societies closed a total of 3,312 branches in between January 2015 and August 2019, with an average of 55 closing each month”.
Which? has been tracking the closures and its breakdown shows 1,094 for the RBS Group (NatWest, Royal Bank of Scotland and Ulster Bank) and 569 for the Lloyds Group (Lloyds Bank, Halifax and Bank of Scotland) while it estimates that Barclays has closed approaching 500, although the bank has declined to share figures with Which?
In addition, the organisation has found that 5,000 free-to-use ATMs had been lost between January 2018 and May 2019, the vast majority in rural and more deprived areas.
But it has not only been IT failures and branch closures that have arguably reduced trust in banking.
Only last month, Barclays announced its debit card holders would be able to deposit money but not withdraw cash from a post office counter from January 2020 as a cost saving measure to save £7 million. Following a huge outcry that situation was quickly reversed.
Nevertheless, it was an indication of the general attitudes of the traditional High Street banks given the number of branches and even ATMs that have been disappearing from villages and towns throughout the UK, on the tenuous argument that customers prefer to bank online. And despite the well-known unreliability of internet connections in such locations.
It all adds up to a massive headache for anyone who lives or works outside of a main city location.
So it is with some scepticism and a few hollow laughs that we note the latest Government initiative, a SME Financial Charter, to which, approximately 20 banks and financial service providers have signed up.
The charter is aimed to support SMEs through Brexit and signatories make five pledges:

  1.  We’re open for business and ready to lend;
  2.  We’ll help you prepare for Brexit and beyond;
  3.  We’ll support your application and signpost other options if needed;
  4.  We’ll treat you fairly at all times;
  5.  We’ll work with the government-owned British Business Bank to support SMEs.

The charter is voluntary and clearly limited in scope.
It would have been more to the point if it had been an ongoing pledge, not confined to helping SMEs with Brexit and its aftermath, and if it had been given some regulatory teeth to encourage High Street banks to offer a real service to SMEs and other customers.
 

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

Fair treatment of employees is a cornerstone for improving productivity

fair treatment equals improved productivityImproving productivity is a concern for all businesses but it is harder to achieve if employees do not believe they are receiving fair treatment.
As I have said in many previous blogs, a motivated workforce is more likely to go the extra mile if they feel valued as people, this means managers treating them with respect, listening to them, showing consideration to them, recognising their contribution, rewarding their contribution and protecting them from inappropriate behaviour by others at work. In summary treating them with respect and showing them that their effort is valued.
Recognition can simply be saying “thank you” for a job well done, it is not just about money.
However, money can become an issue when there is a clear disparity in pay. While discrimination is illegal and applies to any disparity of remuneration on grounds of gender, race, religion or ethnicity, this is not about legislating for staff motivation.
To be motivated staff need to feel they are treated equally which means people doing the same job expecting the same pay and other benefits albeit they will acknowledge any adjustment to pay scales based on valid reasons such as experience, length of service, sickness record, additional responsibilities or other factors. The key is that the reasons for any difference in pay are legal, explicit and understood by everyone.
Two years ago, in April 2017, the government made some efforts to address unequal pay treatment with the introduction of mandatory gender pay gap reporting (GPGR) for both the private and public sectors employing 250-plus people.
It then launched an inquiry into whether organisations should also be required to report on the pay differentials between people from different ethnic backgrounds, although as yet no decision has been reached largely, it is argued, because ethnicity is a very complex subject.
GPGR is regulated by the Equality and Human Rights Commission, and while it can take businesses to court for non-compliance and obtain an order to force them to, it has no enforcement powers beyond “naming and shaming” them.
So recent reports on the situation two years on are not encouraging reading.
The BBC cited figures from the ONS (Office for National Statistics) for the year to April 2019, saying that the gender pay gap for full-time workers rose to 8.9% – up from 8.6% the previous year.
Quoted in the article is TUC general secretary Frances O’Grady:  “Government must pick up the pace. It’s clear that publishing gender pay gaps isn’t enough on its own. Companies must also be legally required to explain how they’ll close them.”
Andy Haldane, a member of the Bank of England’s Monetary Policy Committee, has recently said that the GPGR obligation should be widened to include SMEs with 30 or more employees, something that was dismissed by FSB chairman Mike Cherry because there would be a number of practical difficulties in businesses with such small work forces.
The BoE (Bank of England) has also recently analysed its data and found that ethnic minorities in the UK earn around 10% less than white workers. Andy Haldane said the gap is “strikingly” persistent, having narrowed far less the than the pay disparity between genders over the past 25 years.
But fair treatment extends beyond disparities on pay.  It is also about such issues as bullying and harassment and again, recent findings show some concerns.
According to a CityAM report investigations by Business in the Community found that as many as a quarter of all ethnic minority employees at British businesses are having to put up with bullying and harassment, despite 97% of businesses having a zero tolerance policy to bullying and harassment.
A study by Equileap, which researches corporate gender equality, has found that almost six out of 10 global companies do not have an anti-sexual harassment policy.
Clearly, there is a long way to go before there is fair treatment for all workers, but if businesses want to survive and prosper in a difficult global and domestic economic climate, amid skills shortages and the uncertainties of Brexit, they would be well advised to put it much higher up their agenda than it seems many currently do.

Categories
Accounting & Bookkeeping Cash Flow & Forecasting Finance General Insolvency

After several high profile business failures – Is corporate governance robust enough?

corporate governance failuresand  penalties Research by a provider of audit, tax and consulting services has found that only 21% of board members think corporate governance is critical for a business to achieve success.
The findings by RSM also revealed that 96 per cent of company Board members it surveyed expected to see an increase in the number of criminal prosecutions of those senior executives and organisations implicated for poor risk management.
The issue of corporate governance has been under review by the FRC (Financial Reporting Council) for some time following high-profile collapses of businesses like BHS, Patisserie Valerie, Carillion and most recently Thomas Cook.
In its most recent annual report, the FRC found that that “audit quality is still not consistently reaching the necessary high standards expected”.
More than a year ago, a review of the FRC itself led by Sir John Kingman proposed the establishment of a new regulator, the Audit, Reporting and Governance Authority, but this was not acted upon by the Government before business was suspended pending the outcome of the forthcoming general election.
Concerns about corporate governance have also been raised by a Government committee, the business, energy and industrial strategy select committee which has called on ministers to move faster to reform the audit profession, strengthen corporate governance and curb executive pay.
Among its findings were that “too often, audit teams appear prepared to accept what management tells them rather than questioning its plausibility and drawing on specialists to form their own view”.
Corporate Governance refers to the way in which companies are governed and to what purpose. It identifies who has power and accountability, and who makes decisions. It is meant to take account of the interests of not only the business but its shareholders and stakeholders.
In July 2018, the FRC revised its corporate governance code, which was to apply to the accounting periods beginning on or after 1 January 2019.
According to the FRC the new code was designed to focus “on the application of the Principles [Code] and reporting on outcomes achieved. For the Code’s Provisions, companies should disclose how they have complied with these or provide an explanation appropriate to their individual circumstances.”
Clearly, more robust measures are going to be needed if the RSM research findings are any indication of the attitudes of business directors to the idea of responsible corporate governance.
Interestingly the IoD (Institute of Directors) yesterday launched what it called its manifesto for the next government to restore trust in corporate Britain. It included a proposal for a new Public Service Corporation to restore trust in the outsourcing sector, reforms to the regulation of auditors and replacing the FRC with a new, stronger Audit, Reporting and Governance Authority.
Changing corporate behaviour is a challenge, especially when it is so entrenched, but there is nothing like the threat of criminal proceedings to focus a board of directors given that in law they are collectively responsible for the decisions, behaviour and actions of any one director. The role of non-execs is key.

Categories
Accounting & Bookkeeping Cash Flow & Forecasting Debt Collection & Credit Management Finance

Small Business Commissioner Paul Uppal sacked– is this down to his success in holding large companies to account?

Small Business Commissioner sacked - for telling the truth?In a worrying development the Government has sacked Paul Uppal, the Small Business Commissioner, over what it called a “conflict of interest”.
Even more worryingly, the only news outlet to report on the development was The Times, on October 12.
It reports that “the business department felt his involvement in establishing a bank redress scheme was a conflict of interest”.
So far, apart from the report in The Times, there has been a deafening silence on this development.
Mr Uppal’s role as a mediator of payment disputes between small and large companies was established in 2016.
His dismissal came just a few days after the Government had announced that Mr Uppal’s role was to be expanded to having a seat on the Compliance Board of the Prompt Payment Code, which it was intending also to strengthen.
The Government said: “Fiona Dickie, the Deputy Pubs Code Adjudicator, will provide oversight in the Small Business Commissioner role until early November, pending the appointment of an interim commissioner.
“An open recruitment campaign to appoint a new Small Business Commissioner will get started immediately.”

Has the Small Business Commissioner been too successful?

It was announced in December 2018 that in the first year of the Commissioner’s existence unpaid invoices worth £2.1 million to small businesses across the UK have been recovered. Subsequently that amount had reached £3.5 million.
Mr Uppal also began the practice of naming and shaming those large businesses that were failing to meet the terms of the Prompt Payment Code and of actually removing some of them from its lists.
They included Holland & Barrett, Jordans & Ryvita, BHP Billiton, DHL and GKN, G4S, Bupa Insurance and Zurich Insurance.
Clearly, there is a need for government intervention on behalf of SMEs when payments are withheld by larger customers.
A study by FinTech firm Previse shows that small suppliers are paid an average of 30 days later than the largest firms. And a separate survey by Hitachi Capital Business Finance found the proportion of SMEs that were taking legal action chasing late payments from clients had grown from 31% to 40% over the past year with more than 60% of SMEs affected by late payments.
IPSE (Association of Independent Professionals and the Self-Employment) Deputy Director of Policy, Andy Chamberlain, said: ““Late payment is still the scourge of the self-employed. In fact, IPSE research has found the average freelancer spends 20 days a year chasing clients who have failed to pay them on time.”
Mike Cherry, the chairman of the FSB (Federation of Small Businesses), said: “We’ve made some genuine progress on the late payments front since the Small Business Commissioner first took office back in 2017…. This is a disappointing development, one that will put the brakes on our efforts to date.
He added: “The appointment process needs to be efficient and thorough  .. We can’t delay further action to tackle this crisis, especially in such an uncertain climate.”
Notwithstanding that we are in the run-up to a General Election, when all Government business is suspended there are a number of questions in need of answers on this situation and on the future of both the Small Business Commissioner and the Late Payment Code.
So, the question I would ask is has the Government been successfully lobbied by some large corporates to roll back this initiative. Was it becoming too successful?
Why was Mr Uppal sacked and was it really his involvement in establishing a bank redress scheme that was claimed to be a conflict of interest?
Have UK’s SMEs been consigned to limbo?

Categories
Cash Flow & Forecasting Debt Collection & Credit Management Factoring, Invoice Discounting & Asset Finance Finance

Withdrawal of credit insurance exposes suppliers to greater risks

credit insurance removal increases risk to suppliersWhile it is true that running a business is always challenging the withdrawal of credit insurance is adding to the cash flow pressure on supply chains and in particular on retailers.
Trade credit insurance protects suppliers by minimising the financial impact if a customer fails to pay for goods and services.
The withdrawal of credit insurance is normally based on a company’s credit rating that in turn is adjusted based on disclosed accounts, county court claims, statements by directors and adherence to payment terms as information that is increasingly being provided by suppliers.
For more than a year, the retail sector has been in the spotlight due to the high profile restructuring of several large chains and there would seem to be little sign of this abating, according to recent reports highlighting the latest move, by Paris-based insurer Euler Hermes, which reduced the credit cover it provides to Iceland’s suppliers over the summer.
Euler Hermes is not the only insurer to have taken steps to reduce its exposure. Atradius has also been following the same path, removing cover last year from Debenhams.
According to the most recent figures produced by the ABI (Association of British Insurers) in the first quarter of 2019 the number of insurance claims made so far by UK businesses facing bad debts had reached its highest level in ten years.
It said that there were 5,114 new trade credit insurance claims made, up 6% on the previous quarter and that the value of claims paid was £48 million, up £1 million on the previous quarter. The average payment was £9,000.
So, it is perhaps not surprising that insurers are continuing to take steps to mitigate their exposure as insolvencies continue to climb in the face of political and economic uncertainty.
But the inevitable consequence is that the risk is being pushed back to suppliers, who in turn are reducing the amount of credit they extend to their customers. This is impacting on suppliers and their ability to maintain sales volumes to bigger customers.
For many suppliers with weaker balance sheets or who depend on a few large customers this can leave them taking the credit risk and often means waiting longer for payment.
Should SME suppliers continue to supply a customer if credit insurance is withdrawn?
It is all very well to advise SMEs to ensure they have a broad spread of customers perhaps with no one representing more than ten percent of the sales ledger, but opportunities need to be grabbed and growth is often achieved by taking some risks. It is a brave company that forgoes the benefit of having large and profitable customers. Despite this it is imperative to avoid being caught up in a domino insolvency if a key customer fails.
Growing a business takes time, forethought, planning and access to capital, none of which is available in abundance in the current uncertain national and global economic climate.
So, is there any way suppliers can protect themselves?
One route is to start to demand payment upfront, which may mean re-negotiating supply agreements, although it is debatable whether customers will oblige, which could then force the supplier into seeking help from the Late Payments Commissioner.
Another route could be to protect at least some of their revenue by using factoring or invoice discounting services. Both services tend to offer non-recourse facilities as a form of insurance to protect against approved but unpaid invoices. While this route involves credit insurance the finance providers often share a level of risk by underwriting better credit terms since they also want to make their own profits.
It is understandable that insurers will want to protect themselves but their service is a market and they may take a level of risk to get your business.
However risk is managed, there is a need for a strong balance sheet and credit management to avoid the fallout when a customer fails to pay your bills.
 

Categories
Banks, Lenders & Investors Cash Flow & Forecasting Finance General Insolvency Voluntary Arrangements - CVAs

Post-Christmas apocalypse for the retail sector?

retail, high street trading,As we head for its most crucial shopping period in the wake of Mothercare and Mamas & Papas collapsing into administration, I make no apologies for revisiting the UK’s retail sector.
Following last month’s Brexit Halloween deadline and with Black Friday, Cyber Monday and Christmas ahead of us retailers have reportedly stockpiled seasonal products earlier than usual but the consumer uncertainty remaining no one knows how much stock will remain unsold in the new year.
The Confederation of British Industry, the country’s leading business lobby group, said retailers’ stock levels compared with the volume of expected sales had risen to the highest point in October since it began compiling retail sales estimates in 1983.
This is against a backdrop of dramatically narrowing profit margins, falling consumer confidence and repeated demands for comprehensive reform of business rates falling on seemingly deaf Government ears.
A new report by the global professional services firm Alvarez & Marsal (A&M), in partnership with Retail Economics, has found that store-based profit margins for the top 150 UK.retailers have more than halved in less than a decade – dropping from 8.8 percent as seen in 2009/10 to 4.1 percent in 2017/18.
This, it says, is the result of increasing operating costs, inflexible lease structures and changing shopping habits. Yet, it concludes that there is still demand for the High Street physical retail experience “presenting opportunities for forward-thinking incumbents, entrepreneurs and investors. Those that collaborate with landlords and local authorities will be the big winners going into the next business cycle”.
But with a December 25th Quarter Day deadline for the payment of quarterly rents, cash flow is likely to be tight for many retailers who won’t get much support from landlords.
Indeed, headwinds are building up for retail landlords in the retail sector such as Intu, the shopping centre owner, which has warned that it will have to raise more money from shareholders.  It has said that its rental income has been battered by a wave of controversial retailer restructures, by such retailers as Monsoon and Arcadia, using CVAs (Company Voluntary Arrangements) to negotiate rent reductions.
In addition to rent, rates are also an ongoing problem for retailers. On October 30th the Treasury Committee, a cross-party group of MPs, called for an urgent review of the whole business rates system, saying that it was broken, having outpaced inflation for many years and grown as a share of business taxes, placing an unfair burden on bricks and mortar shops. Not only that, but, it also criticised a backlog of 16,000 appeals against business rate decisions and called for the government’s valuation office to be properly staffed.
This was only the latest in a seemingly endless series of calls for reform, that had come from such bodies as the FSB (Federation of Small Businesses), the British Retail Consortium and others throughout the year, with FSB chairman Mike Cherry warning of a very bleak winter ahead.
With consumer confidence currently at a six-year low according to research by YouGov and the Centre for Economics and Business Research Mr Cherry’s prediction isn’t a surprise.
With an estimated 85,000 jobs having already gone from the retail sector over the last year, and approaching 3,000 more coming after the latest retail closures how likely is it that consumers will rush out and spend during the festive season?
The likelihood of any Government action has, of course, receded into the distance given that politicians are now not sitting, but out on the campaign trail ahead of a General Election on December 12th.
Whether a new government can shift its focus away from the ongoing and ever more tedious Brexit saga and onto more pressing domestic concerns remains a very big question but the party manifestos focus on sectors other than the retail sector which doesn’t bode well for them in the short term.

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Business Development & Marketing Cash Flow & Forecasting Finance General Insolvency

Diversity of thought is about more than challenging stereotypes and ticking a box

diversity of thoughtToo often the word diversity as applied to directors of companies is seen as demonstrating representation by gender, ethnicity, religion, and possibly of age. But it should actually be about more than that, it should also be about diversity of thought and ideas.
The challenges facing businesses in the 21st Century are becoming more complex and happening at a faster pace so it makes sense to have people at board level who think differently and can communicate their ideas.
In a recent survey carried out by Social Mobility Pledge as reported by The Times newspaper, the researchers found that by and large “who you know” was still the most important factor when promoting staff.
Sadly, the inference from this is that recruitment tends to favour like-minded people, which is hardly helpful to businesses wanting to avoid being stuck in a rut.
The ability to challenge the status quo at all levels and in particular a board level was a topic discussed in a recent vimeo by Kenneth McKellar, a partner at AGM Transitions, which advises senior executives on their career transitions and roles.
He argues that every business needs people who can challenge the organisation and this means choosing directors from a wide variety of backgrounds, education and disciplines as being more important than simply having more women on the board which seems to be the focus of most FTSE 100 companies seeking to observe the UK Corporate Governance Code.
Being open to people from different educational backgrounds and with different experiences can bring different ways of thinking, different knowledge bases and different perspectives to problem-solving.
The challenge for boards is to avoid groupthink despite the natural desire among teams to seek harmony and conformity since groupthink can lead to irrational and dysfunctional decision-making.
This is also about people’s preferred ways of thinking as shown in the Hermann Whole Brain ® Model which was the result of research originally conducted at GE’s corporate university, Crotonville.
It describes four main modes of thinking, analytical, organized, interpersonal and strategic, each of which has a value in promoting diversity of thought in the workplace and at board level. Of course, this is likely to lead to differences of opinion which might imply conflict. However, such differences ought to be regarded as healthy if a business is to consider the challenges of the future and continuously change to meet them.
Ultimately businesses need people who represent a range of thinking and of ideas with the ability to think laterally, who can disagree in a way that leads to collective decisions.
‘Yes’ men and women may keep their job but they ultimately they contribute to the decline of their business due to their going along with others instead of contributing in a constructive way that improves the decisions made.

Categories
Banks, Lenders & Investors Cash Flow & Forecasting Finance General Turnaround

Key Indicator: no respite for the global economy as conditions get worse

perfect storm over the global economyAs we head towards the end of the year it is a good time to look at the current state of the global economy.
Trade wars and the threats of tariffs being imposed by the US on China have become a wearyingly familiar story as US President Donald Trump continues his policy of ‘putting the American economy first’ at all times. It is not just China in the firing line, the rhetoric has escalated with his threat made in October to introduce a series of 25% tariffs on a range of exports worth an estimated £5.8bn from the EU.
But this is not the only trade dispute in the global economy as Japan and South Korea’s disagreements threaten the production of smartphones, computers and other electronics, while yet another Brexit delay, and now a UK general election, all add to the uncertain economic outlook in both the EU and the UK.
Growth has been slowing in India, particularly in its automotive sector, and to an extent in China also.
At the same time there seems to have been an upsurge in popular political protests across the world with demonstrations taking place in Spain, Iraq, Lebanon, Chile, Venezuela and Hong Kong, to name but a few.
Arguably, political unrest, too, has consequences for the global economy, particularly in a place like Hong Kong, which has for years been a focus for dynamic business activity but is now in recession after five months of civil unrest. Unrest has also led to Chile having to cancel its hosting of the November APEC (Asia-Pacific Economic Cooperation) meeting at which the United States and China had been expected to sign a deal to ease their trade war.  As yet no alternative venue has been announced.
The growth in global trade may have slowed to 3.0% this year – the lowest since the 2009 recession – according to International Monetary Fund (IMF). Data provider Refinitiv has reported that Global deal making has eased to the slowest pace in more than two years, with activity falling 11% so far this year to $2.8 trillion.
Not surprisingly all this has prompted the IMF to predict that global economic growth will be just 3% this year, its lowest level since the financial crisis and a downgrade from the organisation’s April prediction.
Earlier in the year it also warned in its global financial stability report that the next major economic crisis would be similar to the financial crisis of 2008; while it didn’t say when it believed this is a likely consequence of the estimated $19 trillion corporate debt mountain in eight major economies. This warning was echoed by the Bank for International Settlements (BIS) in its annual health check of the global financial system.
The new IMF head Kristalina Georgieva has also warned that Brexit in whatever form will be “painful”, adding to the effects of a global slowdown.
Meanwhile with Germany in recession and the EU economy stuttering, ECB chairman Mario Draghi announced a cut in interest rates to a new record low at minus 0.5 percent as part of a broader stimulus package making it expensive for banks to hoard cash.
The signs are not looking good for improvements in the global economy in 2020 and it is becoming increasingly clear, in my view, that politics is contributing to and inextricably entangled with the stormy economic weather besetting business.

Categories
Cash Flow & Forecasting Finance Insolvency Rescue, Restructuring & Recovery

A rise in Administrations in Q3 indicates that many businesses are just about hanging on

Administrations rise and businesses just hanging onThe newly-published insolvency figures for Q3 (July to September) show a massive increase in the number of businesses entering Administrations.
A mid-October report by Begbies Traynor reported that the number of British businesses in significant financial distress has risen by 40% since the Brexit vote – with those in the property, construction, retail and the travel sectors the hardest hit and 489,000 companies in significant distress up by 22,000 on this time last year.
This was followed by KPMG’s recent analysis of London Gazette notices of companies entering into Administration and the picture became clearer with yesterday’s statistics from the Insolvency Service.
Administrations increased by 20% in the last quarter, compared to the previous quarter, to reach their highest level since Q1 2014. CVLs (Company Voluntary Liquidations) rose by only 2.3% compared to the previous quarter but were still at their highest quarterly level since Q1 2012.
The category with most insolvencies was Accommodation and Food Services. This would suggest that dining out seems to have fallen out of favour with consumers increasingly ordering meals to be delivered and eaten at home. This was becoming apparent based on the frequency with which I have been reporting restaurant failures over the last year but is confirmed by the stats that show Food Services have come top of the insolvency list. Meanwhile the Construction Industry continues to struggle with the highest number of insolvencies over the last 12 months to the end of Q3 2019.
Notwithstanding changes in consumer behaviour and the plight of builders, there has been a steady rise in the number of insolvencies over the last two quarters which is no surprise given the ongoing economic uncertainty due to world trade, US sanctions and the Brexit farrago. Meanwhile investors and businesses remain understandably wary about planning for growth – or even planning for future trading given the level of uncertainty and lack of prospects for many businesses. All this is against a backdrop of a weakening of the global economy.
Therefore, just hanging on is often the only option for many businesses who simply want to survive rather than plan for growth where the alternative is insolvency, often via Administration.
The Insolvency Service defines Administrations’ purpose as “the rescue of companies as a going concern, or if this is not possible, then to obtain a better result for creditors than would be likely if the company were to be wound up”. All too often Administrations end up as Liquidations following a sale of the assets with companies rarely ever surviving Administration.
K2 is in the business of helping companies to survive and restructure and has several guides to help when they are in difficulties.
If you would like to know more about your duties and responsibilities as the director of a company, with particular emphasis on knowing if your company is insolvent and what to do if it, you can download the Guide to Directors Duties here.
https://www.onlineturnaroundguru.com/Directors-duties
 

Categories
Banks, Lenders & Investors Finance General Insolvency

Investors now putting environmental concerns first

environmental concernsThe UK’s largest investors put environmental concerns and corporate governance issues as top of their lists when considering companies in which to invest, according to research by EY.
However, the respondents awarded a “could do better” to such areas as audit, corporate reporting, trust, and reputation, according to a report on the research published by CityAM.
Clearly the activities of campaigners like Greta Thunberg and Extinction Rebellion have significantly raised awareness on environmental issues.
But the profile of environmental concerns is also being raised by the annual world summits on ethical finance, the most recent of which was held in Edinburgh in early September and was attended by senior representatives from more than 200 companies and organisations.
The summit is organised by the Global Ethical Finance Initiative, which oversees, organises and coordinates a series of programmes to promote finance for positive change.
In early October, Mark Carney, Governor of the BoE (Bank of England) warned that companies and industries that are not moving towards zero-carbon emissions will be punished by investors and go bankrupt.
But he also pointed out that “great fortunes could be made by those working to end greenhouse gas emissions with a big potential upside for the UK economy in particular”.
The Peer to Peer lending platform Lending Works says that Socially Responsible Lending (SRI) has risen up the investors’ agenda in the last five years and estimates that 79% of Generation Xers and 67% of Baby Boomers identify it as an issue of concern.
Identifying ethical investments depends on positive and negative screening by investment funds. Negative screening by fund managers excludes certain activities, such as fossil fuels, alcohol, intensive farming etc from investment, while in positive screening fund managers actively seek out opportunities that contribute positively to environmental concerns such as organic farming, green energy, and public housing.
This research can be tricky for investors to access independently and the advice is to use a financial adviser well versed in ethical funding, and also as ever, to remember that the value of shares and investments can go down as well as up.
But it is encouraging that environmental concerns have risen to the top of the investor agenda.
 

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance Insolvency

Directors of companies in financial difficulties should be aware of their pay and perks!

executive pay and perks under scrutinyExecutive pay and perks have been creeping up the agenda with politicians and the public increasingly questioning the rewards given to top CEOs when companies fail.
But should this be done well before any potential failure and in particular when highly paid executives are seeking support for the restructuring and reorganisation initiatives that is necessary when their company is in financial difficulties?
Leadership involves setting an example and when the chips are down this means making demonstrable self-sacrifices.
This week, the Financial Times reported that Standard Chartered bank CEO Bill Winters may have his total pay cut and Namal Nawana will be leaving his CEO role at Smith & Nephew after less than a year after investors turned down his request to increase his $6m package to nearer $18m-$20m.
But it is not only executive pay that has come under fire, this is also true of pensions and other executive benefits.
In September the influential investor group IA (The Investment Association), told companies they must publish credible action plans that align executive pension pay with their workforce by 2022, or risk further shareholder revolts.
A Guardian report revealed that the IA, which represents City firms with £7.7tn in assets under management, has warned that it will “slap companies’ annual reports with a “red top” or highest possible warning label if they fail to share concrete action plans to align executive pension pay with the majority of staff and continue to offer top bosses retirement benefits worth over 25% of salary”.
Clearly shareholders are becoming less willing to support the “greed is good” philosophy that grew out of the Chicago School economist Milton Friedman’s Neoliberal economic model whereby businesses exist solely to make money for their shareholders and executives should be rewarded accordingly.
How much of this is due to external pressures, such as the growing awareness that perpetual growth is incompatible with a sustainable environment, and how much to a seemingly endless series of high profile business collapses, from Carillion to Thomas Cook with massive debts but still high executive pay and perks?
Are CEOs worth their executive pay and perks?
The CIPD (Chartered Institute of Personnel Development) monitors the gap between average CEO pay and that of workers.
Its most recent report found that average salaries for chief executives fell by 13% between 2017 and 2018, but they still earned 117 times more than the average UK full-time worker, despite the introduction of new standards for corporate governance and the introduction of the Audit, Reporting and Governance Authority by the Government earlier in the year
The argument has always been that in order to attract the best a business has to pay for talent, but beyond their annual reports, there is little or no guidance, or seemingly effort, made to monitor effectiveness or track improvements in profitability following the appointment of new CEOs.
In the most recent example, the death of travel company Thomas Cook, only now are questions being asked about the high remuneration of its CEO and executives when contrasted with its massive accumulated debt, and about the wisdom of turning down offers for lucrative parts of the business that might have made a difference.
At a recent event, moreover, Charles Cotton, CIPD senior adviser for performance and reward, said employers risked sending the message that executives’ contributions were “valued more highly” if their pay was rising when employee salaries had remained largely stagnant since 2008.
Clearly, there is a need for much more awareness among executive about the messages their pay and perks convey to stakeholders. The level of scrutiny they are being subjected to will only increase.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance Insolvency Turnaround

Is the death of Thomas Cook a sign of more to come in the travel industry?

travel industry in trouble?Commentators have been quick to predict the death of the package holiday and in some cases of much of the travel industry following the demise of Thomas Cook in September.
But is this really the case?
Johan Lundgren, the chief executive of easyJet, argues that it is too soon to predict the demise of the travel industry, or indeed of package holidays.
In an article in the Daily Telegraph he says: “sales of holiday packages have grown faster than the economy every year for the past 10 years”.
There is no doubt, however, that technology has made a significant difference to the way people search, book and pay for their holidays.
Lundgren acknowledges that requirements and buying methods have changed significantly: “Rapid development in technology and AI, combined with a focus on data now allows the customer to find holidays suited to them online”.
Holiday companies, he said, needed to invest in technology to support customer interactions.
The tour operators trade body ABTA (Association of British Travel Agents) said 51% of people it surveyed in July had taken a package holiday in the past year, up from 48% in 2018.
According to statistics from the Office for National Statistics (ONS), the number of package holidays taken in the UK has been rising steadily since 2014, reaching 18.2m last year.
In its latest quarterly bulletin on overseas travel in general, published in September, the ONS results found that UK residents spent £4.5 billion on visits overseas in June 2019 (1% more than in June 2018), however, they made 6.8 million visits overseas in June 2019 (7% fewer than in June 2018).
There are also plenty of successful small, independent local travel agents offering tailored packages to fit customers’ requirements. We know of at least three in Suffolk alone and there are doubtless many more around the country.
So clearly once people have decided where they want to go and what they want to do, they still feel the need for someone to take care of the details and to have the assurance of having someone available should things go wrong.
Furthermore, the price paid by consumers and amount received by holiday providers might provide a clue to why travel operators and package travel companies ought to survive. Most online purchases, in particular for accommodation, are now handled by firms like booking.com, trivago.co.uk or tripadvisor.co.uk who charge hotels up to 30% of the package. This is a huge margin for travel companies to exploit.
So, what happened to Thomas Cook?
The company was launched in 1841 by a Derbyshire preacher, Thomas Cook, and became one of the world’s biggest companies to offer “integrated holidays” (ie package holidays).
The company issued two profits warnings in 2018 and in May revealed it was carrying huge amounts of debt – around £1.2bn. According to the Financial Times, many of its wounds were self-inflicted: “Successive managements allowed debts to balloon. The company revealed a debt pile of £1.2bn in May and recorded a £1.1bn write-down from its ill-fated acquisition of MyTravel, a UK rival. About one-third of Thomas Cook’s sales was spent just on servicing its loans”.
Generous remuneration to its executives, including an estimated £20m in bonuses and payment of more than £8m over the past five years to chief executive, Peter Fankhauser, have also been cited as excessive.
The company also received, and declined, five offers for its profitable airline operation and as if that were not enough, the FCA (Financial Conduct Authority) is investigating EY’s audit of the company’s accounts.
The German international broadcaster, Deutsche Welle, has speculated that opaque private equity deals amid low interest rates may also have played a part in its collapse.
Arguably an out-dated business model depending too much on high street retail outlets and a failure to adopt modern technology will have contributed too.
But while there will undoubtedly be casualties among travel firms that fail to adapt their business models and practices to modern consumer requirements, and, of course, the whole industry is vulnerable to the volatility of consumer confidence in the context of an eventual post-Brexit future with fears about job security, it would be unwise to predict the death of the travel industry as a result.
 

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Banks, Lenders & Investors Business Development & Marketing Finance Rescue, Restructuring & Recovery

WeWork reminds us why we should not rely on charismatic leaders and the investment bank advisers who flatter them

WeWork corporate hubrisThis week the new management of WeWork the business space property rental company announced that it was preparing to axe 2,000, or 13%, of its workforce.
It has been calculated that up to 5,000, or a third, of the workforce will ultimately have to go.
This is the latest episode in an increasingly sorry saga, which last month saw its co-founder Adam Neumann step down as chief executive and relinquish control over the company. Mr Neumann also returned $5.9m worth of stock to the firm, which he had controversially received in exchange for his claim over the “We” trademark.
After announcing its intention to launch on the US stock market earlier in the year, the company, which has more than 500 locations in 29 countries, had to postpone its plans when its viability and corporate governance came under closer scrutiny.
The business, which was estimated to be worth some $47bn when the intended float was first unveiled has since had its credit rating downgraded by the ratings company Fitch to CCC+ with a warning that its liquidity position is “precarious”. Earlier in September, Reuters had reported that the We Company could seek a valuation in its initial public offering (IPO) of between $10bn and $12bn, far below the $47bn at the start of the year. This figure is very different to valuations proposed for the IPO work reported in the Financial Times as between $46bn and $63bn by JP Morgan Chase, between $61bn and $96bn by Goldman Sachs and between $43bn and $104bn by Morgan Stanley.
These values were despite WeWork reporting a loss last year of $1.9 billion from revenue of $1.8 billion, these figures almost double those for 2017.
The recent turmoil is no doubt behind the recent announcement by two of its large landlords in London who have said they will not be signing new leases with WeWork for the foreseeable future.
Yet, there are other companies operating similar business models, such as the UK listed IWG group that owns the Regus brand which reported a net profit of £106 million from revenue £2.5bn. Two other similar business would also seem to be doing well: The Office Group and The Argyll Club formerly London Executive Offices.
As for valuations, IWG’s market capitalisation is about £3.5bn which is far lower than those proposed for WeWork but as a listed company might be more realistic.
Another example of value for a similar business model is the sale in October 2018 for £475 of London Executive Offices that had been up for sale for two year sale after an initial valuation in 2016 of £700m.

Hubris eventually catches up

Much has been made of the character and lifestyle of Adam Neumann, not least the mixing of work and pleasure, which was also part of the WeWork culture, one that offered that will offered employees “every millennial-style benefit under the sun”, which may not be right for a property letting company.
He was famous for statements like “Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”
Clearly his character initially charmed the company’s Japanese investor SoftBank, which owns 30% of the company and whose reputation arguably contributed to the initial IPO valuation of $47bn.
However, since then, potential investors have questioned its opaque corporate structure, governance and profitability. They have also questioned the links between Mr Neumann’s personal finances and WeWork.
The whole sorry saga, I would argue, is more about the initial credulous nature of the company’s investors and their belief in Mr Neumann, and less about a business model which has worked well for other similar companies. And the investment banks haven’t helped.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance Insolvency

‘Caveat Emptor’ Is peer to peer lending too risky for peers?

peer to peer lending house of cardsPeer to peer lending (P2P) enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman.
As such, the lack of trust in middlemen has seen the emergence of peer to peer lending platforms as an attractive proposition for retail investors in a climate of low interest rates because they can offer better rates thanks to the lower overheads associated with online businesses. The lower overheads are also related to not having to pay a middleman!
The platforms are generally a website or app that facilitates this alternate method of financing, where the first emerged in 2005 and was brought under FCA (Financial Conduct Authority) regulation in 2014.
However, the FCA has been criticised as being too “light touch” in its oversight following the collapse in May this year of UK property finance peer to peer firm Lendy with £160m in outstanding loans of which it has been calculated more than £90m are in default.
According to CityAM, Lendy was placed on a FCA watchlist last year amid concerns about its inability to meet the standards required of regulated firms. Its subsequent failure is believed likely to result in retail investors losing £millions.
The demise of Lendy came a year after the peer to peer platform Collateral UK went into administration, reportedly, according to the website crowd funder insider, after it was discovered that it had wrongly believed it was authorized and regulated by the FCA under interim permission.
FCA chief Andrew Bailey has been reported as saying that the decision to authorise Lendy had been taken to reduce consumer harm, as refusing authorisation may have risked greater damage.
However, Adam Bunch of the Lendy Action Group, which claims to represent about 900 investors, said: “FCA authorisation was seen by investors as a stamp of credibility. Only now, after the platform has failed, do we learn that the regulator in fact saw authorisation as a way to contain a badly run business”.
I would add that the reference to ‘investors’ worries me since there seems to be no distinction between shareholders, secured lenders and unsecured lenders nor any understanding of ‘caveat emptor’.
Indeed, Lendy was a lending platform and there is no mention of the peers as retail lenders who have a prior ranking claim over investors (shareholders) but I am sure it highlights the ignorance among retail investors and lenders who might be better off seeking advice from professionally qualified middlemen.
Not surprisingly, there have been growing calls for tighter FCA regulation of peer to peer lenders and in June, following consultations, the FCA launched new, tighter regulations, most of which will come into effect in December this year.
They include introducing more explicit requirements to clarify what governance arrangements, systems and controls platforms need to have in place to support the outcomes they advertise and a requirement that an appropriateness assessment (to assess an investor’s knowledge and experience of P2P investments) be undertaken, where no advice has been given to the investors and lenders.
In September the FCA also warned peer to peer lenders to clean up poor practices or face a “strong and rapid” crackdown.
Whether this will be enough to stem the reported exodus of investors’ money from peer to peer lending and to better protect them remains to be seen.
However, the warning to potential investors remains as it has always been to not invest any money you can’t afford to lose.

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Business Development & Marketing Cash Flow & Forecasting Finance Rescue, Restructuring & Recovery

Recession, imminent or not is it time to ban the word?

recession storm cloudsRecession is a word that has immense power, striking apprehension into the hearts of businesses, politicians and consumers alike.
Talk of a recession can also precipitate the very economic conditions that are so feared and it is worrying that the word is currently appearing regularly in the daily news media.
But is recession a useful concept especially in the context of increasing pressure to move to sustainable, rather than perpetual, economic growth, in order to combat climate change and global warming?
Should we keep growing?
The generally-accepted definition of a recession is, according to the Business Dictionary: a contraction in the GDP for six months (two consecutive quarters) or longer. It goes on to say: “Marked by high unemployment, stagnant wages, and fall in retail sales, a recession generally does not last longer than one year and is much milder than a depression. Although [they] are considered a normal part of a capitalist economy, there is no unanimity of economists on its causes.”
So, by these measures, the UK has its highest ever employment and rising wages and is not in recession. On the other hand, it is suffering from falling retail sales, apparently now online as well as on the High Street, as a result, we are told, of declining consumer confidence and worries over future job stability.
Clearly, an imminent recession has been a worry for some time, at least as far as the media has been concerned.
Over the course of the last two months, every time the latest confidence and productivity figures have been announced it has prompted speculation.
In early September, the Sunday Times reported data from MakeUK and BDO who both indicated falls in factory output and from the CBI (Confederation of British Industry) whose latest growth indicator showed a continued decline in services and distribution volumes.
Later in the month these same two bodies were reporting that domestic orders in the UK manufacturing sector had declined in the third quarter for the first time in three years as well as reporting weakening export orders.
Purchasing managers’ monthly indexes from IHS Markit/CIPS throughout the month showed declining confidence in the services, manufacturing and construction sectors.
And so it went on until by the start of October, the Guardian was claiming that a recession was on the way.
In view of the persistent pessimistic data one might wonder how we are not in a recession.
It might be explained by the alternative views based on other data. For example, the Economist carried an opinion piece that pointed out that the last two recessions, between August 2000 and September 2001, and then in 2008, had been as a result of “epic financial crisis” accompanied by stock market crashes.
It then argued that a recession was as much a matter of mood as it was of any reliable economic signals and signs.
Meanwhile on September 27 David Blanchflower, Professor of economics at Dartmouth College in the US and member of the MPC (Monetary Policy Committee at the Bank of England) from 2006-09, argued that the UK was already in recession, even though the conditions for the technical definition had not yet been fulfilled.
Ah, so it is down to the definition of recession. Is a recession now like news: fake or real? And what is a technical recession?
Blanchflower based his argument on the fall in “how businesses are doing on turnover, capacity constraints, employment and investment intentions” arguing that since GDP figures are actually regularly revised after their initial announcement they cannot be used as an indicator of recession.
Confused? That’s no surprise!
This is why I am suggesting that the widespread use of the term is less than helpful to businesses trying to navigate their way through the admittedly uncertain landscapes of imminent Brexit, global trade wars and political mayhem.
They would be much better served by focusing on their cash flow, balance sheets, growth plans and other data in order to remain sustainable and profitable, whatever the surrounding, feverish “mood music” of recession talk.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance Insolvency Rescue, Restructuring & Recovery

Sector update: have there been improvements in care home viability?

care home viabilityIt hardly seems any time since I last assessed the viability of the UK’s care home sector, but in the light of recent developments with one of the UK’s largest providers it’s time for an update.
The last blog in December 2018 focused on the implications of the collapse of Southern Cross in 2011. This time it has been prompted by reports this month that Four Seasons, Britain’s second-largest private care home provider with around 320 sites and 22,000 staff, has confirmed it has failed to pay rent on time. It is being seen as a negotiating tactic in order to cut bills, but is this really the case?
Its latest troubles began in 2017 when its owner Terra Firma was unable to pay interest on its debts, most of which are owned by private equity firm H/2 Capital Partners who took control and have overseen the group since then.
The business, which has more than £700 million in debts, appointed Alvarez & Marsal as administrators in April 2019. While the administrators have sought a buyer, it would seem most likely that H/2 will end up cherry picking the best homes and roll its debt into a new vehicle.
An estimated 70% of the care homes in England are small, mainly family-run businesses, while around 30% are owned by overseas investors, according to information published by the LSE in May this year.
In the LSE’s view many of the latter group of owners: “view them as assets for extracting large sums in the form of interest payments, rent and profit”.
In 2014 after the Southern Cross debacle the sector regulator CQC (Care Quality Commission) introduced a new requirement – a statement of financial viability, in a bid to ensure there were no repeats of the situation.
However, it clearly has not worked.
In August this year the insurance provider RMP published an assessment of the current state of care home viability, in which it quoted findings by Manchester University that “the financial models for nearly all the larger private equity-owned care home chains carry significant external debt and interest repayments”.
In addition, it said that spending by local authorities on social care had fallen while at the same time as costs have risen. This rise is attributed to a number of factors several of which are being related to Brexit: difficulties in staff recruitment and retention, restrictions on immigration numbers and, increases of the minimum wage.
Indeed, the GMB Union cites concern from the newly-published Operation Yellowhammer documents regarding the sector: “The adult social care market is already fragile due to declining financial viability of providers. An increase in inflation following EU exit would significantly impact adult social care providers due to increasing staff and support costs, and may lead to provider failure, with smaller providers impacted within 2 – 3 months and larger providers 4 – 6 months after exit”.
The Yellowhammer document, it says, therefore advises planning for potential closures and the handing back of contracts.
Despite these problems, demand outstrips supply in most local authorities, with an estimated current shortage of 65,000 care home beds, while a recent report by Newcastle University finds that an additional 71,000 care home spaces will be needed in the next eight years.
Clearly, funding the cost of care homes is itself in need of urgent attention and support. Call in the restructuring advisors?

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Cash Flow & Forecasting Insolvency Rescue, Restructuring & Recovery Voluntary Arrangements - CVAs

High Court CVA clarification for landlords

High Court ruling for landlords on CVARecently in the High Court landlords challenged the validity of the CVA (Company Voluntary Arrangement) that was approved for the High Street Debenhams retail chain.
The store chain had announced that its restructuring plan based on the closure of 50 stores and rent reductions for up to 100 others.
Major shareholder Mike Ashley, owner of Sports Direct, had sought to challenge the CVA after the board of Debenhams rejected his offer to buy the chain for £200 million. His shareholding was wiped out when the company went private as part of the rescue and restructuring deal, which was approved by 80% of its landlords.
Although Ashley withdrew his own challenge to the CVA, he continued by backing a legal challenge from Combined Property Control Group (CPC) as landlords who owned several properties.
According to CMS Law the five grounds of the CPC challenge were:

  1. Future rent is not a “debt” and so the landlords are not creditors, such that the CVA cannot bind them;
  2. A CVA cannot operate to reduce rent payable under leases: it is automatically unfairly prejudicial;
  3. The right to forfeiture is a proprietary right that cannot be altered by a CVA;
  4. The CVA treats the landlords less favourably than other unsecured creditors without any proper justification;
  5. There is a material irregularity: the CVA fails to adequately disclose the existence of potential “claw back” claims in an administration.

Items 1, 2, 4 and 5 were rejected by the High Court, although item 3 was upheld, meaning that the landlord retains the right of re-entry and to forfeit a lease and therefore this right cannot be modified by a CVA.
This means that if they choose to, landlords can take back their property, although in the current perilous circumstances in the retail sector it is questionable if this would be in their interests given the difficulties they might have in finding an alternative tenant and their liability for rates even when the property is vacant.
The findings did however leave open the prospect of a challenge over the reduction in the rent value if it could be proven that it was below the current market value.
Given the growth in the use of CVAs to exit unwanted leases and reduce rent in the struggling High Street retail sector, the High Court judgement is to be welcomed, both for those retailers hoping to survive by restructuring their businesses onto a hopefully more sustainable footing by reducing their overheads, and for landlords, who now have some clarity about their position in such cases.

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Business Development & Marketing Cash Flow & Forecasting Finance General Turnaround

The state of manufacturing in the UK and globally – October Key Indicator

the state of manufacturing - redundant machinesThis month’s Key Indicator looks at the state of manufacturing in the UK and globally and by all indications, it is struggling everywhere.
While the proportion of manufacturing as a part of individual national economies varies all economies depend on trade with each other and in an interconnected world a slowdown in one place can have a significant impact on others.
China is currently the No 1 in the world in terms of manufacturing output valued at $2,010 billion representing 27% of national output. USA is second ($1,867, 12%); Japan third  ($1,063, 19%); followed by Germany ($700, 23%); South Korea ($372, 29%); India ($298, 16%); France ($274, 11%) and Italy ($264, 16%).  The UK trails these countries in ninth place with $244 billion manufacturing output representing 10% of national output.
Poland meanwhile has the highest percentage of its workforce employed in manufacturing, followed by Germany, Italy, Turkey, and South Korea.
In the UK, manufacturing makes up 11% of GVA, 44% of total UK exports and directly employs 2.6 million people. In fact, in August according to IHS Markit/CIPS the UK manufacturing sector fell to a seven-year low.
The CBI (Confederation of British Industry) monthly survey showed that manufacturing order books fell in September to -28 from -13, well below consensus expectations of -16%. While food, drink and tobacco and mechanical engineering drove positive growth, metal manufacture, metal products and textiles and clothing pulled in the opposite direction.
However, figures everywhere over the last few months make grim reading.
IHS Markit’s latest snapshot for September of Germany’s manufacturing growth, where a score under 50 signals contraction, slid to 41.4, the worst reading since June 2009. In fact, the entire Eurozone is experiencing a contraction, according to official data from Eurostat, the statistical office of the European Union in Luxembourg.
In China, Reuters reports that growth in industrial production in August was at its weakest in more than 17 years while in the USA, too, the New York Times reported that in August the manufacturing sector contracted again as it had in July, albeit manufacturing accounts for just 11-12 percent of the country’s gross domestic product.

What is causing the current state of manufacturing in the UK and globally?

In a word, uncertainty is the theme everywhere, but while the primary causes may differ around the world, in many ways the underlying reasons are politics and market economics.
There are two ongoing conflicts: 1. between those who advocate stimulating economies and those who believe we should live within our means; and 2. between those who believe in market forces and those who seek to control them whether by tariffs, duty, currency control or exchange rates.
In September the USA introduced yet another set of trade tariffs on Chinese imports as part of the ongoing trade war launched by US president Donald Trump. The question is what next as tariff talks between the two are due to resume in October.
In the UK, clearly, the ongoing uncertainty is primarily over when, if or whether the country will finally resolve its various dilemmas over leaving the EU at the end of October as Prime Minister Boris Johnson continues to promise.
Manufacturers anticipate that output volumes will fall briskly over the next quarter and that output price inflation will accelerate in the next three months, above the long-run average. Anna Leach, deputy chief economist at the CBI, said: “UK manufacturers have become noticeably gloomier in September.”
However, arguably the three-year Brexit wrangle has had its repercussions well beyond the UK as manufacturing supply chains are so closely interwoven across the EU. The effects of the reduced value of £Sterling against the Euro and other currencies has added significant costs to importing of raw materials and components, which has had a significant impact on the automotive industry particularly.
There is little sign that the politicians will shift their stance on the big issues but the one element that so far does not seem to have been factored into the arguments is the effect of climate change and the damage to the environment.
This is an issue that has become so pressing that it is just faintly possible that it could prompt a radical rethink in the way businesses trade globally, the way goods are manufactured and what goods will, or should, be made in the future, and above all on how national and global economies should measure economic success.
Perhaps this presents an opportunity for SMEs to come up with new and innovative ideas that will promote sustainable growth without the endless competition that currently seems to dominate the discussion?

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Accounting & Bookkeeping Cash Flow & Forecasting Debt Collection & Credit Management Finance Insolvency

Can SMEs afford to wait any longer for a business rates review?

business rates review is urgent for businessesRetailers have been calling for months for a business rates review as the decimation of the UK’s High Street continues.
In early August more than 50 leading retailers wrote to the Chancellor ur