How can SMEs manage credit control and late payment effectively?

Prompt Payment Code: late payment penalty?There is no doubt that getting invoices paid on time can make a significant difference to SMEs’ cash flow and the lack of cash due to late payment can make or break a business.

Clearly, there are cash flow advantages for those late payers who string out paying their invoices for as long as possible, while the opposite is true for those waiting on the receiving end, often SMEs.

Towards the end of last year Xero Small Business Insights calculated that the average British small business is owed £24,841 in late payments on any given day.  It is clear that Government initiatives, such as getting businesses to sign up to its Prompt Payment Code, are proving less than effective. A year after the appointment of Paul Uppal, the small business commissioner, it was announced that his service had recovered just £2.1m in unpaid invoices on behalf of small companies. Pitiful!

All this has prompted the Government’s Business, Energy and Industrial Strategy Committee to call, yet again, for firms to sign up to the Prompt Payment Code and for the Small Business Commissioner to be given the power to fine companies that pay late. It says large firms should be legally forced to pay their small suppliers within 30 days.

In January Mr Uppal announced a traffic light warning system to be used to name and shame large firms that fail to pay their suppliers on time.

Will this strike terror into the hearts of persistent late payers and force a change of behaviour? I think not, although making it a criminal offence for directors would work, as currently is the case for HMRC’s Security Demands.

Do SMEs do enough to protect themselves from late payment problems?

Annual research by Bacs Payment Schemes showed that in 2018 small businesses in the UK faced a bill of £6.7bn to collect money they are owed by other companies, up from £2.6bn in 2017.

It is a problem that the FSB (Federation of Small Businesses) estimates is the reason for the collapse of around 50,000 businesses a year.

Some, however, would argue that SMEs should take more responsibility for and be more aggressive in recovering monies owed for the work they have done in good faith, but it’s hardly a level playing field. The cost of money claims through the courts is now horrendous.

Of course, a well-managed business should have a robust credit control system in place, which sets clear expectations from the moment it contracts for work, including a stated agreement with the client that invoice payment will be due within a defined number of days, usually 30.  It is wise to also credit check all new customers. It is also wise to check payment is scheduled for payment before it is actually due; this deals with most excuses in advance.

Payment should be made as easy as possible with online banking details and address for postal payments included on all invoices. If it is feasible perhaps a small discount could be offered to those who pay early or within a stated time period. A supplier to one of my manufacturing companies offers 90 day payment terms with a 40% discount if payment is made within 30 days. That’s my margin so late payment is painful.

The credit control system should also have clear, robust procedures for following up on late payers, from sending out reminder letters that make it clear that failure to pay will likely incur significant costs and disruption such as suspension of the account.

However, even with a robust system in place, and one on which the business acts, there may still be late payment problems and SMEs can use such services as factoring, where another company takes on responsibility for collecting and chasing invoices, or invoice discounting, where, again, another company takes on the task of chasing invoices but with the SME having ultimate control.

In both cases, however, these are fee-paying services, effectively “lending” money up front to the SME at less than the full value of the outstanding invoices. If you use such services do be aware that many have a recourse clause so make sure to check if you remain liable or have to reimburse the lender.

While borrowing against book debts might improve an SME’s cash flow, it comes at a price and often with hidden additional costs and conditions in the small print. This is where an independent broker, not an online one, is a useful ally when looking for book debt finance.

Another option is to take out credit insurance although this normally only pays out in the event of your customer going bust and doesn’t solve the late payment problem.

Why should a business have to pay extra/ lose part of its revenue in order to recover money promptly for work it has done in good faith?

What is needed is robust, effective legislation, and follow-up action, with sufficient teeth to eradicate this persistent problem once and for all.

A free guide to debt collection for SMEs is available for download at:

https://www.onlineturnaroundguru.com/p/getting-paid-on-time

Is your business barely managing and if so why?

Business barely managing in stormEvidence suggests that many UK businesses are barely managing when compared to foreign-owned businesses of equivalent size operating in the UK.

At the moment it is easy to blame everything on the uncertainty surrounding the outcome of the UK’s negotiations to leave the EU, especially as political positions remain entrenched and seemingly irreconcilable with just 40 or so days to go before the deadline.

As the most recent productivity figures from the ONS (Office for National Statistics) showed, productivity and output per hour fell to their weakest in two years at the end of 2018, prompting FSB (Federation of Small Businesses) Chairman, Mike Cherry, to opine: “”Productivity data demonstrates exactly what a prolonged period of uncertainty does to an economy. Small business confidence has dropped to its lowest point since the financial crash, with four in ten firms expecting their performance to worsen.”

Of course, Brexit has prompted more businesses to divert their attention to do such things as stockpiling raw materials or components to mitigate any potential supply chain disruption, and of course, investors have been holding onto their money during this period of uncertainty.

It has also been suggested that another inhibitor to SME growth and scaling up has been what is known as the Seven-year Rule, whereby tax breaks for investors, made through tax-efficient venture capital trusts or via the enterprise investment scheme (EIS), are only accessible to companies for seven years after they make their first sale. This, it is argued, makes it harder for SMEs to access the finance they need to scale up.

Is business barely managing a “British Disease”?

However, in this context I would argue Brexit is a distraction and a convenient excuse for poor productivity and that the answer lies in the way UK businesses value, or actually don’t value, their people.  This is backed up by plenty of research from many sources.

According to the Guardian business and economics opinion writer Philip Inman there is a significant difference in productivity between the way foreign-owned businesses in the UK and UK-owned ones are run.

According to ONS figures foreign-owned businesses make up one in four of large UK-based businesses and are twice as productive as their domestically-owned equivalents. When it comes to medium-sized companies the foreign owned ones are about three times as productive.

Why should that be?

There is, argues Inman, plenty of evidence that the foreign-owned UK businesses pay attention to two things that affect productivity: processes and structure.  The ONS has found that there is a positive link between attention to these two and productivity.

Other researchers have argued that UK businesses do not value or pay enough attention to good middle-tier management, especially in family-owned firms that have been running for more than three generations.

Middle managers often have little management training or support and this leads to a lack of confidence among both senior managers and workers that their ideas are valued and suggestions acted upon.

UK businesses of all sizes clearly need to pay more attention to their people skills and competence, their processes and structure, especially once they find themselves cast adrift on post-Brexit competitive waters.

What’s ahead for the retail sector in 2019? – February sector focus

retail vanishing from high streets?It has been obvious for some time that the High Street is undergoing massive changes as online shopping gains a growing share of the retail pie.

Not a week goes by without another announcement of a “big name” closure or restructure and the New Year has been no different after mediocre Christmas sales with Hardy Amies and HMV falling into administration for a second time, Patisserie Valerie and Odd Bins filing for insolvency and Marks & Spencer announcing further store closures as part of its ongoing restructuring.

The figures make gloomy reading.

Deloitte says it has been instructed by more than 20 struggling high street chains in the past two months to assess whether they are eligible for restructuring their debts and lease obligations, according to the Sunday Times.

Towards the end of January the Guardian carried out a survey of the decimation that has beset High Streets in 88 major town centres in England and Wales and found that they have lost 8% of their shops on average since 2013.

Some have fared worse than others with Stoke on Trent topping the list with a loss of 23% of its 415 stores in five years.

Clothing and restaurant chains have fared worst, according to the research, but, surprisingly perhaps, charity shops have also been hit.

By contrast it also revealed that “a thousand extra hair and beauty salons have sprung up in our town centres”. Also, convenience stores and independent supermarkets have also grown in almost all town centres.

The stresses and strains on the retail sector

In common with other businesses, but arguably having more impact on SMEs, retail has had to contend with rising minimum wages and pension contributions for staff.

But added pressure has come from the high cost of rent and of town centre business rates, both of which the online retailers escape. Online retail now accounts for 20% of consumer retail spending, which adds to the pressure on High Street retailers as consumer buying habits change. This 20% figure when compared with 8% of shop closures would suggest there are many more closures to come.

At the moment, there are signs that worry about the future of jobs and the unknown impact of Brexit is currently putting a dampener on consumer spending and confidence.

Is there any light in 2019 at the end of the High Street retail tunnel?

Certainly, the Sports Direct owner Mike Ashley seems to think so, as do some others.

HMV has just been purchased by a Canadian business, Sunrise Records, although 27 stores will be closed as part of the deal.

Mike Ashley has purchased a share in House of Fraser stores and Evans Cycles to add to his growing portfolio and has recently had some success in renegotiating rents with landlords in some shopping centres, saving some House of Fraser stores that had been under threat. He is also laying siege on Debenhams hoping to pick up another High Street trophy.

Ashley has been vocal in calling for a complete rethink on business rates and for a 20% sales tax to be imposed on online retailers which would help justify his acquisition strategy.

Sir John Timpson has also called for business rates to be replaced with a sales tax operating in a similar way to VAT.

The MP Grant Shapps has also called for radical action to save the High Street, including a reduction in business rates with which he claims the government has so far only “tinkered” with.

These calls have also been backed by Mike Cherry, chairman of the FSB (Federation of Small Businesses), adding “A healthy high street should be diverse – not just featuring retail but also hospitality, services like hairdressers as well as gyms and shared workspaces for the self-employed. High parking charges and a lack of spaces often put off shoppers from visiting town centres, instead favouring out-of-town retail parks with free parking.”.

To add weight to their argument the OECD (Organisation for Economic Co-operation and Development) has said Britain has the second-highest property taxes in the world with business rates, council taxes and stamp duty making up £1 of every £8 collected by the Treasury.

In a sign of some movement in December it was announced that Nicky Morgan MP, chair of the Commons Treasury Select Committee, will hold a joint evidence session with the Housing, Communities and Local Government Committee to agree the terms of a new inquiry into the business rates system.

The death of the High Street has been predicted for some years but there are signs that some people feel there is life there yet, subject to some radical rethinking and tax reform.

The state of UK exporting – our February 2019 monthly Key Indicator

UK exporting on the rise?The health, or otherwise, of UK exporting is perhaps an obvious focus for my monthly Key Indicator as the deadline for the UK’s exit from the European Union moves inexorably closer.

Firstly, some positive news; according to the ONS (Office for National Statistics) the number of British firms trading internationally rose by almost 16,000 last year, an increase of 15,900 last year to 340,500, which now represents 14.3% of total non-financial businesses in the UK. Non-financial services made up 53.1% of Britain’s international traders.

On a trade mission to China in November which was focused on the food and drink industry, Government Minister David Rutley was reported to have said the sector’s exports had doubled in the last three years.

Meanwhile in December the CBI (Confederation of British Industry) reported that factory orders for exports had increased for the second month in a row. Production expanded in 15 out of 17 sub-sectors, led by food, drink, tobacco, mechanical engineering and chemicals.

Which countries are UK exporting’s largest trading partners?

Wikipedia has a useful list, showing that the top five of the UK’s trading partners are, in first place “non-EU partners”, then the EU as a whole, followed by Germany, The US and China. Japan comes in at number 17, India at 20 and Saudi Arabia at 23.

While Wikipedia’s information depends heavily on the knowledge and accuracy of its voluntary contributors, some of this is borne out by ONS information in a 2017 paper that also indicates that the UK is seeking to strengthen trade with non-EU countries like China, India, the United States, Australia and New Zealand.

Nevertheless, the EU countries remained at the top of the list, according to the most recent ONS figures: “In 2016, the EU accounted for 48% of goods exports from the UK, while goods imports from the EU were worth more than imports from the rest of the world combined.”

According to the ONS, in 2016 Exports to the rest of the world were worth £284.1bn while to the EU it was £235.8bn which represents a decline in the share of UK exports of goods and services to the EU from 54% in 2000 to 43% in 2016.

The special relationship with the USA remained important, said the ONS paper, with UK exporting in surplus and valued at £100 billion, “more than twice as much as exports to any other country”.

So what of the future of UK exporting post Brexit?

There are inevitably many uncertainties about the future.

The Financial Times, for example, reported in mid-January that a Whitehall memo had revealed that Britain has so far failed to finalise most trade deals needed to replace the EU’s 40 existing agreements with leading non-EU economies.

Also, in contrast to the optimistic indicators above, the December 2018 IHS Markit’s industry survey on manufacturers reported that while only one in ten were expecting a contraction in the early months of 2019, less than half were expecting output to be higher over the year ahead.

The survey also reported that new export orders had slowed for a second consecutive month with fewer customers from overseas being interested in business, although the consumer goods sector was the one exception.

Perhaps the major factors that will determine UK’s future level of exports are the China/US trade war and China’s growth slowing. Certainly, many UK businesses are spending money on stockpiling parts, raw materials and goods to protect their just in time production processes and in doing so they are not investing in growth, which makes predictions for the future very difficult.

 

Sharp rise in personal insolvencies in 2018 – what might it mean for your SME?

Personal insolvencies - counting the penniesClearly many individuals are finding it hard to cope with rising prices, low wages and ongoing austerity given the latest personal insolvency figures published by the Insolvency Service this week.

Personal insolvencies in 2018 totalled 115,299, a 16.2% rise on 2017 and the highest level since 2011, according to the Insolvency Service.  The majority of these were IVAs (Individual Voluntary Arrangements) which hit 71,034, a record level and an increase of 19.9% on 2017.

Company insolvencies also continued to rise; at 16,090 in 2018 they were their highest level since 2014. The majority, 63.9%, were CVLs (Creditors Voluntary Liquidations).

The top three business sectors for insolvencies were construction, wholesale and retail trade, accommodation and food services.

What does the rise in personal insolvencies mean for SMEs?

The knock on effect of personal insolvencies is consumers reining back on their spending, as they have clearly been doing for some time and most noticeably for retail over the Christmas period. Other types of business will also be impacted.

Given the dire warnings about prices depending on the outcome of Brexit, consumers’ confidence is looking unlikely to improve any time soon.  This is not helped by the week’s announcement by Tesco of a possible cut of 9,000 jobs and worries in parts of the country about the future of employment such as in the automotive industry and for SMEs within its supply chain.

It is also likely that the changes in retailing will continue with more High Street shops closing.

For SMEs, especially those dependent on consumer spending, the likelihood is that they will have to not only scrupulously manage their cash flow and planning but also ensure their invoices are paid on time. They may also be well advised to strengthen their marketing initiatives and those “extra services” that serve small, independent businesses so well by retaining loyal customers.

In these difficult circumstances, to borrow a well-known phrase, “every little helps”.

Are we facing recession in 2019 and is it time to redefine growth?

the effects of a recession can be devastatingThere is no doubt that uncertainty and pessimism are dominating predictions for both global and national economies at the start of the year.

The question is whether this uncertainty will develop into full-blown recession

The official definition of a recession in Investopedia is “a significant decline in economic activity that goes on for more than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP).”

The whole definition is based on the definition of GDP and what is continuous economic growth. While implied, there is little about living standards, getting people out of poverty or growth of employment.

By many measures there are worrying signs of a slowdown. However as noted by the IMF (International Monetary Fund) at this month’s Davos meeting of the WEF (World Economic Forum) a recession is by no means certain.

The IMF predicted global growth of 3.5% in 2019. In October, it forecast 3.7% and for the UK, growth of about 1.5% this year and next, but it also says there is substantial uncertainty around the figures, given uncertainty over the Brexit outcome and ongoing trade wars particularly between China and the USA.

Are there pointers towards recession in the UK?

In some sectors, notably retail, house price growth and motor manufacturing, the trend has been inexorably downwards.  Consumers, too, have been reining in both their borrowing and their spending.

However, while stresses in the economy may be building, they are not at a critical point yet. In manufacturing as a whole, the IHS Markit/ CIPS UK Manufacturing PMI increased to 54.2 in December 2018 from an upwardly revised 53.6 in November.

Employment, another critical recession indicator, is also at an all-time high. But with businesses already announcing job cuts or moves to Europe ii there is no Brexit deal, and an estimated 70,000 retail jobs lost in the past year it will be interesting to see how the employment figures hold up over the coming year.

How will a switch to sustainability impact on traditional measures for recession?

The urgency of tackling climate change has never been greater, nor the time shorter, and there is increasing awareness that economic models based on perpetual growth, especially in those countries reliant on consumer spending, are going to have to be replaced by models that embrace sustainability.

It is possible, therefore, that the idea of recession as defined at the top of this article, will carry significantly less weight in any sustainability model.

The question is whether we need to think more radically to find a new and more appropriate definition of an economy’s health and success rather than using some theoretical construct if we do move to improve the future for everyone.

Our monthly look at the global macroeconomic climate

The global macroeconomic climate under the spotlight in DavosIt’s January so that means it’s time for the annual gathering of the “great and the good” at the World Economic Forum in Davos.

This year, by contrast to January 2018, there is more than a tinge of gloom about the proceedings from which both US President Donald Trump and UK Prime Minister Theresa May will be missing due to more pressing issues at their respective homes.

So far, there have been two stand-out revelations about the global macroeconomic climate, neither of them encouraging.

According to a survey carried out by PwC “Pessimism among chief executives has risen sharply in the past 12 months as the leaders of the world’s biggest companies have taken fright”, a sixfold increase since January 2018. Their concerns have been largely attributed to increasing protectionism, or nationalism as some would have it, notably in Turkey, Poland, Italy and the USA and to the deteriorating relationship between the USA and China as a result of the ongoing trade war instigated by Trump.

The IMF (International Monetary Fund), too, has issued a warning of escalating tensions, not only from the aforementioned trade war, but also because of the ongoing indecision, indignation and intransigence that is besetting all participants in the still inconclusive negotiations for UK leaving the EU, aka Brexit.

Brexit concerns are clearly having an impact on the UK economy, which the ONS (Office for National Statistics) revealed has been stagnant for the last three months of 2018. Both the manufacturing and pharmaceutical industries performed particularly poorly and there has been a marked reduction in export demand.

Arguably, however, there are also repercussions elsewhere, some economic, some political.

Germany has experienced slowing growth, Italy’s financial markets remain unsettled by the now-resolved argument over its budget, which planned increased spending. China’s growth, too, has slowed markedly.

Indeed, there are signs of weakness in the European economy with the prospect of a recession and likely need for the European Central Bank to give more support for some countries.

Arguably, the UK’s dogged determination to leave the EU Is contributing to EU’s problems and strengthening populist/ nationalist demands that are also undermining the global economy.

Then there is the increasing urgency to tackle both climate change and the vast income inequalities that exist in many developed and developing economies.

All in all it looks like the global macroeconomic climate at the start of 2019 is for the time being decidedly stormy.

How do businesses develop managers to become good leaders?

good leaders helping othersAmbitious people often aspire to becoming senior managers in their organisations and some achieve their goal, but how much thought is given to whether they will be good leaders?

Training is essential for many professions but in many businesses, it is often the case that people are promoted into management jobs because they were good at something else.

While the individual may have been a top performer in their role, it is rarely asked whether that makes them capable of managing other people performing those roles.

Unfortunately, the skills required to manage people well are often a completely different to the skills needed to get on the job ladder and show promise early in a career.

Good leaders need both people skills and strategic sense. They need to be well-organised, know how to prioritise without micro-managing, know how to recruit and motivate the right people and how to handle difficult conversations and decisions.

A two-day management training course is not enough

Business profitability is dependent on management for setting goals, planning and implementation. Getting support for achieving the goals and implementing the plans involves people skills, to engage and communicate with others and motivate them in pursuit of the productivity they assume.

Such people skills are rare and not innate to even the most skilled operator in their chosen field.  They have to be learned, developed and practiced, ideally without causing too much damage although mistakes will be inevitable.

Often, managers are thrown in at the deep end with little support and even where there is some acknowledgement that training is needed two-day management training courses are not enough.

Business culture is also a major factor when developing leaders. Given that mistakes will be made, a blame culture will discourage initiative or even decision making so embracing mistakes as an opportunity for learning is imperative. It might however be right not to tolerate making the same mistake more than once.

Therefore, if a business wants good leaders it needs to create the right culture and invest time and effort into helping develop leadership skills.

There are any number of leaders who have published details of their daily schedule, which invariably includes everything from getting up before dawn, fitting in some exercise or yoga, a healthy, energising breakfast drink, to detailing precisely the time it should take for every activity in the diary for that working day as well as extra-curricular time spent on worthy activities “giving something back”.

What is often missing is how they developed their people skills and allocate time for ongoing personal leadership development, for reflection on their own performance, for learning and crucially time spent learning from others whether role models, senior managers, colleagues or subordinates,

Good leaders, in my opinion, need training and practice with ongoing support and mentoring long after taking up their first role as a leader. This will be painful as it involves acknowledging mistakes and feedback on how effectively they have managed situations.

Like most rewarding achievements, effort and pain will reap the benefits of success so long as achieving goals, self-awareness and awareness of others are incorporated into the skill set. This is not for everyone.

Have you reviewed your marketing strategy?

time for a marketing strategy reviewConditions and circumstances in business constantly change so it is necessary to regularly review all your various activities and certainly do so at least once a year.

The New Year is an ideal time to do this, and in particular to revisit your marketing strategy, especially in the light of the confusion and uncertainty that has surrounded the business climate during the ongoing indecision about the way forward on leaving the EU.

There is some evidence that SMEs have been holding off on investment decisions and in searching for new business in the light of this and there is also the temptation to hold back on marketing expenditure.

However, the general advice is that you should not scale back on marketing during an economic downturn or when there is uncertainty. The argument is that even if your business is a well-known name if it disappears from view existing and potential customers may conclude that you have gone out of business.

If anything, this might be a good time to beef up your marketing strategy, thus sending out the signal that you have confidence in your business and its future.

One size does not fit all in marketing strategy

Marketers are always keen to encourage clients into engaging activities in whatever the newest tactic is but this can be a waste of money as well as diluting your message if all your competitors are jumping on the same bandwagon.

Retaining existing customers should be a key component of any strategy, not just finding new ones especially when there is a lot of change in your market. Indeed a downturn can be a huge opportunity if your competitors are not focussed on retaining their customers.

Marketing is not just about promotion and selling but also involves having products and services that customers want, distributing them in a way that makes it easy for them to find and buy, and setting a price they are happy to pay that leaves you with sufficient profit to justify the effort.

If you set up your marketing strategy having first identified your ideal customers and created profiles for them as well as identifying where they are most likely to be active, you will already have a key element of your marketing strategy in place.

You should also have a clear idea, if you regularly check the metrics, (results of activity) where your efforts have gained the most traction, whether this is visits to your website and how long visitors stay there, or whether it is the interaction you have gained on social media platforms, or the viewings and engagement of email marketing.

Equally, you should have an idea of what promotion activity works best, such as adverts, articles, leaflets, blogs, videos, or emails as examples.

Often businesses believe that they must take up the latest promotion idea, whether it is appropriate to them or not, as was the case with videos, resulting in a plethora of frankly dull “talking heads” that eventually turn off viewers.

The best marketing strategy has clear goals, whether to get your business name recognised, to sell products and services, build a trustworthy reputation or to position yourself as an expert in your field.

How you achieve this will depend on your type of business, whether B2B or B2C, the platforms you engage on and how well-produced your promotion materials are.

Most importantly all marketing should put the customer and their concerns first and create a rapport that convinces them that you do truly understand their needs.

Climate change is an opportunity for SMEs

climate change effectsIn December 2018 the world’s leading scientists warned that there were only 12 years to get climate change under control with warming kept to a maximum of 1.5C or there would be significantly greater risks of drought, floods, extreme heat and poverty for hundreds of millions of people.

Such warnings often seem to fall on deaf ears, when it comes to economists and businesses, and even some politicians, notably US President Donald Trump, who has denied that climate change is a serious issue.

However, at December’s UN Climate Change summit in Katowice, Poland, the message seems to have struck home with some of the world’s largest investors, including pension funds, insurers and asset managers, who issued a Global Investment Statement warning that without urgent action there could be a financial crisis several times worse than the one in 2008. They demanded urgent cuts in carbon emissions and the phasing out of all coal burning.

All this may seem a long way from the day to day concerns of SMEs and larger businesses, especially amid the current worries of Brexit, the latest ONS (Office for National Statistics) figures for UK economic growth was near-stagnant in the last six months of the year and amid warnings from the World Bank that the Global Economy, too, was facing significant problems in 2019.

This theme was picked up in an article by the economist Ken Rogoff in the Guardian where he outlined the main risks which included a significant slowdown in China, “a rise in global long-term real interest rates and a crescendo of populist economic policies that undermine the credibility of central bank independence, resulting in higher interest rates on “safe” advanced-country government bonds.

The elephant in the room in both World Bank warnings and in Rogoff’s analysis is the assumption that there can be perpetual growth and that it is essential to both global and national economic health.

This ignores the fact that the earth has finite resources and that sooner or later they will run out.

Small is beautiful, sustainable growth and the benefits for SMEs

Clearly, there needs to be a change in thinking on many levels and we may be seeing the first signs, for example in consumer behaviour, which resulted in significantly lower spending in the run-up to Christmas.

This has been variously attributed in the UK to worries over jobs and Brexit, and to rising costs of such basics as energy supplies and local taxes.

A related influence on spending, however, has been the growing awareness among consumers of the environmental impact of goods they buy. Customers increasingly demand that goods be made from recycled, sustainable or natural materials and that their repackaging and transport-related impacts are minimal.

This underlying change is perhaps also exemplified by the woes of the motor manufacturing industry where sales of new cars and in particular diesel engines have been plummeting for more than a year.

While this tends to be attributed to uncertainty about the future of diesel-powered vehicles or rising raw materials costs given the low value of £Sterling, is it also possible that people are beginning to think harder about their need for and use of cars in the context of climate change? Equally, are people beginning to question the wisdom of constantly updating their wardrobes and their pursuit of the latest new “thing”?

In recent weeks there have been several interesting and thought-provoking articles in Wired, an online publication focusing on all things technological. They include one in November on Carbon Capture technology, which was greeted enthusiastically ten years ago, but whose development has struggled for funding since because although feasible, developing the technology for it to be useful at scale is difficult and it is hard for governments to justify the upfront costs.

In another article in January, there was a discussion of the potential for using AI (Artificial Intelligence) to help in the more efficient use of energy by predicting the demand peaks and troughs and adjusting supply accordingly in order to meet sustainable development goals.

Perhaps the most interesting article of all was by Bernice Lee on the theme of “small is beautiful”, an idea first proposed in 1973, by EF Schumacher. It was largely ignored by big businesses wedded to economies of scale as defined by Adam Smith, in a model that argued that scale and the division of labour lowers costs and increases efficiency.

However, Lee argues that the downsides of Smith’s model are more obvious today in that many traditional business giants have kept real wages low despite soaring profits and have benefited from offshoring, opaque supply chains and the short-termism of investors.

Big businesses also suffer from an inability to change their business models quickly or to be agile in meeting changing circumstances, not least those relating to climate change.

She argues that SMEs, on the other hand, have the advantage of agility, especially given the growth of such things as AI, cloud computing, of outsourcing back-office functions.

As a result, SMEs can be more creative, more innovative and are increasingly attracting the notice of larger businesses.  Therefore, there is more potential for SMEs to grow but also to lead the way to a more sustainable form of economic growth that does less damage to planet Earth.