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?

 

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.

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?

 

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.

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.

 

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.

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.

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.

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.”

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.