Autumn 2018 Budget offered some cheer for SMEs and the High Street

Budget - pulling rabbits out of hatsThere were few surprises in yesterday’s budget given that much of it had been leaked in advance although it did allow the Chancellor to make a joke about no new rabbits being pulled from hats.

Much of the budget was aimed at addressing the concerns of SMEs on the High Street with a promise to cut business rates by a third for those retailers in England with a rateable value of £51,000 or less. This offers an annual saving of “up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes”, which should please the FSB (Federation of Small Businesses), which had asked that any relief be applied to “hospitality and service businesses, not just retailers”.

However, the Chancellor also stressed that the High Street had changed forever and that therefore there would be £675m of co-funding to create a “Future High Streets Fund” to support councils to draw up plans for the transformation of their High Streets, such as perhaps including converting empty shops into homes to increase town centre footfall.

SMEs and especially those in rural areas will also welcome the confirmation of a 30% growth in infrastructure spending (both on roads and IT) amounting to £30 billion, which included the £420 million already announced for pothole repairs.

Although the BCC (British Chambers of Commerce) wanted to abolish the apprenticeship scheme, SMEs did at least get some relief on their contributions which was reduced from 10% to 5%.

In a bid to stimulate stalled business investment in capital such as in plant & machinery, the Annual Investment Allowance is to be increased from £200,000 to £1m for two years from 1 January 2019.

The Chancellor announced that the UK would introduce its own tax on large digital companies, the likes of Amazon, with a global revenue of at least £500 Million a year.  He stressed that it would not be a tax on sales but on the in-country earnings of these companies expected to be at a rate of 2% and applied from April 2020.

The question is whether it will actually be introduced given that there will first be consultations and, given the time frame, how much help it will be to those SMEs already struggling because of the online competition?

Fuel duty rates were frozen for the 9th successive year, which will be welcomed by the Freight industry as well as others that rely heavily on vehicle use.

Entrepreneurs’ Relief was also tweaked with a number of measures including an increase in the minimum period throughout which the qualifying conditions for relief must be met to be extended from 12 months to 24 months.

While subject to further consultation before it is introduced on 1 April 2020, the maximum recoverable R&D tax credit in any tax year is to be restricted to three times the company’s total PAYE and NIC liabilities.

From April 2019, the PAYE tax-free personal allowance threshold increases quite significantly from £11,850 to £12,500 and the 40% higher rate tax threshold from £46,350 to £50,000.

The VAT registration threshold was frozen for the next two years at £85,000.

The budget also covered insolvency & tax avoidance by directors

And, slipped in with virtually no reaction from anyone so far is a change to the status of HMRC, which will now become a preferred creditor in insolvencies. Given that I have already reported on HMRC’s use of increasingly aggressive tactics including an increase in asset seizure from small businesses it will be interesting to see what difference this makes to HMRC tactics. This would overturn the 2002 Enterprise Act which removed HMRC as a preferred creditor but we have yet to see the detail.

Directors and others involved in tax avoidance, evasion or ‘phoenixism’ are to be made jointly and separately liable for company tax liabilities where there is a risk that the company may deliberately enter insolvency

And some fallout from Carillion

In the wake of the Carillion and other high profile business failures involving PFIs (Private Finance Initiatives) there will be no more such arrangements. PFIs will be abolished.

Finally, the national living wage is to increase by 4.9%, from £7.83 to £8.21, something that will bring little comfort to SMEs.

Of course, all of the above comes with the large caveat, that depending on the outcome of the Brexit negotiations there may have to be a second budget in the spring.


What are the benefits to SMEs of collaboration with corporates?

skydiving collaborationThe 2018 Global CEO Outlook by KPMG found that 70% of the 150 UK CEOs involved were in favour of collaboration with start-ups and SMEs.

Many cited the benefits to them of collaboration helping them to drive innovation to remain competitive and support their growth objectives, particularly where new businesses in the tech sector can help their larger partners to become more agile.

Collaboration is not a one-way street

One of the difficulties cited with collaboration, however, is achieving the right fit in terms of shared aspirations and culture. So, it is important that potential misunderstandings are ironed out before working together.

Both sides should want to establish a relationship based on trust which includes understanding others’ as well as their own needs and agreeing how any shared knowledge will be used. Equally, both sides need to be prepared to learn and this may be more difficult for those involved in a large corporation, where there are often clear and bureaucratic lines of communication and decision-making.

There is an argument that to be sustainable the corporate can learn much from the SME/start-up and how to think like a smaller business.

However, the benefits should not be one way.  While it is clear how large corporations can benefit, it is less clear what is in it for SMEs or start-ups unless they are agreed in advance such as access to contacts, finance, resources, technology and distribution channels.

A mistake that corporates make is thinking SMEs want advice when they generally want help to grow. Indeed, all too often the executives of large firms have little understanding of the problems facing small firms. They do however have access to resources that can benefit the SME.

A small business is unlikely to have the spare capital to be able to invest significantly in marketing or R&D. When resourced are limited and there is a prospect of running out of money, the issue for SMEs is the uncertainty of spending time and money while they search for sales that can be replicated. This can take longer and use more resources than the SME can fund hence the benefit to them is a leg up from a larger partner.

Once the SME finds its formula for growth, a larger partner can be particularly useful by helping with the planning and implementation. SMEs can learn how the “big guys” operate, how they establish supply chains and install systems and processes.

Working with others can be frustrating and is often a choppy ride, according to Stefan Tan writing in a blog for

He describes it as being a bit like white water rafting, with all its thrills and spills but “the experience can be truly rewarding if you are able to endure the ride”.

He says it can take time to build a solid relationship and depends on both partners working to understand the benefits and limitations of each one’s corporate culture. Often this can be achieved by running a pilot project to iron out the differences and once that phase has been completed to then scale up activity, being mindful of KPIs and costs.

Above all, he says, they should be mindful that there will always be some cultural differences and that it is important to recognise that neither’s business model is better than the other’s.

Is the insolvency of your business a failure?

business failureLike old buildings that are decaying or no longer fit for use, businesses often need to be pulled down and rebuilt. Should this be regarded as failure or renewal?

There are three definitions of failure in the Cambridge Dictionary:

Someone or something not succeeding;

Not doing something that you must do or are expected to do;

Something not working or stopping working as well as it should.

Much has been written about the role of directors and how it contributes to the failure of a business but less about the lessons that can be learnt and how they contribute to the future success of entrepreneurs.

Failure is something the business writer and chairman of Risk Capital Partners, Luke Johnson, has written about and must have had further cause to reflect on following his injection of £20 million into Patisserie Valerie, which recently announced that it was in danger of imminent collapse after what may turn out to have been the subject of accounting and auditing irregularities that are currently being investigated.  Johnson was one of the company’s founders and main investors and it is perhaps no surprise that his blogsite and website that cover matters such as prudent financial management and spotting fraud have both been offline since the announcement.

Contributors to business insolvency

The potential causes of a business becoming insolvent are many but the most common is simply running out of cash which can be the result persistent losses, non-payment by customers, over trading and the consequential inability to meet liabilities. These are often attributed to the economy, market conditions and increased competition but essentially derive from decisions by directors or more specifically indecision by directors.

Changes in market conditions, or indeed in the wider economy, are arguably outside the control of the directors, although even here, it could be argued that they should have seen these coming and taken steps to protect it by focusing on shoring up profitability and cash flow.

However, the essential point is that any business failure is down to the actions or non-actions and the mindset of the directors.

How? Here are some human traits:

A lack of reality: this might be down to over optimistic assumptions, over confidence or excessive hubris. This can lead to insolvency following a failure to monitor the situation and take the necessary action to make appropriate changes.

Other, equally understandable and human emotions that can lead to inaction by directors are guilt and shame about their business being in financial difficulties.

Business restructuring advisers often cite these factors as the reason why they are called in too late, since all too often the situation has escalated beyond one which they believe can be recovered.

Where is the blame for failure?

Failure of systems and processes: a good example is the tracking of invoicing and payment processes to protect a business from late-paying customers.  If a business does not have robust systems in place and key people to monitor and act on them, it can quickly find itself in financial trouble.

Failure to carry out sufficiently regular reviews of Management Accounts or to identify warning signs of something going wrong:  this is something I have covered in depth in other blogs but essentially without a regular review of such elements as cash flow, profit and loss and success in meeting targets management will potentially miss early warning signs of something amiss and therefore fail to take appropriate action.

Failure of cash and credit management including debt collection, over trading and non-payment by clients.

These are some of the factors that are attributed as the causes or reasons for an insolvency but ultimately it is down to directors as the decision makers.

Insolvency, I would argue, is therefore a consequence of poor judgement and decision making.

However, this is how we as humans learn, indeed the only people who don’t fail are those who don’t try. Failure is necessary for us to make progress. The only issue is whether we heed and learn from our past decisions and from those of others.


Beware of withholding payments to push contractors into insolvency as a way of saving money

the consequence of insolvencyIn June 2018 a court awarded a contractor substantial settlements after it challenged the behaviour of a large customer that withheld payments in an attempt to force it into insolvency as a way of avoiding payment.

The Technology and Construction Court (TCC) ruled in favour of the contractor, Merit Merrell Technology Limited (MMT), after it challenged the Imperial Chemical Industries Ltd (ICI) repudiation of its contract with MMT on the ‘claimed’ grounds that its welding work was of very poor quality.

The ICI withholding of payments had a knock-on effect for MMT, which was also owed substantial sums by other clients such that its bank eventually withdrew lending facilities. Following professional advice from lawyers and an insolvency practitioner, MMT survived by agreeing a Company Voluntary Arrangement (CVA) with its creditors.

It was alleged that the CVA damaged its commercial reputation and it certainly encouraged one MMT client to take advantage of the situation to substantially reduce its final account by £1.3 million.

Unfortunately, the CVA did not survive with MMT eventually entering into voluntary liquidation three years after its difficulties with ICI began.

At a trial on liability issues, the court found that ICI had its own cost pressures and had made a spurious allegation as an excuse to push the contractor into insolvency, described by the court as “extraordinary thin, verging on factually non-existent”, of poor work by MMT.

MMT then began proceedings to force ICI to pay a withheld interim payment. However, although the court ruled in MMT’s favour, the lengthy process of several court cases, including one by ICI to try to recover payments already made, eventually pushed MMT into liquidation.

In addition to the adjudicated sum of £7 million awarded by the TCC, the court also awarded a number of other sums to MMT: £1.3 million in respect of the reduced final account settlement accepted from its client; £266,472 for wasted management time; £239,369 for the professional fees incurred in relation to the CVA; £168,599  for additional banking costs including bank advisor fees and £58,994 for a VAT loan that was necessary for cash flow reasons.

Regretfully the court’s decision made in June 2018 was too late to save MMT from entering liquidation in February 2017.

The moral of the tale

While arguably ICI achieved its objective of pushing MMT into insolvency, it came at a high financial cost following the various court proceedings and rulings.

Any business considering going down this route should be aware that it may face counterclaims from its target contractor and an exceedingly costly outcome if the courts rule in the latter’s favour.

It could also carry with it some reputational damage, making it harder to attract bids from other contractors and ultimately to end up with planned works not being carried out.


Should SMEs consider appointing non-executive directors (NEDs)?

older woman non-executive director It is hard for SME directors to step back and look at the bigger picture when they are so immersed in day-to-day operations. Could they benefit from having experienced and objective non-executive directors (NEDs)?

Research carried out by law firm TLT, University of the West of England and the Association of Chartered Certified Accountants this summer suggested that SMEs did not understand how to recruit or engage with NEDs. The conclusion was that smaller firms with NEDs were not benefiting as much as they could.

What does a non-executive director do?

The NED is an independent director, who sits on a business’ board of directors but does not form part of the executive management team.

NEDs’ primary responsibility is to attend board meetings and crucially to turn up prepared having read the board pack and researched the key matters that require decisions. They should also monitor reports and carry out their own review so they can ask pertinent questions with view to assisting develop systems and strategy and resolving problems. This can involve offering specific and objective advice but does not require them to know the answers, more important to help find ways of finding the answers.

They should have a longer-term perspective and can act as mentors.

The more engaged ones will network, looking for new opportunities and useful contacts and building relationships inside and outside the business.

Obviously, it can be useful for a NED to have experience specific to your business but this is not necessary and can be an impediment since they may be less likely to embrace change.

In a recent description of the role of NED, the IoD (Institute of Directors) said their role was “to provide a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors.”

Referring to the 1992 Cadbury Report it also said, “they should bring an independent judgement to bear on issues of strategy, performance and resources including key appointments and standards of conduct”.

The recent update on corporate governance code introduced by the FRC (Financial Reporting Council) in July specifically referred to the potential role for NEDs as an option for building a wider engagement with stakeholders, particularly the workforce. Having a designated NED for this was one of three options it suggested. The code will become effective from 1 January 2019.

Anyone considering or invited to join a business board as a NED should understand that there is no legal distinction between executive and non-executive directors.  latter have the same legal duties, responsibilities and potential liabilities as their executive counterparts.

It makes sense, therefore, for potential NEDs to carry out proper due diligence and to be properly briefed before being appointed. The ICA has an excellent set of guidelines and advice for NEDs here.

Independent oversight of the strategy and direction, executive remuneration and performance, systems and risk management, and audit of a business is something that surely would benefit their businesses.

While these apply to all businesses, SMEs in particular can benefit from having directors with board and governance experience to introduce best practice and act as a mentor to those SME directors who have had limited exposure to well-run boards.

Will branchless Challenger banks struggle to recruit customers given the concerns about banking technology?

banking technology in the Wild WestThe failure of banking technology has become a wearyingly familiar story with problems this year causing chaos for customers of TSB, Lloyds Bank, Halifax, NatWest and RBS successively and the Visa system in June.

Not only were customers, both individuals and SMEs, unable to access their money, use their debit cards or pay salaries, but in some cases, such as TSB during its system upgrade earlier this year, customers were made vulnerable to fraud.

While this has largely been a problem for the mainstream banks it has affected customer attitudes as a survey by data analysts Consumer Intelligence revealed (as reported by

Stand-out findings included that 25% of online banking customers had experienced banking systems failures in the past year and that 49% of UK adults claimed to have changed their behaviour with regards to online banking due to security concerns. Just over a quarter of respondents said they now carried more cash and 82% said they were more careful about their data, while 43% said they would be put off applying to a bank which had suffered technical issues.

According to Andy Buller, key account director at Consumer Intelligence, bank IT systems are feeling the pressure because of the expansion of digital banking and because “banks are having to work with and update old systems and while they are investing in new technology, there is often a race to be first, which can mean vital testing is not carried out.” He warns that more problems are likely.

Individuals and SMEs are constantly being pressured to use smart phone and internet banking technology as the High Street banks continue to close smaller, less cost-effective branches and even ATMs are disappearing in some locations.

But, leaving aside the preference of many customers to still be able to speak to an actual human being in a local branch, the fact is that internet and mobile phone connectivity in some rural locations is still often patchy or of insufficient strength.

Into this landscape have come the digital Challenger banks most of which do not have branches and are largely based on Fintech banking apps.

The branchless Challengers include Monzo, Starling, Atom, Tandem and Revolut. Their main selling points are that opening an account is quicker and easier, that their fees are lower, that they are able to introduce innovative features more quickly and that they can also be better at security and preventing fraudulent behaviour thanks to their more intelligent analytic capabilities.

Many are relying on the regulatory change introduced early this year introducing Open Banking, which is designed to increase competition and forces banks to share their customers’ data with third parties that can provide financial services if their customers request this.

To be fair the many breakdowns in banking technology also prompted the regulators, The BoE and the FCA (The Bank of England and the Financial Conduct Authority) to impose a deadline of October 5 this year, to detail how they would respond if their systems failed, suggesting that two days is an acceptable limit for disruption to service.

If the contingency plans put forward by banks and other financial institutions are judged to be unsuitable, they could be ordered to make their systems more resilient.

It is early days for the Challengers as they try build their customer base by offering cheaper fees but in many cases have not yet developed business models beyond grabbing market share.

However, they may struggle until customers are convinced that their money is safe and access to it is reliable.

Fine words are not enough to enforce the Prompt Payment Code

Prompt Payment Code: late payment penalty?Last week saw two announcements on the ongoing issue of late payments by large companies to SMEs, both described as measures to end the problem.

The first announced the appointment of Paul Uppal, Small Business Commissioner, to the Prompt Payment Code’s Compliance Board alongside a promise from business secretary Greg Clark to strengthen the voluntary Prompt Payment Code.

The second, by Small Business Minister Kelly Tolhurst, was a call to submit evidence to help the Government to identify “the most effective way possible to tackle this issue once and for all”. The deadline for submissions is November 29 and you can find out more here. Her press release states: “Nearly a quarter of UK businesses report that late payments are a threat to their survival.”

According to the Times, Mr Clark had also promised that 90% of undisputed invoices from SMEs on Government contracts would be paid within five days. He also floated a proposal to make company boards appoint Non-Executive Directors with responsibility for supply chain practice.

In view of the IoD’s (Institute of Directors’) estimate that late payments put 50,000 SMEs a year out of business, I make no apology for revisiting this appalling situation for a fourth time this year, following my previous blogs on April 12, June 28 and a Stop Press on September 25 in which I mentioned a Times report that Mr Uppal had helped just nine SMEs with complaints since his appointment in December last year.

New research from Hitachi Capital, reported in Credit Connect, has also revealed that 17% of business owners say they are forgoing paying themselves a wage so they can pay their staff on time. This rises to 27% of small businesses that say they are already struggling to survive.

The history of action on late payment and the Prompt Payment Code

The Small Business, Enterprise and Employment Act 2015 made it mandatory for larger businesses (those with more than 250 employees or £36 million in annual turnover) to report their payment practices and performance on a half-yearly basis.

Non-compliance is a criminal offence, subject to prosecution. Yet since it came into force in April 2017 only 2,000 of the 15,000 businesses required to comply have submitted reports, and of these, some of the information has been inadequate. Despite the criminal aspects of non-compliance by 13,000 businesses, there have been no reported prosecutions.

In December 2017 Mr Uppal was appointed Small Business Commissioner with a brief, to support (my italics) SMEs in taking action on late payments and on making a complaint.

It was just a month or so later that Carillion, a known late payment offender and a signatory to the voluntary Prompt Payment Code, went bust and three months on from Mr Uppal’s appointment, as I reported, a survey by Close Brothers Invoice Finance found that 84% of those SMEs asked had little confidence that the appointment would have a positive impact on their businesses. It would appear that Boris Johnson’s two-word comment about business was prophetic.

Action that should be taken on late payment and the Prompt Payment Code

Perhaps I am being cynical but the latest Government announcements were made during the Conservative Party conference – no doubt to garner positive headlines in view of the general cynicism about the Government’s understanding of SMEs problems, especially given that businesses are becoming more public about the ongoing Brexit negotiations?  Time will tell.

As one commentator, Greg Carter, founder and chief executive of Growth Street, said in CityAM “At present, the Prompt Payment Code … dictates that invoices should be paid within 60 days, other than in ‘exceptional circumstances’. We’ve all seen now that these voluntary stipulations are worth little more than the paper they’re written on.”

He added “But no matter how energetic and effective the small business commissioner is, he must be supported with a robust, meaningful, and (crucially) enforceable code.”

This, surely, is the point. For SMEs to see any meaningful improvement in payment times, there must be a sufficiently strong set of penalties that are actually imposed to ensure businesses comply. As Mr Carter says in the article action needs to follow rhetoric. Failure to police the Small Business, Enterprise and Employment Act 2015 says it all.

October sector focus – on UK ports

UK ports, Liverpool docksIt is obvious that an island nation with a lengthy coastline is likely to have a large number of ports and the UK is no exception.

The UK has 51 major ports as well as a host of smaller ones.

Its ports industry is the largest in Europe, dealing with approximately 96% of the volume of the UK’s import/export trade. That was 481.8 million tonnes of freight in 2016, according to most recent Government statistics (published in autumn 2017). The sector employs approximately 344,300 people and contributes £19 bn to GDP.

Although overall freight tonnage fell by 3% in 2016, this was largely due to a reduction in demand for coal imports since overall import freight traffic increased by 1-2% depending on the category. According to latest Government quarterly figures total tonnage levels for all UK ports remained level in 2017 compared to 2016 at 481.8 million tonnes handled.

Cargo is segmented into several categories, Roll on Roll off, Dry bulk, liquid bulk, Lift on Lift off, and “other”. Both Roll on Roll off and Lift on Lift off volumes have increased in the period with imports of international goods exceeding exports.

The busiest UK ports are Grimsby and Immingham, Port of London, Liverpool/Merseyside, Tees and Hartlepool and the UK’s busiest container port of Felixstowe, in Suffolk.

Ownership models of UK ports

There are three main ownership models:

Private ownership – This group includes ranges from ports owned by international groups to ports owned by private companies (eg the Bristol Port Company).

Trust ports – These are independent bodies that cannot be owned by other companies or shareholders. They tend to be smaller, but include some major ports such as Aberdeen, Belfast, Dover, Milford Haven and the Port of London.

Local authority owned ports – These include Portsmouth and the oil terminals in Orkney and Shetland

Diversity of UK ports

As well as 120 cargo handling ports there are over 400 non-cargo handling ports and harbours around the UK.

It is often forgotten that ports specialise in many different types of activity, such as fishing, cruise ship terminals, support for marine oil and gas terminals as well as locations for marine industries, such as boat building and marinas for berthing privately-owned yachts.

Arguably the cruise terminals are the second largest income generator, operating from such locations as Edinburgh (Leith), Dover, Southampton, Harwich, London-Tilbury, Portsmouth, Liverpool and Newcastle on Tyne.

Clearly UK ports play a significant part in generating income for the UK economy, even more so if the associated freight haulage is added in.

At the moment, they are facing considerable uncertainty about what will be required of them in the future in the face of the ongoing and now somewhat tedious negotiations over the UK leaving the EU in March 2019 and it is to be hoped that there will be some clarity over such issues as customs checks to enable the ports to plan their businesses for the future.

October key indicator – has global trade peaked?

had global trade peaked?In a report in November 2017 the WEF (World Economic Forum) analysed the future prospects for global trade suggesting that there will be a different kind of globalisation presenting different challenges.

In August this year in an article in the Evening Standard Paul Donovan, global chief economist of UBS Wealth Management, argued that global trade growth had stalled in the last few years and we had hit “peak trade”.

The earlier WEF report had concluded: “International trade of goods based on offshore manufacturing will obviously continue to exist, but it will tend to decline below world GDP growth.”

The most recent OECD (Organisation for Economic Co-operation and Development) analysis painted a similarly bleak picture in September predicting that escalating trade tensions, tightening financial conditions in emerging markets and political risks were contributing to a less positive outlook and “could further undermine strong and sustainable medium-term growth worldwide”.

In all the above the focus was primarily on the trade in goods around the world.

So, what are the key stresses that are leading to such a gloomy picture for global trade? They include trade wars and the imposition of tariffs, a rise in protectionism, the advent of IR 4.0, austerity and its effect on consumer confidence, global debt and concerns about the environment.

Let me take each of these in turn, albeit some can be grouped together.

Tariffs and trade wars: particularly those being introduced by US President Donald Trump on China and the EU as part of his stated purpose to “Make America Great again”. Unfortunately, this escalating tit for tat exchange is essentially a political response following a failure of negotiation. The approach is aimed at addressing the concerns of those parts of US industry that have been hard hit by “offshoring” manufacturing to places with the cheapest labour costs. The consequence is likely to end up with many goods becoming more expensive, not least due to rapidly rising labour costs in US.

This has particularly impacted on the industrial communities of the American Midwest, the mining and metallurgical areas of Liverpool and Manchester, and formerly industrialized, rural areas of France, according to the OECD.

Protectionism: Inevitably, political calculation is intertwined with tariffs and trade wars and it has been noticeable that there has been a rise in the popularity of protectionist, nationalist political parties, not only in the US but across the developed world in the EU, and beyond. The hope is that those communities hardest hit by globalisation and offshoring will be revived as manufacturing returns “home”.

IR 4.0: the advent of IR 4.0 (the fourth Industrial Revolution) is bringing in robotics and AI to replace workers. It will affect many aspects of national economies, reducing costs and making manufacturing closer to the point of sale cheaper. The consequence will be the loss of many low-skilled jobs although it has been argued that these will be replaced by the higher skills necessary to operate such technical equipment.  Paul Donovan argues that the politicians are therefore hopelessly out of date and are “leading cavalry charges across a battlefield of nuclear missiles”.

How we trade and what we trade are both changing, he argues, hence his thesis that as IR 4.0 makes supply chains shorter the world may well have hit peak trade in goods.

Austerity and consumer debt: ten years after the 2008 Great Recession began, many developed world countries, most notably the UK, are still trying to deal with the consequences and rein in public spending to an extent that has had a significant negative impact on both business and consumer confidence. This in turn has impacted on the investment and spending on which their economies depend. Greece, one of the hardest-hit countries, is still struggling, the Italian economy is not in the best of shape and the UK debt burden is reportedly still at 80% of GDP.

Environment:  there is also growing concern about the impact of relentless growth on the environment, focussing on global warming, natural resources, population growth, deforestation and so on. This will have an increasing impact on costs and consumer spending.

Global debt: there are already signs of stress in several developing world economies, most recently in Venezuela and Argentina but it is predicted that Turkey too will soon follow their lead in requesting aid from the IMF (International Monetary Fund).

The Guardian’s Philip Inman in an op-ed piece on September 26 suggested that the world’s poorest countries had “little protection against Trump’s trade wars and the growth slump”. He reports that Unctad (United Nations Conference on Trade and Development) has warned in its annual health check on the global economy that there has been a “dramatic increase” in developing world debts, attributing this largely to the behaviour of private corporations. This has resulted in a tripling of global debt in relation to GDP in the weaker economies since 2008 from 7% to 26%.

It’s not all doom and gloom for global trade

All of this may seem like a bleak picture, but there is some evidence that in fact the global centre of gravity is shifting and we are currently living through a transition period.

According to an analysis of the world economy by HSBC: by 2020 China will become the world’s largest economy and India will overtake Japan, Germany, the UK and France to become number three behind US.

To an extent, argued Hamish McCrae in the Independent last week, this will be driven by two major factors contributing to their growth: catch-up and frontier. Catch-up is where emerging economies such as China start to adopt and apply the technologies from the developed world, while frontier economies will improve the productivity of their predominantly younger work forces through education and innovation and nurturing entrepreneurial talent.

Toothless regulators and unrepentant ‘too-big-to-fail’ banks

"too-big-to-fail" banksIt has to be said that since the 2007/8 Financial Crisis from which several of the “too-big-to-fail” banks had to be rescued by the central banks, SMEs have struggled to obtain loans and funding facilities from them.

There appears also to have been little in the way of retribution for those that caused the banks to collapse, although banks have since been forced to increase their capital reserves in an attempt by the regulators to avoid having to bail them out in the future.

Take RBS (Royal Bank of Scotland), which had to be bailed out and taken into public ownership, where it still partly remains.

There has been the emerging scandal concerning its treatment of SME customers who were transferred to its restructuring arm, GRG (Global Restructuring Group), with approximately 16,000 ending up insolvent and having to close down. No bail out for them!

After intensive lobbying starting in 2013 this situation eventually became the subject of a lengthy inquiry by the FCA (Financial Conduct Authority), which earlier this year published a summary of its findings, and “recommended” that the turnaround units in all banks be reviewed, and also the relationship between banks and insolvency practitioners, who generally act as their advisers when dealing with clients in difficulties.

The FCA only published its full report in February 2018 following pressure from the Treasury Select Committee. And then in July it announced it not taking any action against RBS or its senior managers over GRG’s behaviour “because its powers were very limited” and “there were no reasonable prospects of success”.

It also announced in early September that banks will face no further action over the interest rate swap mis-selling that contributed to the collapse of many SMEs and the financial difficulties experienced by many clients who had been duped by their banks.

More recently, despite assurances to the Treasury Select Committee given by RBS CEO Ross McEwan that he was not aware of any allegations of criminal activity, in late July it was announced in the Times that a former GRG banker was being investigated by Police Scotland over allegations that RBS had demanded “tens of thousands in cash” from SME owners in exchange for forbearance on their debts.

SMEs have also been advised to get on with any claims they wish to make against GRG before a deadline of 22 October 2018. According to business news website Bdaily, so far £10 million has been paid out in compensation out of a £400 million fund and there have been 1,230 complaints from a potential 16,000 SMEs.

It is little wonder that the CMA (Competition and Markets Authority) has found in a survey of business customers that RBS was rated Britain’s worst bank overall.

Yet despite all this, ahead of a briefing to challenger banks this week on a contest for £833 million of funding, provided by RBS to boost banking competition, Ross McEwan has been quoted as saying the challengers will struggle to compete against the Big Six in the face of their recovery from the consequences of 2007/8.

But this is not all about RBS.  Yesterday’s Financial Times reported on the behaviour of Lloyds Banking Group:  “Not only did the bank seek to obstruct Thames Valley Police’s inquiries into the £1 billion HBOS reading fraud, it also prevented access to the key “whistleblower” Sally Masteron, author of the critical Project Lord Turnbull report, and then fired her because of the inconvenience of her report’s message.”

It seems clear that unless regulators like the FCA are given much more robust powers to take action against the banks, not only RBS, but all ‘too-big-to-fail’ big banks will continue to feel they can act with impunity.

How much longer before they precipitate another, albeit different, calamitous financial crisis?