Get independent advice before embarking on costly business litigation

Business litigation can be costlyIt is a sad fact that disagreements can arise in the best-run businesses and if they cannot be settled amicably they can result in costly business litigation.

It is also a sad fact that legal fees are often far greater than the damages awarded and. Worse, if you lose and have to pay those of the other side.

While most litigation involves a financial settlement, the underlying dispute can be for a myriad of reasons. Many disputes relate to the non-payment for goods or services that one party believes were provided while the other believes were defective or the terms were not observed. Others may be down to parties falling out or wanting to terminate contracts. Whatever the cause taking issues to court can be extremely expensive if the facts are in dispute.

Often when each side feels that it has much to lose emotions will run high and judgement may be less than impartial.

Very often, when the parties involved realise the length of time that may be involved and the escalation of costs starts to bite they end up agreeing to settle out of court. But before coming to terms with this reality they may have spent considerable sums that might not have been necessary.

So, it makes sense before embarking on costly business litigation for all parties involved to establish clearly and accurately the facts of the dispute and the realistic prospects for a satisfactory outcome.

Simply assembling all the relevant paperwork as evidence before appointing lawyers will save a lot of money and may even avoid an expensive mistake as it will highlight your ability to substantiate claims.

This may involve examining the terms of a contract to establish the nature of a breach such as non-payment for goods and services, not meeting deadlines, the definition of poor service or substituting a material with one of lesser quality.

It may mean establishing precisely what had been agreed by the partners or shareholders including whether there were any terms or conditions that should be referred to should either party wish to leave.

Partnership and shareholder disputes, like employee termination, may be cited as being down to a breach of duties or obligations or poor performance but all too often these are contrived reasons that are used to justify another reason such as a clash of personalities.

Service and contract disputes are rarely black and white matters and can result in lengthy court hearings, as also can breaches of confidentiality or copyright.

While you might think you are the best person to consider the merits of any litigation it makes sense to engage someone impartial to carry out this task as they will help you remove emotion and pride from any decision.

It is difficult to decide who to use since engaging the right person can also remove a procedural bias. There are likely to be a number of different ways of resolving the dispute where for example, some lawyers like the adversarial nature of the court room, others might promote mediation or arbitration as a form of dispute resolution.

Before engaging a lawyer, a trusted adviser may be useful. While they may not have the same insight as a barrister who might advise on the likely outcome in court, they can be objective and hopefully wise.  I have often simply picked up the phone to the other party and met them to resolve matters for clients long before they escalate. It is a tragedy that emotion and pride tend to be the real barriers to resolving disputes.

Whoever you get to advise you, assembling your evidence and getting an early independent perspective can help avoid fruitless litigation or at least identify the most appropriate procedure for resolving matters.

Can fashion retail ever be made sustainable?

fashion retail garment workersIt is no secret that High Street retail has been in dire straits for some time, and clothing and fashion retail have particularly suffered.

The most recent, and perhaps most high-profile example has been the struggles of Philip Green’s Arcadia Group, comprising the clothing chains Topshop, Topman, Evans, Wallis, Miss Selfridge, Burton and Dorothy Perkins, to use CVAs as a way of restructuring.

But it is not only physical fashion retail stores that are struggling. ASOS has recently issued its second profit warning in seven months, albeit blaming IT chaos in its overseas warehouses despite overall sales being up 12% in the four months to 30th June.

Obviously, cheap prices and turning around lines quickly, have been the two main things on which fashion retail has been relying. As a consequence, clothes are often made by low-paid workers in appalling conditions, in factories located in countries like Bangladesh.

However, for some years there have been demands from consumers for such workers to be paid fairly and treated better following revelations about their working conditions.

That did not, however, mean that consumers were prepared to pay more for their clothes or necessarily to wear them for longer.

Marketing plays a big part in this kind of consumer environment by encouraging shoppers to “be ahead”, “get the newest” and stay “on trend” in order to encourage them to buy and to do so often and repeatedly.

But as I said in my blog on Tuesday, corporate survival is coming increasingly dependant on a variety of demonstrably ethical behaviours, including protecting the environment and treating employees fairly.

It may be that we have reached a critical moment where the zeitgeist among consumers is changing in a way that is focussing fashion retail on the need to change its business model by marketing its ethical and sustainable credentials.

What would sustainability mean in fashion retail? 

Clearly, a recent initiative by Boohoo.com highlighted its ‘new’ sustainable credentials by the launch of its range of “recycled” clothes.

The collection, the company says, has been manufactured entirely in the UK to cut air pollution and its garments are made from recycled polyester, with no environmentally unfriendly dyes or chemicals being used.

It is not yet clear if this is marketing puff or a shift in values as the launch has been greeted with some scepticism, according to an article on the BBC news website.

It may be a start but the EAC (Environmental Audit Committee) argues that it doesn’t address other issues with clothing, including the fact that synthetic fabrics used to make such garments shed micro-fibres when washed, polluting waterways or that even those that are disposed of through retailer take-back schemes or in charity collection bins will eventually find their way into landfill.

The Independent recently reported that fashion retailer Net-a-Porter plans to launch a new platform, Net Sustain, to highlight brands meeting certain criteria regarding sustainability. Attributes will include “Locally Made”, when at least 50% of a brand’s products have been manufactured within their own community or country, and “Craft & Community”, where products showcase exceptional, artisanal skills. The platform will launch with 26 brands and 500 products.

However, other pressures are also having an influence, not least all the publicity about plastic waste littering the world’s oceans and land, which it has been argued is not helped by the rise in online shopping where packages generally use plastic materials.

Fair pay for overseas garment workers and the use of sustainably grown fibres, such as cotton are also factors.

Another is the popularity of new initiatives such as the decluttering movement started by Marie Kondo who has been encouraging us to hoard less “stuff”, or the Tiny House movement that is encouraging us to use less space.

One company in Suffolk has been in the forefront of fair trade and environmentally sustainable clothing production for five years.

Where Does it Come From, operates in both India and in Africa and offers a complete history of its manufacture with each garment. It has to be said their range is not as cheap as perhaps the fast-turnaround online and high street fashion retail can produce but its ethical, environmental and sustainability credentials are impeccable.

And this is perhaps the main issue for fashion retail, promoting their values as evidenced by their actions rather than by their marketing. Will consumers be willing to pay more and buy less frequently to satisfy their concerns?

The Suffolk business has clearly been able to survive and has some extremely loyal customers but whether its model can work in the mass fashion retail market remains to be seen.

 

Long term corporate survival can only be achieved by having the right values

corporate survival means eliminating industrial pollutionThere are signs that the Gordon Gekko culture of “greed is good” is dying and that corporate survival will depend on not only giving customers what they want but also being seen to have and act on a wide range of ethical values and behaviours.

In an environment of high employment and significant skill shortages in many sectors, the bargaining power of millennials and Generation X will only strengthen as the older generation of employees retires.

Equally, the power of consumers and customers choosing who to buy from is having a greater impact on corporates’ processes and practices.

In this context, CSR (Corporate Social Responsibility) policies will no longer be enough. Too many of them have been unmasked as marketing and PR exercises among the larger corporations and of little practical substance. SMEs often fare better, however, being closer to their localities and customer base, where their greater visibility puts them under pressure to be more accountable.

However, movements like Extinction Rebellion, highlighting the urgency of acting on environmental damage, as well as greater publicity about the treatment of whistleblowers who have unmasked the less than ethical behaviours of their employers (eg the Cambridge Analytica scandal), often at great cost to themselves, have focused attention on better ways of assessing corporate behaviour.

To address these concerns, ESG (Environmental, Social and Governance) is becoming more and more popular as way of assessing Sustainable Investment.

ESG incorporates measurements of how businesses respond to climate change, treat their workers, build trust and foster innovation and manage their supply chains. ESG is also becoming a key marker for investors decisions, according to a blog by npower, which claims that “a quarter of the world’s professionally-managed investment funds now only invest in companies that demonstrate solid ESG credentials”.

It quotes Nigel Topping, the head of the We Mean Business coalition of 889 companies with $17.6trn in market capitalisation: “If these challenges are tucked away and approached solely for compliance reasons, they are not being integrated. And if businesses aren’t incorporating them into financial decisions and long-term planning, then they are not being taken seriously – which leaves the business poorly prepared for the future.”

Businesses can adopt a process of continuous improvement on their energy efficiency, for example, by adopting the globally-recognised ISO 50001 standard, which can be verified and used to reassure customers, clients and investors.

Employee and consumer pressure means incorporating ethics for corporate survival

Investor, employee and consumer pressure is mounting for companies to incorporate the values that will help ensure corporate survival, despite some being at the expense of short term profits. This is somewhat at odds with many senior executives whose focus has been on reporting profits. The focus on profits has been understandable since they underpin most reward structures but this will need to change as ESG gains acceptance.

There are many recent examples of changes to corporate behaviour as a result of consumer pressure, most notably this year’s focus on plastic waste and environmental pollution.

Not surprisingly, the superstores and hospitality industries have been in the forefront. McDonalds has committed to completing a roll-out of bringing in paper straws in all its outlets by the end of the year.

Waitrose removed all its plastic straws from sale last year and has promised to reduce plastic whenever possible, while Iceland aims to be “plastic-free” by 2023.

Single-use plastic carrier bags are no longer to be had in virtually all the superstore chains and both Morrisons and Sainsbury are rolling out plastic-free fruit and veg areas across their stores.

But ethical behaviour is not focused solely on environmental concerns.

Just a few days ago the Chartered Institute of Credit Management (CICM) suspended another 18 businesses from the Prompt Payment Code for failing to pay 95% of all supplier invoices within 60 days. They included Screwfix, Galliford Try, and Severfield.

Employees and potential employees are also becoming more discriminating.

Research in the USA has revealed that:

* 75 percent of millennials would take a pay cut to work for a socially responsible company.

* 76 percent of millennials consider a company’s social and environmental commitments before deciding where to work.

* 64 percent of millennials won’t take a job if a potential employer doesn’t have strong corporate responsibility practices.

PriceWaterhouseCooper has also studied the millennial generation and found that “corporate social values become more important to millennials when choosing an employer once their basic needs, like adequate pay and working conditions, are met”. Their report concluded that “millennials want their work to have a purpose, to contribute something to the world and they want to be proud of their employer.”

There are moves afoot from the Government, too, to strengthen protection for those who discover unethical, or unlawful, behaviour in their workplaces and become “whistleblowers”.

Business minister Kelly Tolhurst has announced proposed new laws to ban the use of NDAs (non-disclosure agreements) that stop people disclosing information about their employer to the police, doctors or lawyers.

There remains the issue of excessive corporate executive remuneration to tackle. While there has been a significant increase in the numbers of shareholders who have questioned CEO and director level remuneration, so far, the High Pay Centre has found that every single vote at a FTSE 100 firm was approved between 2014 and 2018.

Clearly there is some way to go before the adoption of ESG by corporates becomes the norm, but the momentum is there and businesses should pay heed as their corporate survival will increasingly depend on it.

What are the prospects for UK manufacturing?

UK manuafacturing prospectsUK manufacturing output growth held steady in the three months to May, according to the Confederation for British Industry’s (CBI) monthly industrial trends survey.

In July, the CBI reported that in the three months to June UK factory output had turned in its slowest quarterly growth since April 2016.

Furthermore, the CBI reported that ten out of sixteen sub-sectors experienced growth with chemicals, food, drink and tobacco being resilient, while car manufacturing struggled.

Confusingly the CBI also reported that order books deteriorated in the quarter.

By comparison the monthly snapshot from IHS Markit and the Chartered Institute of Procurement and Supply showed that activity levels in the UK manufacturing sector in June had dropped to the lowest level since February 2013.

IHS Markit/Cips found that high stock levels, ongoing Brexit uncertainty, a deteriorating economic backdrop and rising competition contributed to the drop in output. Weak export demand amid a faltering global economy also had an impact.

These figures, while confusing, support the hypothesis that UK manufacturing prepared itself for Brexit in March by building up stock levels and in doing so increased output. However, since then much of this productivity has been ratcheted back.

So where are we?

What is the true state of UK manufacturing?

The publisher, The Manufacturer, takes an up-beat view.

It argues that “Contrary to widespread perceptions, UK manufacturing is thriving, with the UK currently the world’s eighth largest industrial nation. If current growth trends continue, the UK will break into the top five by 2021.”

In their annual manufacturing report for 2019 they argue that there is a “surprisingly resilient mood among manufacturers with 81% saying they are ready to invest in new digital technologies to boost productivity.

But they do not deny there are challenges.

Of course, Brexit and ongoing uncertainty, is having an effect on strategic-planning and business prospects with 51% arguing that the Government should be doing more to promote exports, especially given the currently favourable exchange rates from an export perspective.

Among the challenges the 2019 survey identifies for UK manufacturing is the need for a clear strategy and strong leadership when introducing smart technology into the processes, citing lack of coherent digital strategies and in some cases an inability to understand the practical applications that technology can offer.

Another issue is the lack of skilled engineers. Some respondents argue that the education system and the Government’s approach are both failing. The survey reports that some companies are now establishing their own training schemes and academies because the situation is so bad.

However, I would argue that while the mainstream education system undoubtedly plays a big part, there is actually no reason why businesses should not be doing  so as well. After all, they are in the best position to know precisely what skills they need in a way that schools and colleges perhaps cannot.

On exporting, there were some in the survey that argued that Brexit might be a good thing in stimulating more UK manufacturing rather than being locked into and dependent on complex transnational supply chains.

One manufacturer in Cheshire is reported as saying in a Guardian article in June this year: “We are under the threat of closure all the time.”

But the article goes on to describe how this particular manufacturer is fighting back: “If we didn’t have a drive on productivity we wouldn’t be in business.”

Their solution has been to drive forward with robotic technology and with the support for their proposed changes from their workers. They have involved everyone in the process, mocking up robotic workstations in cardboard to see how they fit in with the workforce, with the result that “while robots have replaced some jobs new ones have come and staff have been trained up along the way”.

All this is without considering the opportunities for completely new businesses that will arise from the growing drive to clean up the environment and make activity more sustainable which will no doubt create opportunities among the more innovative producers for new processes and ways of doing things.

Perhaps we should not write the obituary for UK manufacturing quite yet.

 

Proposed HMRC preferential status a blow to financing and restructuring

HMRC preferential status could cause more CVA failures The Government last week published its new draft Finance Bill, which includes the proposal to restore HMRC preferential status as a creditor for distribution in insolvency. This was originally granted in the Insolvency Act 1986 but removed by the Enterprise Act 2002.

In summary, HMRC is currently an unsecured creditor ranking equally with suppliers as trade creditors and unsecured lenders for any pay-out to creditors from an insolvent company. The preference would mean they get paid ahead of unsecured creditors leaving less or nothing for most creditors whose support is necessary when restructuring a company.

There had already been considerable consternation expressed by insolvency practitioners and investors after Chancellor Philip Hammond announced the proposal in the Spring, but it seems the Government has decided to press on making only a light amendment to the effect that preferential status will not apply to insolvency proceedings commenced before 6 April 2020.

The change in HMRC to preferential status will apply to VAT and PAYE including taxes or amounts due to HMRC paid by employees or customers through a deduction by the business for example from wages or prices charged such as PAYE (including student loan repayments), Employee NICs and Construction Industry Scheme deductions.

It will remain an unsecured creditor for other taxes such as corporation tax and employer NIC contributions.

The consultation period for the Bill ends on 5 September 2019 and, not surprisingly, there have already been criticisms of the HMRC preferential status element of the bill, not least as reported in the National Law Review:

“Unfortunately for businesses and lenders, this does not address real concern about the impact of this change on existing facilities and future lending,” it says.

It points out that preferential debts are paid after fixed charges and the expenses of the insolvency but before those lenders holding floating charges and all other unsecured creditors.

Accountancy Age also reports on reactions from the Insolvency trade body R3’s president Duncan Swift, who described the Bill’s publication as “shooting first and asking questions later”.

He said: “This increases the risks of trading, lending and investing, and could harm access to finance, especially for SMEs. This means less money is available to fund business growth and business rescue, and, in the long term, could mean less tax income for HMRC from rescued or growing businesses. It’s a self-defeating policy.”

The article also includes comments from Andrew Tate, partner and head of restructuring at Kreston Reeves: “The introduction of this in April 2020 will be interesting,” said Kreston Reeves’ Tate. “The banks will have to change the criteria on which they base their lending to businesses in the light of this new threat, but will they also reassess the amounts they have lent to existing customers?

Is HMRC preferential status the death knell for CVAs?

CVAs (Company Voluntary Arrangements) have traditionally been the route whereby unsecured creditors could have some say, and receive an enhanced pay-out, when a business becomes insolvent and seeks to restructure its balance sheet in order to carry on trading and manage its debts.

Instigated by the directors, approval of a CVA requires 75% of unsecured creditors where the payment terms are binding on any dissenting creditors providing they are less than 25%. Generally, the earlier a business enters a CVA the better, although they can be used as a means of dealing with a minority creditor who has lodged a Winding Up Petition (WUP) in the courts.

CVAs generally involve a payment to creditors which must be distributed by creditor ranking where currently HMRC gets paid the same as trade creditors but under the proposals HMRC will be paid first, leaving considerably less for trade creditors whose support is needed as ongoing suppliers.

CVAs have been a valuable insolvency tool for saving struggling retailers, most recently Monsoon/Accessories, Arcadia (owned by Philip Green) and earlier Debenhams, Mothercare, Carpetright and New Look.

But there have been signs of creditors’ disenchantment with the CVA mechanism when used for retail chains, notably from landlords, who stand to lose significant revenue if they agree to reduce their rents as part of the CVA agreement.

Arcadia, in particular, struggled to reach agreement when landlord Intu, owner of several large shopping arcades, said it was not prepared to accept rent cuts averaging 40% across Arcadia Group shops in its centres. In the end the deal was agreed after landlords were promised a share of the profits during the CVA period. This is an example of the flexibility of CVAs and of how they can benefit creditors if a business is to be saved.

It is a dilemma for landlords in particular, but on the whole they seem to have come to the view that some revenue going forwards is better than none, given that there is reducing demand for High Street Retail space not least because of the sky-high business rates and dwindling footfall from shoppers.

However, it is very likely, in my view, that this latest move by the Government to restore HMRC preferential status, could just tip the balance in making the CVA ineffective as a restructuring tool since the lion’s share of available money will be paid to HMRC.

Proposal to strengthen sanctions for late payments culprits

late payments penalty?Some 18 months since the appointment of Small Business Commissioner Paul Uppal to tackle the problem of late payments to SME suppliers by larger companies it seems that the situation has barely improved.

In fact, according to research published in June by Purbeck Insurance Services late payment problems have actually got worse for 27% of SMEs with some 30% reporting worsening cash flow problems.

In the first quarter of this year Mr Uppal’s department has overseen the removal or suspension of some 17 companies that had signed up to the Prompt Payment Code (PPC) but failed to meet its standards.

The five removed altogether included BHP Billiton, DHL and GKN Plc. Signatories to the PPC pledge, among other things, agree to pay 95% of all supplier invoices within 60 days.

In its most recent completed case in May 2019 the Small Business Commissioner (SBC) was approached by a SME over the failure by G4S to pay it an invoice for £31,880.49 despite having contracted to do so within 60 days.

Although G4S claimed this was an isolated incident and the invoice was paid immediately it was contacted by the SBC, further investigation found persistent late payment of previous invoices over an 18-month period.

Now the Government’s small business minister Kelly Tolhurst has announced proposals to consult on strengthening Mr Uppal’s powers.

The proposals include making directors accountable for overseeing their payment practices, which would have to be detailed in their annual reports.

They also propose strengthening the powers of the small business commissioner to tackle late payments through imposing fines and introducing binding payment plans.

The proposals have been welcomed by Mike Cherry, national chairman of the Federation of Small Businesses while the IoD (Institute of Directors) is reported in an article published by CityAM to have said  that they marked a significant step forward: “Forcing larger firms to report on their payment practices will ensure much greater scrutiny where standards fall short, and sunlight is often the best disinfectant,”

In another development, from September this year firms that do not pay 95% of subcontractors within 60 days risk being frozen out of public sector procurement. The new rules force companies to report their payment data every six months to a national database overseen by the business department. This will no doubt encourage whistle blowing by those who are not paid within the 60 day deadline.

It is clear that voluntary agreements by large companies as well as being named and shamed are not going to be sufficient to halt the scourge of late payment to SMEs but barring large companies from public sector contracts and moves to strengthen the SBC powers are to be welcomed as they may change the late payment culture that seems to be embedded.

The UK Film Industry – sector focus for July

The UK film industry offers settings like this for international film makersrIt’s good to write about a UK business success story, the UK film industry, which has become an important economic sector having grown faster than much of the UK economy.

According to the DCMS (Department for Digital, Media, Culture and Sport) in November 2018 the value of the creative industries as a whole to the UK was up from £94.8 billion in 2016 and had broken through the £100 billion barrier. It said the sectors had grown at nearly twice the rate of the economy since 2010 and together are now worth £268 billion.

For the film world specifically not only does the UK have a widespread and skilled support base of experienced film production crews and technicians, it also has both the locations and the studios to attract the biggest film companies from around the world. It is an industry that employs an estimated 60,000 people.

Then there is the knock-on effect into the wider local economy, not only by boosting the tourism sector, but also in some other surprising ways. We know of one Essex-based haulier who reports consistent and increasing contracts for transporting materials, equipment and support units to film locations as well as to studios like Shepperton and Pinewood.

Last week, Netflix announced what is believed to be a 10-year deal to lease Shepperton Film Studios near London, where it plans to create a dedicated UK production hub, including 14 sound stages, plus workshops and office space at the site owned by the Pinewood Group.

Another recent example is the newly-released Danny Boyle/Richard Curtis film ‘Yesterday’, filmed almost entirely in Suffolk, Norfolk and Essex.

These are only the latest results of an ongoing investment in the UK film industry, which has been stimulated by Government tax breaks and local authority initiatives that have encouraged spending by international filmmakers.

According to figures from the BFI (British Film Institute) 2017 saw the highest level of spend by international filmmakers ever recorded, reaching £1.692 billion.

But the success of the UK film industry has not only been about attracting international film makers. Production of home grown films in 2017 had also risen, with 72 films going into production including ‘Mary Queen of Scots’ directed by Josie Rourke; ‘Yardie’ directed by Idris Elba, ‘Peterloo’ directed by Mike Leigh; ‘Close’ directed by Vicky Jewson; and ‘The Boy Who Harnessed the Wind’ directed by Chiwetel Ejiofor.

UK cinema revenues have also grown, reaching £1.3 billion (totaling 170.6 million admissions) that same year.

According to the ONS (Office for National Statistics) the gross value added to the economy by film, video and television companies has increased by 313 percent since 2008.

How much can businesses realistically plan for no-deal Brexit?

no-deal Brexit amid Global economic slowdownClearly businesses are operating in very uncertain economic times with no-deal Brexit having become a game of political football and with such an unpredictable outcome.

While a degree of uncertainty is a fact of life in business, which is why I strongly recommend regular and at least monthly scrutiny of management accounts, the current situation is arguably unprecedented.

We are in the midst of a global economic slowdown, with UK manufacturing activity at its lowest level for six years and the economy stagnating according to the British Chamber of Commerce (BCC) latest quarterly report published last Monday, much of this being self-inflicted following the Brexit referendum.

And worse, the UK is now beset by a contest to elect a new leader for the “governing”, Conservative party in which only a small group of party members have a say, and seemingly with both candidates adopting increasingly intractable positions on leaving the EU by the end-October deadline and even worse with the prospect of leaving with no deal in place.

It was alarming for UK businesses to hear the most recent comment, from the previously moderate and supposedly business friendly entrepreneur, Jeremy Hunt, that he would be willing to tell business owners that they should be prepared to see their companies go bust in a no-deal Brexit as a price worth paying to fulfil a “democratic” promise to voters.

Meanwhile his opponent, and the alleged favourite to win, famously used a four letter word to dismiss business concerns and, more recently, according to his colleague, the International Trade Secretary Liam Fox, has failed to grasp that leaving with no deal actually precludes the UK relying on a 10-year standstill in current arrangements using an article of the EU’s General Agreement on Tariffs and Trade (article 24 of the general agreement on tariffs and trade) which actually only applies if there is an agreement in place.

Amid this turmoil the Governor of the Bank of England, Mark Carney, has urged businesses to prepare properly with the relevant paperwork for a no-deal Brexit to allow them to continue to export to the EU.

Furthermore, in the last few days it has been announced that around £96 million has been paid to consultants helping the Government to prepare for departure, while Tom Shinner, the top government official in charge of no-deal Brexit planning has resigned as has his colleague, Karen Wheeler, the HMRC official in charge of “frictionless” Brexit border planning.

How on earth can businesses be expected to make realistic and achievable plans for an unknown future against this backdrop?

Well, there is some help to be had, courtesy of the BCC, which has issued its own Business Brexit Checklist, divided into nine sections of some detail about the areas businesses should be looking at.

They include assessing their Labour and Skills needs for the next few years, Cross border trade and the paperwork that will be needed in the event of no-deal, Currency/intellectual property/contracts, Taxation/insurance, Regulatory compliance/data protection, European funding and a link to a Government’s online support called ‘The Business Preparation Tool’.

To be fair, UK businesses, particularly manufacturers, did their best to prepare for the March Brexit deadline, stockpiling essential parts, materials and the like to be able to ensure continuity in the expected aftermath but it would be unreasonable to expect them to continue to tie up capital indefinitely in this way.

Indeed, most UK car manufacturers brought forward their annual shutdown to coincide with the March deadline as a means of preparation. There is no doubt that the further delay and continuing uncertainty is a major factor that is causing our largest export industry to struggle.

At the other end of the scale I believe that UK SMEs are among the most resilient and innovative in the world and will find ways to survive come what may and in spite of whatever economic damage is caused by the politics of Brexit.

But for the time being the sensible strategy may be to hold off on any major investment, to focus rigorously on management accounts and cashflow, and to ensure strategy and business plans are as flexible as possible to cover a range of eventualities. If necessary contact a rescue and turnaround adviser.

As for current political announcements, they might be taken with a large spoonful of salt.

Redefining measures of national economic health – July Key Indicator

national economic health measured by more than just GDP?For almost 40 years the defining measure of a country’s national economic health has been GDP (Gross Domestic Product).

As such, my monthly Key Indicators have focused on various specific aspects, such as oil prices, factory output or investment decisions and the like. This time, however, given that the summer is generally a time to pause and reflect, the Key Indicator considers this notion of how we measure national economic health.

There are signs of a growing resistance to using such a simplistic measure as GDP to compare the relative success of national economies.

For example, Evan Davies, the BBC’s former economics editor argues: “It is barely an exaggeration to say it has been fetishised in economics, despite obvious weaknesses in its capacity to encapsulate a whole economy in a single number” in an article analysing where economists have been going wrong.

National economies are, he argues, both too complex and too theoretically based on mathematical models.

This is a theme also in the work of Joseph Stiglitz, Nobel laureate in economics, a professor at Columbia University and chief economist at the Roosevelt Institute, who, in asking what kind of economic system is most conducive to human wellbeing, has for some years argued that “The neoliberal experiment – lower taxes on the rich, deregulation of labour and product markets, financialisaton, and globalisation – has been a spectacular failure”.

The key word is “wellbeing”.

In 1972, Bhutan became the first country to change its method of assessing the country’s national economic health and performance to a more holistic method of assessing progress based not only on its economic performance but also on Gross National Happiness (GNH). The then King Jigme Singye Wangchuck argued that for sustainable development both should be measured.

Bhutan’s GNH includes psychological wellbeing, health, education, time use, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards.

In May this year, New Zealand released its first-ever “wellbeing budget”. According to the country’s Prime Minister Jacinda Ardern, the purpose of government spending is to ensure citizens’ health and life satisfaction, and this should be how a country’s progress is measured, not by GDP alone.

Is UK about to follow suit in changing how it measures national economic health?

Just last week it was revealed that in the last three years the numbers of people employed in the “gig” economy had doubled to 4.7 million people, meaning that one in 10 people now works in insecure employment with all the worries this brings about having sufficient – and regular – income to pay the rent, the mortgage, living expenses and so on. The lack of security and lack of welfare support is a real problem for those without savings who live pay cheque to pay cheque.

It has been no secret for some time that income inequality has been rising massively, manufacturing in some parts of the country has been decimated (as covered in my recent macroeconomic update). Arguably this has led to the rise in nationalist and populist movements as demonstrated by the massive national division that was the result of the 2016 referendum to leave the EU.

This is without taking into account the impact of current thinking on the urgency of tackling climate change and environmental damage and moving towards a more sustainable economy.

Clearly, therefore, current circumstances are concentrating some politicians’ and economists’ minds.

In early June, MPs on the All-Party Parliamentary Group (APPG) also backed a proposal to widen measures of UK’s growth performance beyond GDP. Measures of national economic health should take into account other indicators of economic progress, such as consumption, inequality, leisure time, unemployment and life expectancy, it is argued.

The backing followed publication of the first part of a study by the Centre for Progressive Policy (CPP), commissioned by the APPG.

Is all this the start of an unstoppable movement that will have us all rethinking how we asses national economic health? Only time will tell, but why don’t you join the debate and post your own thoughts about what indicators should be included in the assessment?

June macroeconomic snapshot of UK regional economic inequality

UK regional economic inequality snapshotWe hear a lot about UK regional economic inequality, so as part of our series of macroeconomic snapshots we’re taking a look at some of the data.

These are just a few examples of recent announcements of businesses facing closure or insolvency in the immediate or near term: British Steel, Scunthorpe (c.3,000 jobs), Honda UK, Swindon (3,500 jobs), Kerry Foods in Burton-upon-Trent (900 jobs). What they all have in common is that they are situated in the regions outside London.

Then, of course, there is the ongoing carnage in the High Street retail sector which according to the British Retail Consortium’s calculations has cost 75,000 jobs since the first quarter of 2018.

The long decline in UK manufacturing, initiated in the 1980s Thatcher era, has hit the regions of the north and Midlands, and S. Wales, particularly hard.

In January this year NIESR (National Institute for Economic and Social Research) calculated that since the mid-1990s regions that now have reduced shares of the national economic pie are the North West (-1.8%), West Midlands (-1.4%), Yorkshire and the Humberside (-0.8%), and the North (-0.4%).

The ONS (Office for National Statistics) list of the top 10 most deprived UK towns and cities are Oldham, West Bromwich, Liverpool, Walsall, Birmingham, Nottingham, Middlesbrough, Salford, Birkenhead and Rochdale. In their most recent report, they took into consideration metrics like low incomes, levels of employment, health, education and crime.

By contrast, real output rose twice as fast in London as in other regions over the 10 years to 2017. The “the Golden Triangle of London, Cambridge and Oxford that attracts over half of all research funding – more than £17bn” while just £0.6bn goes to the north east, according to Newcastle on Tyne MP (Lab) Chi Onwurah.

Also, according to the 2019 Global Cities report released today by consultancy firm A.T. Kearney, London has been ranked as the top city in the world for future business investment.

Of course, none of this disparity is a revelation. The 2010-15 Conservative/Liberal Democrat coalition prioritised cutting public spending in the short term over all other objectives, including regional equality and long-term social cohesion. One of their first acts was to abolish the regional development agencies. But in 2014 the then chancellor, George Osborne coined the phrase Northern Powerhouse, a recognition, and arguably a u-turn, that action was needed on UK regional economic disparity.

There is some evidence that the north’s economy has strong foundations, with productivity growing at a faster rate than in London between 2014 and 2017 and jobs being created at a greater rate than the UK average.

According to new report from TheCityUK, the trade body says the number of people employed in the financial services sector in Wales has jumped by over 20%, about 11,000 people. There has also been a 10,000 rise in the West Midlands, 12,000 in the East of England, and 24,000 in Yorkshire and Humber. Conversely, the number of financial workers in London has dropped by 10,000 since 2016, and by 32,000 across the South East of England.

However, with a £3.6bn cut in public spending in the north of England since 2009/10 and 37,000 fewer public sector workers, there is also evidence, reinforced by IPPR figures in May, that the Northern Powerhouse has been “undermined” by austerity, with power and resources “hoarded in Westminster.”

There is clearly a long way to go before the UK’s regional economic disparities are anywhere near to being reduced.