Categories
Banks, Lenders & Investors Cash Flow & Forecasting General Insolvency Rescue, Restructuring & Recovery Turnaround

Update on Interest Rate Swaps missold to SMEs

 

The May deadline for banks to compensate thousands of small businesses for the misselling of Interest Rate Swaps (IRS) has now past and banks would seem to want everyone believe that they have resolved matters within the deadline.

But campaigners Bully Banks say that many SMEs will miss out on compensation arguing that banks have rejected most claims for consequential loss.

The compensation scheme imposed by the Financial Conduct Authority (FCA) on the banks allowed for basic redress – a refund for excessive interest paid plus 8% interest. However, affected businesses could also claim for such things as lost profit and legal expenses (consequential loss).

Bully Banks Chairman Jeremy Roe was quoted recently as saying: “I don’t know of any business that has successfully claimed for consequential loss and received reasonable compensation from their bank”.

Meanwhile the British Bankers’ Association claims that banks have met their obligations by informing businesses of the IRS compensation they may be owed by May’s end. The claims for consequential loss are being dealt with case by case but would seem to be being dragged out.

It is three years since Bully Banks first began their campaign into IRS misspelling.  That is a long time for a small business to wait for recompense. 

But for many it seems that the waiting is still not over and the outcome remains uncertain.  In the meantime many such businesses would be well advised to prepare for the worst by revising their business plans with the help of a turnaround adviser rather than wait in hope for a big payout.

Categories
Cash Flow & Forecasting General Rescue, Restructuring & Recovery

Is blaming the weather for a downturn in High Street trade a red herring?

With the somewhat slow and tentative arrival of Spring have come the by now regular comments blaming the weather for the struggles of High Street retailers.
But there are signs that the High Street might not be dead quite yet and that actually the weather is only a small part of the picture.
Research from analysts Kantar recently has revealed that 70% of us still like to try a product before we buy despite the boom in online shopping and that even with the rise of online shopping 90% of retail spending last year had taken place in actual shops and stores.
While trading conditions are difficult in the continuing economic crisis it may be that what is going on is actually a restructuring process between online, out of town malls and the High Street. 
Recently Tesco has cancelled some plans to build larger retail outlets but in common with other large supermarkets continues to develop smaller drop-in stores both in town centres and suburban local shopping areas. Some formerly online only stores are also moving into physical stores in a process called “showrooming”.  They include the Kingfisher-owned Screwfix, furniture store Oak Furniture Land and SimplyBe, owned by online fashion group JD Williams.
Small independents are also said to have a place on the High Street but as a specialist in turnaround and restructuring I would want to look at their business plans, costs and potential cash flow before recommending that they go ahead.
What would help most of all, however, would be for the Government to finally get the point that Business Rates, last revised at the height of the pre-crisis boom and now at an artificially high rate, which increased again in April, are no longer either justifiable or affordable for SMEs like the independent retailers.
According to Graham Ruddick of the Daily Telegraph, even the Policy Exchange, which is said to have close ties to senior Conservatives, is recommending freezing business rates for two years until they can be thoroughly reviewed. http://tinyurl.com/pxm2c2y
In our view a review and revision downward is urgent. Freezing them will only allow the Government to avoid having to consider revaluations and reductions in the hubristic hope that growth will return to pre credit-crunch “normal”.

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

Maghreb and Middle East Volatility Adds to Pressures on UK Business

Pressure on UK businesses is already intense as a result of the Government’s austerity measures designed to cut the UK budget deficit.
Already facing changes to NI payments, rising prices for raw materials as well as January’s increase in VAT from 17.5% to 20% and the dilemma of how much of these additional costs to pass on to consumers, now upheavals throughout North Africa and the Middle East are adding enormous uncertainty.  Oil prices have soared to their highest levels for two years, with impacts on all areas of the economy.
But it is not only oil prices that could add to business instability.  The UK is Egypt’s largest investor at around £10 billion, with around 900 UK companies involved, in
Tunisia exports from the UK in 2009 totalled £153 milliion, while imports were at £406 million, and trade with Libya is estimated to be worth £1.5 billion. British exports of goods to Libya were worth an estimated £1.29 billion in 2010.
The impacts will be felt on the UK travel industry, UK construction involved in building and infrastructure projects in Egypt and Tunisia but also on domestic services, for example Libyan-funded education in the UK of more than 6,000 students on undergraduate and postgraduate courses, worth an estimated £160 million.
I believe that, while businesses should try to hold their nerve, even those businesses that have survived so far without getting into difficulties might be wise to not only pay close attention to cash flow but also to revisit their business plans to put themselves in the best possible shape to be able to cope with the continuing uncertainty.