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

Labour's promise on zero hours contracts may result in a rise in unemployment

The run-up to an election can be relied on to generate ambiguously-worded promises that may or may not be delivered by the eventual winner.
One such is the promise in Labour’s manifesto to “ban exploitative zero hours contracts so that if you work regular hours you get a regular contract”.
This pledge has been truncated in some media to “ban exploitative zero hours contracts”.
Either way the pledge could be read in more than one way. Is it a complete ban on all zero hours contracts or is the key word here “exploitative”?
The fact is that a zero hours contract can be very useful, particularly for SMEs to justify employing staff. In a volatile market it gives a company flexibility and allows it to keep overheads as low as possible by tailoring the workforce to demand. Orders cannot be guaranteed and businesses will behave rationally. If they cannot use zero hours contracts then they have other alternatives such as overtime for existing employees, to simply not take on the work, to outsource it to low-wage or more flexible countries, or they can use agency-supplied workers.
There is one aspect of “exploitation” that does need to be addressed which is when an employer makes the contract exclusive to them thus preventing the employee from taking any other work to fill in the gaps.
It is acknowledged that there is an issue for employees due to the lack of a guarantee of a minimum level of hours. There is however a market for jobs whereby employees will weight up the wages and security offered by some employers against those of others and behave rationally. It is also why the market for jobs needs to be underpinned by an effective unemployment benefits system.
So what is Labour really proposing? To close the loopholes that allow exploitation by allowing workers to have more than one zero hours contract? To get rid of zero hours contracts all together, and replace them, with what? To limit them somehow, whether a maximum period of work, or by size of employer?
Absent all other factors, any major reduction in the use of zero hours contracts will result in a rise of unemployment. This may however be the real objective of Labour’s paymasters as it is believed that very few employees on zero hours contracts are members of unions.

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

Another bank inquiry – increased costs for SMEs?

Yet another massive fine, RBS again, this time £56 million for a computer meltdown in 2012 that left people unable to access their accounts.
In recent weeks there seems to have been a steady stream of fines for a variety of misdeeds.
Yet will it make any difference?
We, along with many others, have been saying for months if not years that SMEs and personal customers have been badly served by the “big four” (Lloyds, HSBC, RBS and Barclays) who between them have 85% of the small business banking and 77% of the personal account markets in the UK.
And now the Competition and Markets Authority (CMA) has begun an 18-month investigation into how banks treat their customers.
Who knows how many more revelations about bank misbehaviour are yet to emerge from this new investigation?
Will there be more fines?
Despite the schadenfreude, let’s be clear fines are ultimately paid by customers, not the banks.
What has emerged is that the cleanup now means that banks don’t make much out of their SME and personal accounts which has resulted in the introduction of various regular charges and closure of branches.
It is not yet clear whether the rhetoric will result in any meaningful change that improves the relationship between banks and SMEs.
It is however clear that the cost of banking services will increase for SMEs.

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Cash Flow & Forecasting General Rescue, Restructuring & Recovery Turnaround

The shifting sands of retail

 

There are signs of a re-balancing between online retail and physical stores as Asos posts its second profit warning in three months.

The rise of e-commerce was regarded by many as a nail in the coffin of the High Street because it was spared the costs of expensive rents and business rates, in-store staff and high energy costs.

However, in their enthusiasm, it seems that the champions of e-commerce may not have paid enough attention to some of the additional costs involved.

While prices may be cheaper online, there are some additional costs which are turning out to be significant.

Online retailers certainly reap some benefits from centralised warehousing as opposed to a High Street presence. However they have significant packaging and shipping costs, which are proving a burden when dealing with the issue of returns and who pays for them. The additional staff handling costs can also prove significant, especially when administering returns.

This is becoming a big concern for a volatile sector like fashion and clothing, where, for example Asos  in the UK returns amount to 39% and in Germany 58%.

A major issue is the size labels used on women’s clothes. Another relates to the difference between the item on a screen and the one that is received. I know several women who order many items at a time expecting to return most of them. They choose retailers with pre-paid return policies and often return as many as 90%.

There are two examples of retail outlets that have had consistently good performance even over the last few uncertain years: Next and John Lewis.

Both combine e-commerce and a High Street presence, but crucially, both have introduced a hybrid system, click and collect, where customers can order online but pick up their order in a store.

It will be interesting to see how the online retailers overcome the issue of returns.

Plainly High Street retail is not dead yet.