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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General Insolvency Turnaround

The EU Referendum – businesses want stability

worried businessmanWith just 23 days to go before the UK votes on whether to stay in or leave the EU there is a big question mark over the stability of the UK economy both in the run-up and after the votes are cast.
Certainly stability has been noticeably absent for businesses as the deadline approaches.  Investment and other business decisions have been deferred, UK growth appears to have stalled, particularly in construction, and manufacturing has entered recession.
All this has, of course, to be set in the context of sluggish growth both in the EU and China since the start of 2016, not to mention a volatile commodities market and political instability in many parts of the world.
The arguments from both the Brexit and Remain camps have been more in the nature of predictions than absolute fact, and neither side has put forward any concrete plans for what they will do after June 23.
It should be remembered that the UK at the moment is ranked number 1 as a soft power due to its cultural influence and is “hyperconnected” to the rest of the world given its demographics, where one in eight of its 64 million population was born overseas.

What of the future?

Undoubtedly there will be serious repercussions for the UK economy and for business if the vote is to leave, not least because a vote for Brexit will not resolve the certainty about the outcome whereas a vote for Remain will at least clarify the situation for business.
But it would be a mistake to assume all order will be restored, calm will return and the economy will stabilise even if the outcome is to remain in the EU, especially as it would seem that it will not resolve issue of a Government majority due to the anticipated fall out in the Tory party.
Furthermore, the decision to hold a referendum has itself altered relationships and the balance of power between politicians and arguably altered perceptions of the country with its trading partners and others across the world.
If there is a narrow majority for either leave or remain it is unlikely that the “losers” will accept defeat gracefully.
It is possible that now that the debate has been opened up there will be a push for renegotiation of some of the issues that the UK and other countries object to within the EU regardless of the outcome although it is believed that a vote to remain will weaken the UK’s hand in any future negotiations since we will have already played our only ‘nuclear’ card.
While the issues are played out, the Government is going to find it hard to focus on what needs to be done to restore the economy.
So it will be a while before businesses can expect a return to a level of stability that will give them the confidence to unlock investment and pursue the plans for growth that have been put on hold.
(Image courtesy of Vlado at FreeDigitalPhotos.net)

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Why do successful people practise time management?

Continuing our series on successful people this time we are looking at the importance of time management.
There are two important reasons for practising time management.
Not only is it important to create a structure to the day that makes it possible to define what needs to be done but also it enables tasks to be prioritised so that the most important are the first to be dealt with.
Time management, using lists and a diary, makes it possible to review the task list, to allocate time and in particular to reschedule the less important from the most urgent along the way.
A second important reason to practise time management is to build in the necessary free space for taking regular breaks from the desk and the phone and for research, personal development and creative thinking.
It is neither mentally nor physically healthy to remain sitting at a desk all day without taking regular breaks to at least stand up and walk around the office for a few minutes.
Pausing to think, visualise what success will look like and to then plot the steps needed to get there is one of the things that distinguishes successful people from those who are competent at their job.
Too many business managers feel obliged to multi-task especially earlier in the day when they feel freshest, but research conducted at Stanford University has found that multi-tasking is less productive than doing one thing at a time and fully concentrating on it.
The danger with multi-tasking and not managing time becomes more apparent when things start to go wrong in a business. Then the failure to prioritise and build in thinking time will show up as stress and an inability to make the right decisions necessary to deal with a crisis.

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Banks, Lenders & Investors Business Development & Marketing Finance General Rescue, Restructuring & Recovery Turnaround

Steel industry's problems are benefiting the UK metal fabricators

Ironically, the causes of the woes currently besetting the UK’s steel industry are good news for the country’s metal fabricators.
The recent insolvency putting 1,700 jobs at Caparo at risk and job cuts affecting 1,200 employees announced by Tata Steel and closure of SSI in Redcar with 2,200 job losses are the result of both a slow-down in demand for steel and a reduction in prices worldwide, mainly due to ‘dumping’ from China but also due to the significant rise in energy costs in UK as a result of the government’s obligations on UK manufacturers to use renewable energy.
While yet to hit the insolvency statistics, the steel stock holders and distributors have also been affected. They have had to drop their prices, which is impacting on their own margins, and we are likely to see some significant losses due to writing down the value of their stock.
However the drop in steel prices for customers has benefited the UK metal fabrication industry who can now buy supplies at much lower cost while they have largely been able to maintain their prices.
This wasn’t always the case. The UK metal fabrication industry was significantly cut in the 1990s and 2000s, which led to a decline in apprenticeships and training for welders. Those that survived did so by improving their efficiency and often by investing in plant and machinery to reduce labour costs.
Many of the survivors are SMEs who also had a dire time after the 2008 collapse. More recently demand has returned to improve their order books and as a consequence their profits due to the double benefit of both the reduced steel prices and improved efficiency.
Metal fabricators have, however, been affected by a lack of UK-trained welders and machine operators following the decline of major industrial engineering industries such as ship building. Fortunately the European labour market has helped and they can easily recruit well-trained, highly skilled workers from Eastern Europe.
All this has meant that there are fewer UK fabricators overall but those that remain are becoming increasingly busy and in demand as growth in the economy kicks in.

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Business Development & Marketing Finance General Turnaround

How can SMEs prepare for the National Living Wage?

Predictably, predictions of job cuts and slower growth for SMEs followed the announcement of a compulsory National Living Wage in July’s emergency budget.
But how serious a threat is it really, given that businesses are already used to annual increases in the minimum wage and the £9 Living Wage will not come into effect until five years hence in 2020?
Although there are other factors such as business rates and rent that received no mention in the budget and play into business costs, the wage issue alone need not put a brake on plans for growth.
Firstly, some of the increased wage bill is offset by an increase in the employers’ national insurance employment allowance from £2,000 to £3,000 and from a reduction in corporation tax. Secondly the living wage will only apply to those aged 25-plus.
It could, therefore, be used as an opportunity to plan ahead, which all businesses should be doing each year in any event.
All businesses depend on a well-motivated and well trained workforce and with four or five years still to go, now might be a good time to consider taking on an apprentice or two or investing in staff training.
It may also be a good time to invest in more up to date equipment and more automation or to consider outsourcing some routine tasks that will leave more time for existing staff to focus on those tasks that need to be done by skilled humans.
Arguably, such measures will bring the advantages of a more stable, committed and engaged workforce and higher productivity per person and a growing business better prepared for paying the Living Wage in 2020.

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Banks, Lenders & Investors Business Development & Marketing Finance General Turnaround

How do we improve productivity?

Output per worker, ie productivity, in the UK has been stagnant for some years since the 2008 economic crisis.
It shows no signs of recovery, in fact in the last three months of 2014 output per hour actually fell in manufacturing by 1.3%.
The causes have been: a lack of innovation, a shortage of skilled people and a failure to invest in plant and machinery.
It would seem that businesses are focused on maximising their profits in the short-term to either repay banks and other creditors or pay dividends. Despite the low interest rates and poor returns for lenders and investors, there seems to be very little interest in improving productivity through investment.
It is assumed that this is either cultural or a rational fear of losing money due to market uncertainty.
In the last couple of years there has been some attention paid to the skills shortage, with a focus on increasing the numbers of apprenticeships, but investment in businesses is still declining, despite various initiatives by Government and banks to encourage more lending.
Regretfully bank loans and in particular Government backed loan schemes all require directors and shareholders to provide personal guarantees. The effect of this has been to deter SME businesses from seeking funds to grow.
Productivity matters because over time we become less competitive making it harder for UK companies to compete in a global market.
The political rhetoric doesn’t help as the focus on soliciting votes results in a focus on minimum wages rather than one on the productivity which is necessary to justify any increase.
Growth will continue to be sluggish while there continues to be a lack of investment in productivity.
What can we do to justify investment in productivity rather than simply talk about improving it?

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Business Development & Marketing Finance General Turnaround

How can SMEs benefit from membership of a local business groups?

Online business forums regularly feature debate on the costs versus the benefits of membership of local business groups, such as the Chambers of Commerce, the Institute of Directors or the Federation of Small Businesses, all of which have local branches linked to their national bodies.
In some, members can access cheaper, or free, business banking as well as legal advice and better insurance deals.
Others offer a wider range of benefits that include the ability to network and make connections with other local businesses that may be potential clients or customers, and access to support services, trade missions and information on trading overseas.
Access to local information and marketing intelligence can make all the difference between growth and stagnation.
Many SMEs use local business groups to enhance their own sales team. They collaborate to share contacts and this approach works particularly well when members promote each others’ business and solicit leads on behalf of each other.
Owning a small business can be a very lonely experience so the opportunity to link with others cannot be over-estimated. To some extent what you get from membership will depend on how active you are within the organisation.
Do you belong to a local business organisation? Have you found it valuable to your business and do you have any tips for others considering joining one?

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Banks, Lenders & Investors Business Development & Marketing Finance General Turnaround

How do you stay ahead of your competition?

In the choppy and uncertain economic climate of early 2015, while the outcomes of the UK election, Eurozone QE and the new Greek Government’s efforts to renegotiate its debts are still uncertain, investment in business and consumer spending are likely to remain muted.
Currencies fluctuate, commodity prices, not only oil, yoyo and business margins continue to be squeezed.
In these circumstances what can a small business to develop and grow rather than simply survive?
While it will be necessary to continue to keep a tight control on cash flow and to have a clear marketing strategy, the three main opportunities for growth are improving employee productivity, looking to new markets such as overseas, and innovation to offer a ground-breaking new product or service.
These drivers of growth rely on investment in marketing, equipment and R&D, but your competitors can copy this if they see it working.
Culture, however is more difficult to copy where getting it right is key to implementing change. People really are the greatest asset in a business.
In today’s highly competitive world change is the new normal and standing still is no longer an option.
Investing in people, their training, development and welfare is the best way of achieving growth as they are needed to implement the changes necessary to stay ahead of your competition.

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Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

How can you as a small business fund the growth of your team?

Zero hours contracts were heralded as a tool that would help businesses to keep their wage bills under control, by only paying employees for the time they spent actually working.
No wonder they were enthusiastically taken up by many large employers and could have been ideal for small growing businesses with tight margins. Regretfully most small businesses do not employ advisers on how to structure such contracts so they are not that common among small businesses who more often use sub-contract or piece-work contracts.
Zero hours contracts have also proven to be a problem because some employers abuse them by using clauses that prevent employees from taking other work even when there was none available with the contractor, leaving the worker with an uncertain income or in some instances no income and certainly no safety net. No wonder unemployment statistics have declined.
Legislation is on the way to change this but it raises the question as to how small businesses can attract and keep the best staff and how they can find the money to pay them a reasonable wage while at the same time developing capacity for a growing business.
It may be that revamped zero hours contracts will be useful to smaller businesses but legislating against the abuses will be difficult. For the moment the preferred option is likely to continue, that of outsourcing work to trusted sub-contractors.
Sub-contractors are often small businesses or sole traders themselves who take pride in their work and have a vested interest in building long-term relationships with clients. Essentially they become part of your team without the cost or obligations of employment.
Collaboration and partnering arrangements offer scope for growing both businesses.
Let us know how you are funding the growth of your team without breaking the bank.

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Business Development & Marketing General Rescue, Restructuring & Recovery

Thinking of trading overseas? Where can you get help?

 

Businesses are being encouraged to sell their goods and services overseas as part of the drive to rebuild and rebalance the UK economy after the carnage unleashed by the 2008 crash.

Prime Minister, David Cameron, has set business a target of increasing exports by £1 trillion by 2020, but, if a recent reported comment by business secretary Vince Cable is accurate, businesses cannot expect any help from Government to do so.

So what is a small or a middle-sized business with little or no export experience outside the EU but with the potential to expand overseas to do?

Well actually, there is at least some Government help via the auspices of UKTI (UK Trade and Industry) which acts as a facilitator in organising trade missions to specific countries and pointers to local contacts and to the local issues to be aware or wary of.

Its website also has a very useful page called “where to go next” which details all the issues that a business will need to address to minimise and protect from risks.  These include legal advice on local employment, tax and other issues, insurance, access to export finance (including services provided by UK Export Finance) and specialist advice on risk and security.

While a business may be able to find all this expertise  relatively easily in London, it can be harder for businesses in the regions and the one glaring piece missing from the whole jigsaw puzzle is the existence of experts who can project manage or help a business to organise all these additional aspects.

Has your business considered moving into export markets? How difficult do you find organising all the elements?  Where have you gone for help?

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Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Further thoughts on small business definitions

 

If, as is argued, Micro businesses are unable to take advantage of Government initiatives for small businesses (the S in SME) what about these further two sub divisions?

There are two other types of business that presumably currently fall into the “S” category of SME – the Lifestyle business and the Sole Trader.

Broadly the Lifestyle business can be described as one where its owner(s) deliberately run it so as to allow them to support a lifestyle. They need a satisfactory level of profit but tend not to focus on growth beyond a certain size. Typical examples would be those who want to prioritise their time with children, or those who want to work from home. Such businesses might be based on providing services time can be self-managed such as designers or consultants, or using creative skills to write or make goods for sale. The internet has made many such businesses possible.

The Sole Trader, on the other hand, is a definition used by HMRC to cover anyone who is self-employed. They may have a particular trade or skill they can sell, such as carpentry, plumbing, painting and decorating, accountancy, book keeping and so on, and some may have set up independently as a result of redundancy though others will have made a conscious decision to become independent.

Given time, effort and ambition this second group can potentially grow into a much larger business employing people. There is likely to come a time when the Sole Trader needs support, mentoring and funding to achieve growth.

Plainly, though, to be of genuine, practical help any Government support for the Sole Trader, the Micro Business with fewer than 10 employees and the Small Business, with between 10 and 50 employees should be tailored to each specific group’s needs.

While economic recovery is said to depend on the growth of small businesses what chance is there of Government understanding or adopting this more nuanced and necessary approach to achieve this?

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Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Are SMEs really MSMEs and what is the squeezed Middle?

 

We all use it without really thinking and assume we know what it means.

The acronym SME provokes puzzlement in some quarters and ire in others, according to Daily Telegraph business writer  Michael Hayman, who quotes King of Shaves founder Will King: “Get rid of this casual piece of profanity…It needs to be removed from the Oxford English Dictionary.”

So what is the problem? 

SME is short for Small and Medium Sized Enterprises and that, according to CBI director general John Cridland, means the M in the middle is a “forgotten army”, the middle-sized businesses on which the economy is relying for growth.

But it’s actually a bit more complicated than that since no-one agrees on the definition of small.

The UK and the EU use the same definitions for businesses, based on number of employees and turnover – Micro, Small and Medium – which actually would give us the acronym MSME!

Micro Businesses are those with fewer than 10 employees and turnover under £2 million, Small Businesses consists of fewer than 50 employees / turnover under £10 million and a Medium Business has fewer than 250 employees / turnover under £50 million.

It is argued that 95% of UK companies qualify as Micro Businesses. This has led to the setting up of a parliamentary group, the All-Party Parliamentary Group (APPG) for Micro Businesses, chaired by Anne Marie Morris, Conservative MP for Newton Abbot.

The CBI has calculated that middle-sized companies contain between £20billion and £50billion of unrealised economic output, and are best placed, unlike their smaller brethren, to take advantage of export opportunities in the emerging markets of the world.

The argument is that by lumping them all together the M, Medium, businesses in SMEs are neglected and don’t get the support they deserve.  Equally the other M, Micro Businesses, lose out by being lumped in with Small but actually can’t take advantage of government support aimed at the Small.

What do you think? Do you see yourself as Micro, Small or Medium?  Do you feel neglected? And should we replace SME with MSME?

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Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

What help was the budget to SMEs?

 

A post-budget vote in Kent by 100 business people revealed that 80% of them were more confident about the prospects for the economy in the South East than at this time last year.

But looked at closely, there was very little in the budget that was likely to make things any easier for the UK’s SMEs, which account for more than half our output and two thirds of all employment.

Admittedly, direct lending from government to UK businesses to promote exports was doubled to £3bn and interest rates on that lending cut by a third and business rate discounts and enhanced capital allowances in enterprise zones were extended for three years. But how many SMEs will benefit from these measures?

Admittedly also, some small builders may benefit from the extension to Help to Buy until 2020 and the “support” for the building of more than 200,000 new homes.

But there was not a word about the review of business rates that had been pressed for by so many businesses, not only High Street Retailers, in the days leading up to the Budget statement, nor about the previously oft-repeated promises to reduce red tape.

Given that the Chancellor himself has conceded that economic recovery is built on very fragile foundations is such an increase in confidence on the part of the businesses of Kent a case of too much too soon?

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

Unbalanced recovery – surprise, surprise

 

Over the past few weeks there have been a number of profit warnings from high profile companies, including Serco, Pearson, RBS, Debenhams and Morrisons, mainly based on their sales in the last quarter of 2013.

Subsequently the Governor of the Bank of England, Mark Carney, said that the so-called economic recovery was “neither balanced nor sustainable”.

Then last week Chancellor George Osborne, speaking to business leaders in Hong Kong, referred to the economy as being “not secure” and “unbalanced”.

Prior to these developments the overall message coming from Government was far more positive with unemployment falling faster than expected and predictions that the economic recovery would consolidate throughout 2014.

There had been plenty of voices warning that the recovery was far too dependent on consumer-led spending and the property market but they went unheeded.

What has changed?

Now it seems the ONS figures due to be released next week are expected to reinforce this latest message of an unbalanced and fragile recovery too reliant on consumer spending.

Could it be that we are being prepared for an unpalatable budget which the Chancellor is due to deliver in three weeks’ time? 

The message for SMEs remains that caution is warranted, close attention to cash flow is still in order and ever greater efforts to grow are needed.

As an SME owner are you more confident than you were a year ago  – or less?

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Banks, Lenders & Investors General Insolvency Liquidation, Pre-Packs & Phoenix Rescue, Restructuring & Recovery Turnaround Voluntary Arrangements - CVAs

Zombie companies have a number of options for achieving growth

Zombie companies will at some time need to confront three fundamental problems before they can achieve growth: 1. how to fund growth; 2. how to repay debt; and 3. how to service interest when rates rise.
Provided that a zombie company can generate profits on an EBITDA basis (earnings before interest, taxes, depreciation, and amortization), it has a number of options for resolving these problems as a pre-requisite for growth.
Options include negotiating a partial debt write-off, a pre-pack sale via Administration or a Company Voluntary Arrangement (CVA).
From the suppliers’ viewpoint a growing business offers the prospect of increased profits from increased supplies. From the existing lenders’ viewpoint profitable growth means that non-performing debts can be repaid. From a new investor’s viewpoint, new money can be used to fund growth rather than replace existing debt. From the company’s viewpoint growth inspires confidence in the future prospects of the business. 
Given the benefits, it makes sense for zombie companies to get help from restructuring experts who are familiar with these options.

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Banks, Lenders & Investors General Insolvency Rescue, Restructuring & Recovery Turnaround

Zombies are not dead

We hear a lot about the dead weight of zombie companies and how they should be put out of their misery.
But we take a slightly different view.  Yes a zombie company is regarded as one that is limping along only servicing interest on its debt, unable to fund growth.
However, a zombie status does not mean that a business is necessarily a failure and that the best thing creditors can do is to take the money and run.
Often, the reason a company has reached this point is that it has pursued aggressive growth based on debt during the so-called “good times” pre 2008 but the trading climate since then has changed out of all recognition.
All companies are at the mercy of market forces at all times, but we make the point that it does not necessarily follow that the services or products a business is offering are in themselves a bad idea.
What is needed is for the directors and management to recognise that there is a problem sooner rather than later.
Then they should get in expert help to assess the situation and advise them of their options and if necessary help implement changes to secure the future of their business.
A turnaround advisor is on the company’s side unlike the insolvency practitioner who, if appointed, works for creditors.
The turnaround advisor has an interest in helping the company survive and be prepared, including having adequate finance available, for growth when it comes.

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Accounting & Bookkeeping Banks, Lenders & Investors General Rescue, Restructuring & Recovery Turnaround

Further evidence that a safe pare of hands is not enough for growth

Some new figures on attitudes to innovation from Price Waterhouse Cooper reinforce the point that growth will not come from being risk averse and hoarding cash.
In the UK the most innovative top fifth of companies grew 50% faster than the bottom fifth and, more alarmingly, the survey found that in the UK just 32% of companies regarded innovation as very important, compared with 46% of German and 59% of Chinese companies. Just 16% of UK companies planned to prioritise product innovation in the coming year compared with almost 33% globally.
Further proof, if it were needed, that, while it would of course be foolish to be complacent about economic recovery, the risk-taking, innovative manager is needed more at this point in the cycle than the risk-averse accountant.
 

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Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery

Culture Shock

If all the recommendations in the Banking Commission’s long-awaited report on banking standards are implemented the banking industry will undergo a profound change in its operating culture.
We would argue that it is not only in banking and finance that a change in culture is long overdue following the 2008 credit crunch.
Businesses and consumers have already had to rethink the way they manage their finances. Businesses have been paying down debt and larger companies with comfortable capital reserves are not spending or investing. Consumers, too, are trying to repair their finances while coping with rising inflation and falling incomes.
Depending on which audience they are speaking to, however, Government seems to be wedded to austerity, sustainability or growth, as the solution to the UK’s economic ills.  
Every new monthly statistic is used to herald imminent recovery.  Most recently, new figures showing a 17% rise in mortgage lending in May 2013, compared to May 2012, will doubtless be seized on as evidence of success for schemes like Funding for Lending and the newer Help to Buy in stimulating home ownership.
Yet all the “experts” warn that without massive additional home building, they risk precipitating another housing bubble because the lack of affordable small homes will overinflate house prices.
With the homeless charity Shelter estimating that a first time buyer may have to spend 14 years raising the deposit to get on the property ladder, the chances are that consumers are already facing a massive culture change from home ownership to long-term renting, but without the tenancy protections that used to provide some security and continuity in living arrangements.
Is it time that politicians stopped grasping at short term electioneering straws and underwent their own cultural revolution to get real about economic life in the 21st Century?

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Banks, Lenders & Investors General Rescue, Restructuring & Recovery

Politicians and Economists are failing SMEs

Investment in innovation has to be a long term strategy while the UK’s fixed term parliamentary system and the need to grab headlines encourage short term thinking.
The evidence is piling up for all to see.
Firstly, research by the Big Innovation Centre has emphasised, if it were needed, that there is a “systemic failure” holding back the economy shown in part by the worsening of access to finance to SMEs and in particular to those developing entirely new products and processes.
Yet these new innovative SMEs are the most likely to create new markets and achieve rapid growth, so have a disproportionate impact on employment and the national economy.
The point was reinforced by Tony Robinson OBE, a successful micro-business owner with more than 25 years’ experience and co-owner of Enterprise Rockers, which supports micro enterprises. In an article in the Daily Telegraph business pages, he says that despite the UK’s 4.5million micro businesses providing 32% of private sector employment and 20% of its turnover: “…95% of all government employment support and training funding goes to the largest 5% of UK businesses.”
Sir Hossein Yassaie, CEO of Imagination Technologies, has also weighed in, comparing planned support for innovation in S. Korea over the long term to what happens in the UK, where much of industry has been sold to overseas owners: “…The Government changes and everything is short term…. I think we really need to stop all that.”
In his view, also quoted in the Telegraph, instead questions need to be asked now about what we need to do today to be in markets in ten years’ time and imagination now is the key to future success.
Politicians need to put in place support that is genuinely aimed at SMEs that is more than rhetoric and not prone to change by a new Government, or they need to provide real short-term incentives to investors in innovation that will have the same effect over the longer term.
Examples of such incentives might be to provide soft loans, or offer matched funding alongside new share capital. We don’t want politicians trying to be clever as they have been with the flawed Enterprise Finance Guarantee Scheme which was never going to stimulate business.
It is a great pity that ‘highly regarded’ economists like the BBC’s Stephanie Flanders, who I understand also advises the Government, are unaware of the Small Firms Loan Guarantee Scheme that for approximately 15 years drove much of growth by SMEs in the 1980s and 90s. I asked her recently, and she had never heard of it.
This makes me think that economists like to operate at a theoretical and strategic level rather than try to understand what really makes SMEs tick so they can develop tactical stimuli that promote SME growth. Quantitative Easing is another example of theory not working for SMEs.

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Banks, Lenders & Investors General Rescue, Restructuring & Recovery Turnaround

Is it all doom and gloom or are there rays of sunshine on the horizon?

It started mid-May with the Bank of England governor Sir Mervyn King upgrading the economic forecast for the rest of this year.
The British Chamber of Commerce (BCI) was also slightly more optimistic in its forecasts and reports on business confidence.
In the last few days we’ve had three forecasts on monthly performance for the manufacturing, service and construction sectors, all of them showing signs of growth.
While no-one is denying that there are some years to go on paying down household and business debt, as the Telegraph’s CItyAM editor Allister Heath emphasises this week, is his doom-laden piece predicting an even more cataclysmic crisis really justified?
He cites the need to further massively cut the welfare state and also to what he calls the “terrifying recklessness” of the Government’s proposed Help to Buy scheme that could stoke up another credit-fuelled housing bubble.
It doesn’t help that we are only building 100,000 new houses a year instead of the 300,000 that we need to satisfy demand.
However, if the scheme were to stimulate house building we might stem house price inflation and avoid a bubble. It could also be used to redress the scarcity of smaller homes for both first time buyers and older people wanting to downsize as well as provide jobs for the approximate 20% of all SMEs that a thriving construction industry could employ.
We all know that “bad news” sells papers but there is also a converse argument that we need businesses to believe they have a future. With some measure of confidence in the future, businesses and SMEs in particular might begin to invest in growth.
So are you a pessimist, a realist or an optimist?

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

Two steps forward and one step back is the new normal

“It seems that every time an upward trend in sales volumes seems to be emerge it’s quickly snuffed out. While disappointing, trades data are a reminder that despite some positive upward indicators, the ongoing squeeze on incomes means there’s a limit to how quickly growth can pick up”.
This reported comment from Simon Wells, HSBC’s chief UK economist, in the London E. Standard may seem to be a statement of the obvious but it bears repeating in a world where every tiny short term uptick is seized on as evidence of recovery from the global economic crisis.
Irrespective of who is to blame we should remember that high price inflation and minimal salary inflation plus the current uncertainty about employment have meant a real squeeze on incomes. Both businesses and consumers remain focused on paying down debt.
While confidence might rise this can only translate into a rise in credit and in people’s ability to service debts.
We are also in the midst of a global economic rebalancing that is shifting power and influence away from the so-called developed world to other economic centres and this is likely to take a long time to stabilise.
Every business, and not only the retail sector, that is looking at restructuring for growth needs to bear all this in mind whether it is considering developing exports or its home market.  It will be about focus on the longer term, about real innovation, about providing value for money and about close attention to customer service to achieve success and growth.

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General Rescue, Restructuring & Recovery Turnaround

UK Business Growth

There are indications of consumer confidence in the UK. One the sale of new cars where during the first three months of 2013 the sale of new cars in UK was up 7.4%, while elsewhere in Europe they were down in Germany 12.9%,  France 15.6%, Italy 13%, Spain 11.5% and Cyprus 41.6%. In March alone new car sales in UK were 394,806, against 281,184 in Germany, 165,829 in France, 132,020 in Italy and 72,677 in Spain.
This would suggest that we in UK are emerging from a long-term malaise if not depression while it would appear that Europe remains mired in a torpor with declining confidence.
So where is the engine for business growth? the above evidence would suggest it won’t be Europe which some eminent economists such as Professor Nick Crafts at Warwick University argue will be approximately 1% a year until 2030.
I don’t believe we want it to be driven by consumer confidence due to property inflation as this will become another bubble.
We need industrial, manufacturing, service and professional businesses that add value and we need export sales. These require investment in developing ideas, training people, building capacity and marketing them.
I would urge everyone to get this message across to every politician you come across as we need policies that stimulate and justify investment in such businesses.
As for the increase in car sales, how many UK manufacturers are benefiting from the new sales? The lack of a UK car industry is down to short-sighted and weak politicians who supported fundamentally flawed restructuring plans like the Phoenix Four’s failed attempt to save Rover.

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

Are we brewing another bubble?

Profits are up at Currys, PC World and Asda.  Outgoing Bank of England Governor Sir Mervyn King has revised upwards the bank’s growth forecast for the year and the CBI too is a bit more optimistic about “more balanced growth” in the economy.
Add to this, results from the Royal Institute of Chartered Surveyors’ latest survey showing that house buying enquiries had reached their highest level for three years and in April the Ernst & Young ITEM Club predicting a pick up in the housing market activity to almost pre-2007 levels.
Some would argue that Chancellor Osborne’s Funding for Lending and Help to Buy schemes are finally helping potential home buyers but let’s not get carried away here.
Was it not unwise lending on housing that led to the unsustainable property bubble that precipitated the 2008 economic meltdown?
Despite the unseasonably chilly May are these reliable signs of green shoots?
Or are we collectively clutching at short term straws?
We should remember that banks are still weighted down by illiquid assets such as commercial property, investors continue to seek short term gain rather than investing in the longer term future and politicians think only in career terms of keeping their seats in the next election.
Clutching at short term straws will not fix our economic problems. Investing in the longer term, in promising new companies, in support for R & D to keep our knowledge economy competitive overseas and investing in a sensible education and business support policy that provides the skilled workers for the future through apprenticeships just might give the economy a fighting chance.
In the meantime while it’s a bit early for SMEs to shift their focus away from managing cash flow it might be appropriate to revisit the business plan and model to identify any changes that should be made to prepare to take advantage of growth should it materialise.