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

Self employment – are we sowing the seeds of a catastrophe?

Self employment accounts for almost two thirds of the new jobs created in the UK since the 2008 financial crisis according to the Office for National Statistics (ONS).
Effectively these are micro businesses and many of the 4.6 million people in this category, according to the ONS, are older people, often offering “white collar” consulting and skilled services.
This may be keeping people off the unemployment register and the Government, naturally, attributes it to entrepreneurial spirit and more people wanting to be their own boss. It is also hoping that many of these micro businesses will grow and be significant providers of future new jobs.
However, there is some evidence that most micro business owners are working longer hours than employed staff, for lower remuneration and that many will have to continue working well beyond retirement age.
This development raises two important concerns. Firstly, how are these businesses being funded while the statistics indicate that banks and other finance providers are not lending to micro and small businesses? Are they depleting personal savings or growing consumer debt? And how will they fund retirement?
Secondly, if the earnings from self employment are lower than they for those in direct employment, notwithstanding the impact on the economy due to a reduction in spending, is this change in employment patterns sowing the seeds of a yet unforeseen catastrophe?

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

RBS – whitewash or exoneration?

 

The first of the investigations into behaviour by the Royal Bank of Scotland (RBS) following publication of the Tomlinson Report in November last year has found “no evidence” to back up the most serious allegations that the bank systematically put customers out of business.

Clifford Chance does not however completely exonerate RBS in its dealings with customers, only the allegation of a deliberate policy – a copy of the report is available at  http://bit.ly/1ljINfK.

The report by the law firm Clifford Chance was commissioned by RBS after Tomlinson, adviser to the Department for Business, Innovation and Skills, investigated the behaviour of the RBS-owned turnaround unit, Global Restructuring Group (GRG).

His report accused GRG of systematically charging large fees to small businesses, thereby putting them out of business and generating profits for the bank.

While there is speculation that RBS could sue Mr Tomlinson for libel, for damage to the bank’s reputation, it is likely that RBS will wait for the FCA report before responding formally

Given that Clifford Chance are a panel firm of advisers to RBS and the limited scope of their investigation, it will be interesting to see if their findings are supported by the FCA whose report is due to be released much later this year.

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

Relying on consumers for restored economic growth is madness

Moderate improvements in economic activity, upwardly revised growth forecasts for the rest of 2013 and now, Bank of England figures showing increased lending to small businesses in June are to be welcomed.
Certainly coupled with a few sporting triumphs and some hot, sunny days this has all been seen as good news by politicians and some media commentators.
But look a little more closely and actually many of the figures given are still well below pre-2008 levels. In the case of SME borrowing records only began in 2011 and lending has been falling since 2009. SME borrowing may have risen a little in June but compared with a year earlier according to the BoE it is still declining, by 3.3% on the same period last year. One monthly swallow does not make a summer.
Sensible businesses are still watching their cash flow, consumer debt may be falling but is still believed to be unsustainably high, yet everyone seems to be jumping on the optimism bandwagon. Most recently the EU’s Gfk/NOP indicator is suggesting that consumer sentiment will continue to pick up.
Haven’t we been here before?  As the Telegraph’s City AM editor Allister Heath pointed out a week or so back, lessons have not been learned if everyone is relying on credit-fuelled consumer-led growth via increased activity in the housing market and rising house prices, fuelled by the Help to Buy scheme.
Isn’t it also true that our economic difficulties are where they are precisely because of a house price bubble and too much credit pre-2008? Plainly there are still lessons not yet learned.