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

Inequality stifling growth?

With an election due soon and party conference season in the UK almost completed, it is no surprise that there has been some focus on the widening inequality between society’s poorest and richest.
However it seems it is not only on the politicians’ minds.
Income inequality is on the agenda for annual meetings of the IMF and the World Bank, and it has also been the subject of a discussion on BBC’s Radio 4 between economics editor Robert Peston and two US economists, Amir Sufi and Prof Atif Mian, whose book House of Debt explores the issues of widening inequality making us all poorer.
Why?  Because there is a theory developing that there is a link between the debts of the poorest in the economy and recession, which argues that because the poor have little or no spare disposable income and when there is a slump, and debts outweigh the value of property this group spends much less.
When millions do this, as consumers did following the 2008 Crash, the result is recession.
Could there also be a link between this and the anaemic wage growth that has hit most working people since then? And could this be an argument for boosting their spending power to stimulate economic growth, – either through wage increases at least in line with inflation or by reducing taxation?
Of course SME employers will argue that wage increases are unaffordable given global competition and narrowing margins – so what can be done to break the deadlock?
My own view is that we need to stimulate investment in productivity so that in turn employers can share the gains. What’s yours?

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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.

Categories
Cash Flow & Forecasting General Rescue, Restructuring & Recovery Turnaround

Is it wise to rely so heavily on a recovery led by consumer spending?

There has been some recent data and a good deal of spin about the economic recovery becoming more secure and that it is time for businesses to start investing for growth.
While unemployment may be steadily decreasing, the housing market picking up and consumer spending rising a little it would, in our view, be wise to be cautious, not least because the Government seems to be relying a little too heavily on a consumer and SME-led recovery.
Firstly, there has been evidence that the jobs being “created” are part time and low-paid and that in any case wage increases are lagging far behind the rising cost of living. 
Secondly, on the evidence so far, households will be facing hefty utility and energy price rises in the region of 10% by the end of the year, despite Thames Water’s attempt to increase water rates next by 8% being rejected by the watchdog. 
Thirdly, there is also some evidence that increased consumer spending is yet again being financed by credit cards and personal debt, which has been rising steadily since mid-2012. 
Fourthly, there are still plenty of voices arguing that the ‘Help to Buy’ scheme is merely pushing up house prices and borrowing to “bubble” levels – a point reinforced by property website Rightmove, which revealed a 10% rise in property price in London in October and of an average 2.8% in asking prices in most parts of England. 
It would appear that measures to stimulate the economy are working, but can we be certain these are not a pre-election gimmick that conceals the truth? 
Regardless of short term statistics, consumer spending will continue to struggle while personal and SME levels of debt are so high and households continue to worry about making ends meet. In such a market SMEs as well as consumers might be wise to wait until after the election to confirm growth is sustainable before making big investments.
 In the meantime they would be well advised to continue paying close attention to cash flow, paying down any expensive debt or hoarding cash and if necessary restructuring to be as lean and fit as possible ready for the moment when the fat lady really does start singing, IF she does. What do others think?