£20bn custom system would “dampen the ambitions and confidence of UK SMEs”

Regarding the news that the Brexiteers’ favoured technology-based custom system could cost UK businesses £20bn a year, Specialist Finance Director at BFS, Kash Ahmad, commented “The idea that businesses may have to foot a bill of up to £20bn to trade with the EU would prove another significant barrier for UK SMEs international expansion aspirations. Effectively, it would be an enormous step backwards in the Government’s efforts to promote trade.

“A “plausible” figure of £32.50 per individual declaration is yet another burdensome cost for SMEs already feeling the squeeze. From operating on small margins and handling different payment terms, many businesses are already stretching their working capital to the maximum.

“The Government continues to ramp up the positive energy to a bright future for UK Plc, but solutions like this only dampen the ambitions and confidence of UK SMEs.”

All work and no play for UK’s Small businesses

Almost a quarter of small business owners in the UK (24%) took fewer than five days’ holiday over the last year with 15% taking no leave at all, according to new research from Hitachi Capital Business Finance. Among start-ups, this figure rose to 31%, with 19% taking no leave.

At a time when most people are making plans for the long bank holiday weekend, Hitachi’s new research shows that whether by choice or compulsion, many of the UK’s small businesses will not taking a break away from the office.

Ploughing away – farmers least likely to take holiday
Half of those (50%) in the agricultural sector took fewer than five days’ holiday last year, with just over a quarter (28%) saying they took none at all. After this, the next most likely to have taken a maximum of five days’ leave were those in the retail sector (38%) or the legal professions (22%).

Women take less leave than men
More than a quarter of female small business owners (27%), took a maximum of 5 days’ leave, compared with 23% of male bosses. Men were also more likely to take more than 30 days’ holiday than women (14% vs. 11%).

North vs South
Small businesses in the North took fewer days than their southern counterparts, according to the results. Almost three in ten northern small enterprise owners (29%) took fewer than five days’ leave, compared with 24% of those based in the South. In London this figure dropped again to 19%.

By specific region, businesses in the North East were the least likely to take annual leave – 41% of bosses took less than five days’ leave. This was followed by 28% of bosses in the North West.

At the other end of the scale, there were those that did take their annual leave allowance as planned. More than two in five Scottish small businesses (41%), a third of those based in the West Midlands (35%), and 28% of company owners in the capital all took more than 26 days’ holiday last year.

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance commented: “Hitachi have carried out detailed research looking into the links between productivity and the health, happiness and wellbeing of an organisation’s employees. We completely support organisations that take this seriously, and see holidays as a key ingredient in the wellbeing mix. At the same time, we understand the pressures that small businesses face and that for many ‘time is money’.”

“Hitachi Capital helps businesses to be confident that their cash flow is well managed and their growth plans secure so that if and when they take time off, for however long they choose to do so, they are able to relax as they take their hard-earned leave.”

British businesses have £680bn in hidden cash

British businesses have around £680 billion tied up in working capital, according to new research on more than 5,400 businesses from Lloyds Bank Commercial Banking.

Working capital is the amount of money that a company ties up in the day-to-day costs of doing business, and tends to increase as businesses grow or as efficiency falls.

Lloyds Bank’s Working Capital Index found that businesses’ annual revenues have increased, on average, causing the amount of cash tied up in inventory or unpaid invoices to increase by 6 per cent in the last year.

This puts pressure on firms’ cash flow and could leave many firms ill-prepared to quickly access the funds they might need to take on any unforeseen opportunities or challenges.

While partly caused by the fact businesses were growing, the report also found that firms – and particularly smaller ones – were becoming less efficient at collecting cash from their customers, making the problem worse.

Ed Thurman, managing director, head of Global Transaction Banking at Lloyds Bank, said: “Revenue growth is good news for British business, but to improve efficiency is going to take investment and that requires cash flow.

“Small firms in particular are taking even longer to free up cash from inventory and unpaid invoices. The longer that money remains unavailable, the less firms can invest in growth, new machinery or pay down debts.

“Companies that manage their working capital well can generate healthy cash flow and will be best placed to invest in their businesses and take advantage of new trading opportunities

“Those who don’t may find it difficult to deal with a potential rise in interest rates later this year, or to take on the opportunities and challenges created by Brexit.”

The report found that annual revenue growth nearly quadrupled during 2017 to 8.3 per cent, from 2.1 per cent in 2016.

At the same time, firms’ inventory levels increased 10.6 per cent during 2017, while outstanding invoices increased 10.3 per cent

Firms responded by lengthening the time, in days, that they took to pay suppliers. But this primarily benefited larger firms, 13 per cent of whom said they were now taking longer to pay suppliers, compared with just four per cent of small firms.

Looking ahead, almost a third of businesses (31 per cent) said demand uncertainty was their biggest concern affecting their management of working capital and cash flow in the year ahead. This was followed by changes to payment terms (16 per cent) and rising costs (13 per cent).
Lloyds Bank has recently partnered with Be the Business, a new free to join and use business movement set up to unlock practical and pragmatic practices that help productivity and share them across the UK.

Tony Danker, chief executive of Be the Business, said “Productive companies get more out of what they’ve got, enabling them to increase their profits, pay higher wages and invest in their future. This Lloyds Bank research shows the importance of closely managing working capital and how even small improvements can yield dramatic results for a business.

“Through our partnership with Lloyds Bank we hope to support as many UK firms as we can to put in place the simple management and business practices used by the best to be successful.”

Subcontractors wary of working with large construction firms following Carillion collapse

Half of subcontractors working within the UK construction sector are wary of working with main contractors, following the collapse of Carillion, according to a new study by specialist financial services provider, Bibby Financial Services (BFS).

Findings of the Subcontracting Growth study reveal a shift in attitudes towards working within the supply chains of large construction firms, following the Wolverhampton-based giant’s liquidation in January. Almost half of subcontractors (47%) say that it has made them cautious of working with large contractors, and the same proportion now has concerns over the financial stability of similar firms.

The prospect of a main contractor going into administration is the second greatest threat to subcontractors over the next twelve months, behind late payment.

Specialist Finance Director at BFS, Kash Ahmad, commented: “It is clear that January’s news has sent repercussions throughout the sector and subcontractors working within the supply chain of large main contractors have serious concerns about others suffering a similar fate. It’s now vital that both public and private sector organisations work together to support the sector’s SMEs at this pivotal time.”

Following the collapse of Carillion, subcontractors are calling on the Government to introduce measures to prevent similar supply-chain collapses in the future.

Four-fifths (82%) say they support mandatory payment terms for public sector suppliers and more than two-thirds (69%) believe there should be better public reporting of supply chains. Furthermore, 59 per cent of firms say that Project Bank Accounts – ring-fenced accounts ensuring that all parties in the supply chain are paid on time – should be mandatory.

Kash Ahmad continued: “There are a number of measures that subcontractors and small construction firms would like to see introduced to level the playing field between them and the larger contractors with which they work. As an industry, we must look to address the power imbalance that has become indicative of the sector. Only when this is achieved will the sector reach its full economic potential.”

Findings of the study highlight this power imbalance. More than half (56%) say they must accept onerous contract terms of large customers or face losing work, and 44 per cent say that contracts are difficult to understand. Just six per cent say they seek professional support when negotiating contracts.

The data echoes recent comments from Small Business Commissioner, Paul Uppal, who said that many businesses would “rather have a very, very bad commercial relationship than none at all.”

The research shows that some subcontractors have acted to protect their businesses following Carillion’s collapse. A fifth of firms (19%) say they have evaluated their cashflow position, and 16 per cent say they have reviewed existing agreements with main contractors. However, two-thirds (66%) are yet to take any action.

Kash Ahmad continued: “Small construction firms often have Hobson’s choice. They must either accept the burdensome contract terms outlined, or lose contracts and vital revenue. Very rarely can they influence the terms of these agreements, and this often leads to disputes and even insolvency further down the line.”

New Collective Redundancy & Insolvency Guidance ‘Very Positive’ – R3

The Government’s proposed new guidance for consulting on collective redundancies in insolvency situations is ‘very positive’, says insolvency and restructuring trade body R3.

Following a number of high-profile insolvency cases where employees were made redundant without the full statutory consultation period, the Government has been looking at reforms which could be made to redundancy consultations.

R3 has long called for reform so that inevitable clashes between insolvency and employment law can be resolved. The Government’s proposed guidance could help get a better deal for employees, employers, insolvency practitioners, and the taxpayer.

Caroline Sumner, R3’s technical director, says: “The Government’s recognition of the difficulties faced when consulting on collective redundancies in insolvency situations is very positive. Having called for reform for a number of years, we’re pleased to see action finally being taken.

“We’re also pleased that the Government understands that new guidance rather than regulation is needed. Additional regulation would have compounded the problems in an already complex area.

“Recognising that insolvencies are a special situation and that they require different approaches to redundancy consultations is a pragmatic step. The current situation does not work for employees, employers, the taxpayers, or insolvency practitioners. New guidance will help get a better deal for everyone.

“Collective redundancy consultations are required by statute but the special nature of insolvencies, and the speed with which they happen, often result in an inability to undertake the full consultation process. A full consultation requires an alternative to redundancy which often isn’t there when a company has failed. The cost of keeping staff on and running the consultation means less money can get back to creditors, but maximising creditor returns is one of the primary goals of an insolvency procedure. Not making staff redundant quickly could prevent them from accessing benefits or applying for new roles, trapping them in a situation where they’re not being paid by their insolvent employer.

“The difficulty in resolving these issues often means significant ‘protective awards’ are made to employees by Employment Tribunals. These costs are typically met by the taxpayer in the first instance rather than the insolvent company. It’s just not clear who the existing set-up is meant to help.

“Guidance will help resolve some of the issues which exist between employment and insolvency law and we look forward to working with the Government to ensure the new guidance is a success.

“Insolvency practitioners should try as far as they can to consult on redundancies, and this guidance will help them do that.

“While the Government says it will consider regulation in future, we should see how the guidance works first. Insolvency practitioners find themselves in an impossible position when caught between employment law and the realities of an insolvency, so additional regulation would have led to punishment for practitioners trying to do their jobs with few alternatives.”

Background

Under employment law*, in situations where there will be more than 20 redundancies in one location, there must be at least 30 days’ consultation for employees before the first redundancy is made (45 days for 100+ redundancies). This can cause problems in insolvencies, particularly where a company has failed because:

  • The cost of retaining employees while consulting – and running the consultation – can exhaust the company’s remaining funds. The depletion of funds can make business and job rescue unviable and it makes it difficult for insolvency practitioners to comply with their obligations under insolvency law to maximise returns to creditors. Serious threats to creditor returns could also threaten businesses’ confidence to lend and trade.
  • An insolvent company may not have the funds to pay employees while consultations take place.
  • When a company has failed without prospects for rescue, this can leave employees ‘trapped’: if they resign from the company to seek new work they risk losing redundancy benefits (e.g. statutory redundancy pay, paid by the government); if they stay, they face at least a month without pay.
  • When a company fails, no meaningful consultation can take place: there is no realistic alternative to redundancies. In these circumstances, a 30- or 45-day consultation serves little practical purpose.
  • In an ideal world, redundancy consultations would start before a company becomes insolvent.
  • However, company finances can deteriorate very rapidly in some cases, making this difficult.
  • Insolvency situations can also be fast-moving and unpredictable, making formal consultation processes difficult to manage.

When claims are brought before the Employment Tribunal for a failure to consult, a significant ‘protective award’ may be made against the company for the benefit of employees. However, because the company is insolvent, the award is paid by the taxpayer, who then becomes an unsecured creditor in the insolvency process.

*Trade Union and Labour Relations (Consolidation) Act 1992

Leading pharmaceutical wholesaler agrees £8m funding with Bibby Financial Services

Bibby Financial Services (BFS) has provided an £8 million asset-based lending facility to Veenak International Limited, one of the UK’s leading wholesalers of pharmaceutical and healthcare products.

Established over twenty years ago, the company is at the forefront of pharmaceutical export, import and wholesale activity, and has an established and expanding client base in the UK and Europe.

The business, based in Birmingham, provides a wide variety of medicines, medical devices and disposables such as bandages, dressing and syringes. Its products can be found in pharmacies and healthcare practices across the UK and Europe, including Germany, Italy, Netherlands, Spain and Ireland.

Veenak’s expertise in negotiating import and export regulations efficiently, providing its customers with the medical products they need quickly, has driven demand for its products over the years. Veenak has ambitious plans for the future and is aiming to increase revenues from £28 million in 2017 to over £35 million by 2019. To facilitate this growth, Veenak required additional working capital to serve an ever-increasing number of customers.

The business spoke with BFS’s Corporate team, which was able to structure a bespoke funding package for the business in a short timescale. The new facility provides Veenak with the flexibility to quickly access cash as and when it needs to, allowing it to serve more customers and invest in the future growth of the business.

Shan Hassam, Group Managing Director at Veenak International Limited, said: “We strongly believe that sourcing the medicines and supplies needed by the healthcare sector should be a streamlined and hassle-free process. To achieve this, our business must operate at maximum efficiency and our ability to access cash quickly is an integral part of that.

“The facility from BFS provides us with working capital that we can rely on when we need to. The BFS Corporate team demonstrated an in-depth understanding of our business and its needs and built a facility around that. With this new facility in place, we can focus our efforts on working to expand our customer base and growing the business.”

Chris Sygrove, Corporate Manager at Bibby Financial Services, said: “Veenak is built around efficiency and its success and growth to date hinges on its ability to provide medical supplies and pharmaceuticals in a timely fashion. It is an ambitious business managed by a first-class team and we’re excited to work alongside the company, providing the funding it needs to grow.

“We’re a relationship based funder, and this means that we get to know our clients’ businesses so we can tailor a funding package suited to their specific needs. We look forward to helping the business realise its growth ambitions in the future.”

Ben Smith, UK Corporate Sales Director, said: “This exciting new deal is a great example of our ability to work to our clients’ timeframes and provide flexible funding that suits their needs. In recent years, we have made significant additions to our Asset Based Lending capability which now includes Stock Finance, Foreign Exchange and Asset Finance.

“As a result, we are able to offer a greater range of financing options to our clients, providing them with the working capital they need to expand in both domestic and international markets. The BFS Corporate team has structured more than 600 deals across the UK since 2013, and we look forward to supporting even more businesses over the coming years.”

CoCredo to launch the first Dual Report within the credit industry

Today CoCredo are launching their new Dual Report, which has been over a year in the making and is a brand-new concept to the credit industry. Prior to their public launch on Monday 14th May, the product was trialled by valued customers who were given the opportunity to offer their feedback in time for any changes to be made before the product went live.

The new DUAL Reporting Service promises to make the lives of customers (including those who currently use multiple providers) considerably easier. The first of its kind, this service is looking to take the credit industry by storm.

To enable CoCredo to offer this premium service they have added an additional leading data supplier to their portfolio. This means that customers will now be able to view the best data from both suppliers alongside each other in one report, gaining a more detailed overview of a company and combining the ‘best bits’ of both. The reports will have the same look and feel as their current reports but customers will now be able to view two providers’ opinions and perspectives.

Commenting on this Dan Hancocks, Managing Director at CoCredo said; “From our research we have found that a growing number of people use multiple reports when credit checking companies to gain a wider understanding of a business and to give them more peace of mind. However, it can become very costly and time-consuming logging into different systems and comparing credit reports that are in different formats. Our new DUAL Report aims to take away this stress and expense and will save our customers time by only needing to look at one report. They will also have the benefit of having our Customer Services Team on hand to discuss queries on both sets of data in one phone call rather than having to make two phone calls.”

Asset finance new business more than £3.3 billion in March

New figures released today by the Finance & Leasing Association (FLA) show that asset finance new business (primarily leasing and hire purchase) fell by 5% in March, compared with the same month last year, and by 3% in Q1 2018 overall.

New finance for business equipment grew in March by 13% compared with the same month in 2017. Over the same period, the plant and machinery finance and commercial vehicle finance sectors reported falls in new business of 9% and 2% respectively.

Commenting on the figures, Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “The asset finance market recorded its third highest monthly new business total in March at more than £3.3 billion. However, the latest figures reflect some of the recent slowdown in the UK economy, with new finance for agricultural and construction equipment 1% and 8% lower in March than in the same month in 2017.”

“Lenders have a responsibility to do more than just provide finance” says Just Loans

Alternative Finance provider Just Loans has welcomed yesterday’s commitment from the British Business Bank to provide financial advice to businesses that need it.

Commenting on yesterday’s Treasury Select Committee evidence, which saw British Business Bank (BBB) CEO Keith Morgan talk about the BBB’s finance guide, John Davies, Director, Just Cash Flow PLC, said: “We have always believed that lenders have a responsibility to do more than just provide finance. Yesterday’s evidence highlights a trend we see in our business, which shows there is a significant gap in financial and business knowledge for those already in and those starting out in business.

John feels that it is the duty of the finance industry as a whole to support these early stage businesses.

During the evidence session the British Business Bank CEO also spoke about a new initiative they are launching, called Finance your Growth, to provide additional advice for businesses.

Accelerating Speed & Transparency in Leasing

“Leasing needs to develop a more transparent, customer centric approach as digitisation, regulation and changing customer approaches to finance reinvent, or disrupt, depending upon your view, the leasing landscape. New technology needs to help the leasing sector to bridge the experiential gap that exists in large parts of the market,” this is the view of fintech software experts Copernicus’ MD Allen Jones.

Leasing has become increasingly popular over recent years with the rapid expansion of SME businesses viewing it as a smart funding option, now joined by a growing number of consumers switching to leasing their cars as part of the trend to usage of their cars, rather than ownership. However, right across the industry, the customer buying experience falls short of the type of accessibility and transparency available in personal loans, Hire Purchase and Personal Contract Purchase.

Copernicus which has forged a strong reputation for its smart, plain English tech over the last 36 years, has developed what Jones sees as an ideal way to bridge the gap as he reflects;

“Whether as a business or as a consumer, customers want ease, speed and transparency. An inability to provide a full and accurate leasing quote in seconds creates a sub-optimal customer experience, that often sees a sale stall before it has ever really started. JukiAPI bridges this GAP. It is an elegantly simple ‘plug & play solution, that in installation and affordability is as true as the offer that it provides leasing providers; it is easy and affordable.”