UK manufacturing exports fall despite strong demand for consumer goods

Overseas demand for British luxury goods, homeware and sports and leisure products helped an index of UK manufacturing exports recover from a seven-year low in the final quarter of 2019, according to Lloyds Bank Commercial Bank.

While UK manufacturing exports fell for the third quarter in a row in Q4 of 2019, according to the Lloyds Bank International Trade Index, growth in consumer goods exports slowed the rate of decline.

The Index, compiled in partnership with IHS Markit, posted a reading of 47.9 for new manufacturing export orders in Q4, up from 46.5 in in the third quarter, which was the weakest for seven years. A reading of above 50 indicates growth, while one below 50 signifies a decrease.

A reading of 51.0 was measured for consumer goods in Q4, up from 48.2 in Q3. The growth was driven by ‘other manufacturing’ exports, which includes sports and leisure equipment, homeware and hard luxury items, such as jewellery.

‘Other manufacturing’ is the only manufacturing export category measured by the Index where new orders grew throughout 2019.

Meanwhile, UK services exports contracted at the fastest rate in five years in Q4 2019, with an Index reading of 46.5. Service businesses surveyed by Lloyds Bank attributed the fall to delayed decisions from overseas clients ahead of the UK’s departure from the EU.

Financial services, together with transport and communications services, bucked the trend, with exports increasing between October and December.

Transport businesses benefitted from a bout of inventory stockpiling by UK firms in Q3, but slowing economic growth and lower demand in European export markets contributed to the fall in overall UK trade volumes in the final quarter of 2019.

The economies of Germany and the Netherlands – two of the top five destinations for UK exports – contracted for the first time in six-and-a-half years according to IHS Markit surveys in Q4. Weaker economic conditions were also recorded in Italy, Austria, Poland and the Czech Republic.

Gwynne Master, managing director and global head of trade for Lloyds Bank Global Transaction Banking, said: “Last year was a challenging period for UK exporters, so it’s encouraging to end 2019 with a strong outing for British consumer goods, alongside financial services and transport and communications services exports.

“The pull of Brand Britain and favourable sterling exchange rates helped exports of premium British products grow consistently last year, while new orders for other UK goods and services fluctuated in the face of political and economic uncertainty.

“The landscape for exporters is constantly changing, even as the UK enters 2020 on a firmer political footing. We will be by the side of businesses as they navigate changing global environments and work to take advantage of new opportunities.”

FSB: New economic plan needs to be backed by a pro-business Budget

The Scottish Government’s refreshed Economic Action Plan will only deliver if backed by concrete pro-business measures in the forthcoming Scottish Government Budget, the Federation of Small Businesses (FSB) in Scotland has said.

The plan, published today, outlines a range of measures Ministers are taking with the aim of boosting the economy.

Andrew McRae, FSB’s Scotland policy chair, said: “This new plan for the Scottish economy sets out the many ways in which the government aims to help the business community – an endeavour that should be welcomed.

“FSB has repeatedly called on the Scottish Government to create a business support system that provides a seamless, co-ordinated and joined-up service. Therefore, the delivery of a new bespoke website for enterprise advice, support and information should be applauded.

“However, the enterprise support landscape is littered with countless online ‘one-stop shops’. So, to be effective, we need to further de-clutter the landscape by reducing the number of publicly funded, business-facing websites.

“With all eyes on the upcoming Scottish Government Budget, Government and opposition need to build on this launch and agree a package of support to boost the fortunes of local businesses. Top of the list should be protecting the Small Business Bonus Scheme and backing migrant entrepreneurs.”

Leonard Curtis Business Solutions Group is seeking a buyer for Botleigh Grange Hotel and Spa

Neil Bennett and Andrew Duncan, Directors at Leonard Curtis Business Solutions Group, were appointed by MSP Capital Limited, one of the largest property financiers in southern England, as Joint Administrators to Botleigh Grange Limited on 13 January.

Botleigh Grange is an established hotel with 55 bedrooms, five function rooms, a restaurant and a bar that is located in Hedge End, a suburb of Southampton.

Until its recent closure, the hotel was run by Addison Way Limited and generated sales for the year ending May 2019 of £1.78m, excluding VAT. However, trading was affected by some negative press, recently reporting on health and safety issues at the hotel and spa.

The independent hotel, which is a former country house constructed in the 17th Century, is being sold by the Joint Administrators through the commercial property consultants Lambert Smith Hampton in Southampton. A number of parties have expressed an interest in the property as they see the potential to grow and generate revenue from a range of income streams such as accommodation, food and drink, conference and banqueting, leisure and spa breaks.

Neil Bennett, Director at Leonard Curtis Business Solutions Group, says: “We aim to conclude the sale of Botleigh Grange to a buyer that will be in a position to reopen the hotel in a short timeframe. The property has attracted a high level of interest, and a potential buyer will be exploring the possibility of honouring the future events booked at the hotel.”

Optimum Finance invests in market leading Open Banking and Open Accounting technology to improve financial processes for UK SMEs

Fast growth firm Optimum Finance is leading the UK invoice finance market by incorporating cutting edge technological solutions into its client approvals, onboarding process and financial reporting systems.

Optimum Finance, which was established in 2017, has reviewed the market to identify suppliers which can provide the latest data-driven technological solutions to improve client experience. Following a competitive selection process Validis and AccountScore were chosen by Optimum Finance as part of its ongoing investment strategy in fintech solutions.

The industry-first partnership will mean that Optimum Finance can remove manual, administrative elements of the underwriting process when taking on new customers. Business owners will be able to receive formal funding offers almost immediately through the use of Open Banking and Open Accounting functionality which will automate the transfer of financial records from the customer to the Optimum Finance team.

The majority of UK SMEs now use online accounting software and Validis has developed an award-winning Open Accounting platform called DataShare which enables businesses to grant permissions and access to its accounting records instead of manual collation and transfer of documents.

Optimum Finance, once in receipt of online access to a prospective customer’s accounting records, can then make immediate and accurate lending decisions and ensure robust compliance through automated risk assessments.

Validis partner business AccountScore operates as part of this process by enabling businesses via its proprietary Open Banking technology to grant consents to business account bank transaction data thus removing the need to supply bank statements manually.

This holistic solution will radically enhance the sign-up process for new clients, improve the quality and speed at which data can be supplied to the underwriting team and reduce risk of fraudulent applications.

Commenting on the partnership, CEO of Optimum Finance, Richard Pepler, said: “We’re committed to investing in technology which improves the way the industry operates which is still very paper-based. As a fintech-first business we know the market will benefit from increased digitisation of previously manual operations.

“This automation of our onboarding process will also be extended in the near future to the monthly processes of invoice submission and cash received reports which customers need to be able to ensure robust financial health and to access agreed funding to ensure a healthy cash flow position.

“Our vision is to use cutting edge technology to drive the industry forward; this means we can focus our time on developing our customer relationships and on providing value-added advisory services which is where we are unique in the invoice finance market.”

Validis CRO, Jake Niarchos said: “Optimum Finance is leading the way when it comes to utilising technology within the lending lifecycle. We are excited to work with Optimum Finance in order to provide the most seamless lending journey possible for its clients, while ensuring they have all the right data points available to make fast, accurate and safe lending decisions.”

AccountScore CEO Emma Steeley said: “We are delighted that Optimum Finance has chosen to embrace Open Banking through AccountScore’s market leading solution. Optimum Finance’s rapid adoption of the most cutting-edge fintech products has been clear for all to see and we’re delighted to be part of their story. We are very much looking forward to working with the Optimum Finance team and by extension enabling more SMEs to reach their full potential.”

UK export growth set to outstrip leading European economies in 2020

Growth in the value of UK exports will outstrip the rest of Europe this year with only China, the US and Canada set to record bigger increases globally, according to research from Euler Hermes, the world’s leading trade credit insurance provider.

The insurer, which published the findings in its latest Global Trade report, expects the UK to record a USD25bn rise in the value of goods and services sold overseas in 2020, more than the Netherlands (USD21bn), Germany (USD18bn), Belgium (USD16bn), France (USD11bn), Spain (USD10bn), Switzerland (USD10bn) and Italy (USD10bn).

The UK is placed fourth overall globally behind China (USD90bn), the US (USD87bn) and Canada (USD35bn) in the analysis of the top 25 exporting nations.

The figures are based on the UK leaving the EU under terms agreed in the current deal.

The findings come as the business forecasts global trade volumes to grow by +1.7% in 2020 – with values forecast to rise by +2.3% – after recording the slowest growth in a decade last year (+1.5%).

The research shows that the software and IT services (USD62bn), agrifood (USD41bn) and chemicals (USD37bn) sectors will be the main contributors to the year-on-year growth.

China (-USD67bn), Germany (-USD62bn) and Hong Kong (-USD50bn) were the main victims of the global trade slowdown in 2019, with the UK losing -USD29bn as a result of the uncertainty surrounding Brexit.

Ana Boata, senior European economist at Euler Hermes, said: “We expect the UK to experience a strong rebound in export growth this year as the promise of a deal with the EU lowers the levels of uncertainty for both UK businesses and their customers overseas.

“While the threat of a recession still looms and we forecast the economy to contract by -0.1% in the next two quarters, a recovery will follow in the second half of the year with quarterly growth expected to reach +0.6%.

“Globally, the worst is behind us but the resurgence in trade growth will be slow. The so-called phase 1 deal between the U.S. and China, despite being superficial, will help matters. But renewed threats of tariffs, the US elections and a calendar of global summits will result in more volatility, leaving little hope for sizable improvement this year.”

Profit margins tumble for food suppliers amidst currency volatility

Small food and drink producers are being urged to enhance their risk mitigation processes in a sector report by trade credit insurer Atradius.

The Food Market Monitor by Atradius reports that with more than 45% of food consumed in the UK imported, exchange rate volatility and its impact on the cost of commodities and food items remains a key issue facing many British food producers and processors who are reliant on imports.

Being predominantly SME, both the meat and fruit and vegetable subsectors are particularly susceptible to currency fluctuation. In the report, available for free download at www.atradius.co.uk, Atradius warns that the added risk for many SMEs is often a lack the resource to effectively manage risk mitigation with forward contracts and currency hedging. While sterling has seen a recent rebound, any positive affect is likely to be limited as many businesses are bound by contracted prices agreed at lower sterling exchange rates.

Looking at a wider picture, the Market Monitor highlights value added growth in the British food and beverages sector is forecast to have grown 2.5% in 2019, with a further 1.6% expansion in 2020. However, input costs for food businesses remain high with any opportunity to pass on price increases to retailers limited. Consolidation in the retail segment and the increasing market success of discounters, which puts traditional retailers and pricing under pressure, weigh heavily all along the supply chain.

The Market Monitor goes on to warn that profit margins of British food businesses deteriorated in 2019, and the trend is expected to continue in 2020. Despite an increase in real incomes, UK consumers remain price sensitive. In 2019, food producers and processors have continued to pursue mergers and acquisitions in order to increase leverage in price negotiations with major retailers as well as to diversify the offering.

Looking at payment behaviours, Atradius reports payments in the British food sector take between 45 to 60 days with some larger players pushing the supply chain on even longer terms, adding cash-flow challenges for many smaller food businesses. Due to an inability to absorb higher input costs and increased pressure on margins, the number of payment delays and level of insolvencies increased in 2019 and Atradius economists expect this negative trend to continue this year with an 8% rise in failures.

Darren Power, Regional Manager at Atradius’ Northern Hub, said: “While exchange rate fluctuation has always been a risk in international trade, the last three years have seen more volatility in Sterling with an increasing impact on British importers and exporters. To trade successfully, access to reliable information alongside forward planning are key to effective risk mitigation. Therefore, all businesses must ensure equip themselves with the insights, tools and resources to stand them in good stead and ensure they trade with protection from risk. Atradius supports customers to mitigate risk from the outset, developing robust trade relationships to maximise the opportunities for growth.”

Three quarters of Scottish smaller firms opposed to council rates move

Three quarters of Scottish firms believe that giving councils additional powers over non-domestic rates would be bad for business, according to a new survey from the Federation of Small Businesses (FSB).

The poll – conducted over the last month – also shows that seven in 10 businesses are opposed to proposals to give councils additional powers to increase or decrease businesses’ bills. In addition, four in five Scottish businesses are opposed to moves to abolish national rates reliefs, like the Small Business Bonus, even with the option for councils to develop their own replacement schemes.

The survey comes ahead of a crunch Holyrood vote, expected over the next four weeks, where MSPs will debate the final stage of the legislation crucial to the future of Scottish rates system.

At present, the Non-Domestic Rates (Scotland) Bill would see the Small Business Bonus scheme cancelled and powers over the business rate poundage handed to councils. If the Small Business Bonus scheme – a Scotland-wide rate relief – was abolished, some smaller businesses could face a business rate hike of more than £7000.

Andrew McRae, FSB’s Scotland policy chair, said: “At the moment, Scottish smaller businesses face a Frankenstein’s monster of rates changes and the risk of a £7000 tax hike. No wonder then that our survey shows that a clear majority of Scottish firms are opposed to this move.

“Scottish smaller businesses are already facing punishing overheads and an unpredictable economic future. Ending the uniform business rate as well as national rates reliefs risks undermining independent Scottish firms.”

The Scottish Government has signalled their intention to attempt to reverse these amendments at Stage 3, but they will require the support of a number of opposition MSPs.

Andrew McRae said: “The business rates bill going through parliament is mostly sensible, if you excise the ill-considered measures added at Stage 2. Any MSP that supports local independent firms must vote to remove these damaging amendments and return this legislation to reflect its original intentions.”

Only around one in ten firms believe giving new rates powers to councils would have a positive impact on businesses. Similarly only nine per cent of respondents signalled that they would support the end of national reliefs, and only 16 per cent of businesses wanted overall control of bills passed to councils. The remainder of the respondents across all questions signalled they didn’t know.

Business rates generate £2.8 billion for Scottish local authorities.

Small businesses twice as likely to predict sales growth than cost-cutting for 2020

More than three in four small business owners (77%) are priotising new initiatives for 2020 to make their business stronger.

With 2019 being characterised by market uncertainty and static growth forecasts, it appears that small business leaders are starting the new year with a different set of priorities. Over a third say they are looking to improve sales (38%) – but those looking to cut back on costs have significantly dropped from 35% to 20%.

The latest figures from Hitachi Capital Business Finance give a first indication that small businesses are starting 2020 with an expansionist mindset. The nationally representative poll of 1,196 business owners suggests there are three key factors powering the small business community’s ambitions for increased revenues and growth.

1. Diversification and innovation

Supporting a focus on sales growth, around one in four (24%) of business owners are keen to diversify their business in 2020, launching new services and products. To prepare for sales growth, 16% of small businesses plan to do more marketing in 2020 to raise brand awareness, with online advertising seen to be a key channel for reaching new customers. Further, 11% of business owners plan to invest more money to improve the digital capabilities of their business – this coming at a time when 10% say they want to expand into new geographical markets during the year ahead.

2. Investing in people

Talent management is high on the priority list for small business owners in 2020 – and the focus is to develop talent organically rather than to buy it in. While 6% of small businesses plan to hire senior people, 15% are placing greater emphasis on developing the skills of the staff they already have – with 10% of business owners saying they will invest more money in staff training and e-learning. When it comes to increasing headcount, small businesses are more likely to hire young people that they can train and develop over time (11%).

3. Prudent financial planning

After a year of unprecedented political and economic uncertainty, small businesses show signs of embracing the unknown and are factoring this into their financial planning for 2020. Overall, 15% of respondents say they are doing more forward-planning with their budgets, 11% are putting in place more far-ranging contingency plans to anticipate market uncertainty – with 5% building greater flexibility into their year-ahead forecasts to allow for greater seasonality. Overall, financial strength is a key issue for one in five businesses (21%) who say they are doing more to build up their financial reserves for the year ahead. Also, 10% of business owners are looking to make back-office efficiencies – this at a time when broadly the same proportion of businesses are investing more in online sales and marketing.

Looking at the findings by industry sector, manufacturing emerges as the sector where small businesses are most likely to predict sales growth (54%), whereas those enterprises in the retail sector are most likely to recognise the need to diversify their business – to broaden their product range and services (36%) in order to compete in a faster-placed, digitised landscape.

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance said: “Last year small businesses had to adapt to a period of protracted Brexit uncertainty and the economic ripple it delivered to sectors across the UK. We start 2020 with far greater certainty and our research suggests small businesses have switched from staying afloat through cost-cutting to a new era of planning for sales growth, investing in people and product diversification to boost bottom-line growth. While 10% of business leaders are investing in training, the remaining 90% should be giving this serious thought, and what options that are available to businesses.

“Our research also suggests that more small business owners recognise the need to adopt flexibility in their budgeting, whilst safeguarding their financial strength by building up their financial reserves. These factors point towards 2020 being a year when more small businesses will be looking for finance to help to realise their growth ambitions. We would encourage business owners to shop around, to look beyond the high street lenders and talk to specialists that can offer flexible solutions that are tailored to the needs of their business.”

RSM unveils growth strategy for creditor services business

Audit, tax and consulting firm RSM has announced major growth plans for its creditor services business, including substantial new investments in products, people and premises.

Controlling credit risk

As part of a long-term strategy, the firm is further enhancing its product portfolio designed to help businesses manage credit risk among suppliers and customers. Significant investments are being made in two key systems:

  • Portfolio Risk Manager (PRM) – this unique system enables a business to monitor its credit portfolio, providing unrivalled early access to trusted information including court petitions, notices of dissolution and credit scores. PRM was originally developed for a large utility client, and is now used by a number of blue-chip clients.
  • Tracker – RSM’s popular cloud-based risk management system is being upgraded with a new user interface, providing instant and up to date access to information on company credit scores and financial health. Tracker reveals many different emerging risks, reducing the likelihood of businesses incurring bad debts and facilitating increasingly informed business decisions.

Managing bankruptcies

With bankruptcy numbers rising rapidly and debtor wellbeing recently rising to the top of many businesses agenda, RSM has codified its existing wellbeing processes into a protocol designed to protect vulnerable individuals (and to avoid potential brand damage for petitioning creditors). An emphasis is placed on contacting debtors at an early stage in order to recognise any obvious issues and to tailor an individual strategy to deal with those with mental health issues.

Debt collection

The firm has also invested in a new Customer Relationship Management (CRM) system designed to support the growth of the RSM’s B2B debt collection services. This system will support Creditor Services clients, as well as the firm’s own insolvency practitioners in the collect-out on debtor ledgers.

New staff and premises

Plans are at an advanced stage to recruit an additional Partner for the Creditor Services operation. This follows a number of other recent appointments to the faculty’s leadership team. The move reflects a continued commitment to growing the business in an area where some competitors have scaled back or withdrawn.

Under plans announced today, the Creditor Services business will also be rebranding to operate entirely under the RSM brand, and it will be relocating from Finsbury Circus in central London to purpose-built offices in Essex – while also retaining a permanent presence at the Farringdon office. The team of 40 will join RSM’s existing Employer Services business creating a 85-strong RSM presence in Brentwood, bringing the firm’s total headcount in Essex to around 140. The move will take place in May 2020.

Robert Beat, Partner for the RSM Creditor Services business said: ‘Businesses and consumers have faced many challenges recently, not least the transition out of the EU. We are seeing strong growth prospects for our business ahead, as prospective clients’ finance departments work to improve their management of creditworthiness among both suppliers and customers.

‘The technologies and processes we have developed are tried-and-tested with clients ranging from SMEs to major banks and utility companies, and we are very well placed to provide clients the reliable and cost-effective services needed to enhance their returns and protect their brand. 2020 will be an exciting time for our business.’

Ultimate Finance provides more than £1.6bn of funding in 2019

Specialist asset-based lender, Ultimate Finance, broke its own annual lending record by providing funds of more than £1.6bn to SMEs across the UK last year.

The newly released figures show that Ultimate Finance finished the year with a record high loan book of £265m. Further growth in the size of the company’s client base means Ultimate Finance ended the year supporting more companies than ever.

This growth is on the back of continued focus on strengthening relationships with introducers across the UK and another year of strong development of Ultimate Finance’s asset-based lending portfolio. Highlights include:

  • The average size of Invoice Finance deals more than doubling with facilities of up to £5m
  • Asset Finance hitting a new annual high, with the loan book exceeding £55m
  • The Bridging Finance loan book growing close to £40m, an exceptional year-on-year increase of 23.5 per cent

Josh Levy, CEO at Ultimate Finance, said, “Ultimate Finance has prospered in 2019 against the backdrop of an unsettled year for many UK businesses. Uncertainty surrounding Brexit and the general election were contributing factors to business investment falling in five of the last six quarters, however it is encouraging to see business confidence returning. In this context, I’m proud to announce another record-breaking year of lending for Ultimate Finance with over 1,000 new businesses supported by our funding solutions.

“Our flexible, solution-driven approach to funding and excellent customer service increasingly make us the funder of choice for businesses wanting to invest and thrive. To that end we were pleased to be a founding signatory of the SME Finance Charter to demonstrate our unwavering commitment to facilitating growth for ambitious businesses in all market conditions.

“Our continued growth mirrors a trend of businesses becoming simultaneously more comfortable with alternative finance providers and moving away from traditional banks. This trend, along with the investment in developing our introducer relationships, present us with a big opportunity for 2020 to continue supporting more businesses around the UK.”