Qualco UK invites the industry to join its World Mental Health Day activities

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Qualco UK is to host an event on World Mental Health Day at The Stoop – home of Premiership rugby team, Harlequins – on Thursday 10th October, and the industry is invited to submit staff teams to take part.

The event offers businesses a platform to express the importance of mental wellbeing amongst their workforce, and support their own efforts on World Mental Health Day. Participants will have the opportunity to play in a tournament of mini-tag rugby on the pitch, enjoy a unique Mental Resilience session led by an esteemed ex-Royal Marines Officer and meet members of the Harlequins squad.

The Qualco Mental Health Awareness Day at Harlequins will host industry clients, partners and guests; organisations are invited to submit teams of up to five to participate in a World Series mini-tag tournament following a warm-up session led by members of the Harlequins Women team.

Harlequins Business Academy Director, Roderic Yapp, will kick off the day by delivering a talk on Resilience. A former Royal Marines Officer, he has led Marines on Operations in Afghanistan, Libya and off the coast of Somalia. He will use stories from his time on the front-line and working with the Harlequins first-team to illustrate the concepts before offering some practical take-aways that people can implement when they return to their organisations.

The event also offers a special screening of Harlequins ‘Be a Man with More Words’ video; a partnership supporting The Movember Foundation featuring star players in an emotive video encouraging men to open up about their mental health.

Qualco UK’s managing director, Christian Jacob commented, “We are delighted to offer our industry friends the opportunity to play on the Harlequins pitch whilst supporting a very worthwhile cause in World Mental Health Day. We work in an industry that touches the most vulnerable in society, which can be distressing for the teams assisting those customers. We want to give them an opportunity to bolster mental, emotional and physical resilience in a relaxed and entertaining environment. We hope as many of you can join us.”

If you are interested in submitting a team, please get in touch with marketing@qualco.co.uk.

SMEs Remain Resilient Despite Continued Uncertainty

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The SME Health Check Index, a quarterly measure of performance and outlook for UK SMEs, fell by 6.9 points to 41.9 in Q2 2019, as economic and political uncertainty continued to weigh on business confidence. The study overall, however, reveals a mixed picture, with continued resilience in the labour market, and encouraging insights on business diversity.

The SME Health Check Index, which is published by CYBG in partnership with leading economic consultancy, The Centre for Economics and Business Research (Cebr), draws on data and qualitative information from a wide range of sources. It is designed to ‘take the temperature’ of the UK’s SME community as a whole, and provide a comprehensive overview of the challenges and opportunities it currently faces.

The reduction in the headline figure was driven by falls across the majority of indicators comprising the Index, including the first quarterly contraction in GDP in Q2 since the final quarter of 2012, as well as declines in capacity, lending and net business creation measures.

However, there was more positive news for employment, with the relevant indicator rising by 5 points, as SMEs continued to hire. Employment reached 32.8 million in Q2, 114,000 higher than in Q1 and 425,000 higher than in Q2 2018.

The SME Health Check Index also shows the regional variations over the last quarter. Eight of the 11 regions measured saw declines, in line with the reduction in the overall Index. London and Yorkshire & the Humber recorded the biggest regional reductions – primarily driven by falls in GDP and business confidence, as well as an increase in the share of SMEs operating below capacity. However, Scotland and the South West of England both bucked the national trend by each recording significant index increases, driven by strong performance across confidence and capacity indicators north of the border, and sentiment and employment in the English region. The East Midlands was the only region to remain stable compared with Q1.

SME diversity offers protection as tough conditions persist

In a special report this quarter, the Health Check Index also examines how the complexity and diversity of UK SMEs enhances their ability to deal with the ongoing political and economic uncertainty. Looking at companies from a range of perspectives – including diversity in products, customers, suppliers, geography and workforce composition – the research sought to ascertain how far companies have protected themselves from sudden disruption or shocks.

The research found some regional variation in the diversity of the industrial base across the UK. The most diverse business populations are in the West Midlands and Yorkshire & the Humber, which have an established presence in the manufacturing and construction sectors together with a spread of activity throughout the services sector. London leads the way when it comes to product complexity and workforce diversity, with only one in six SMEs in the capital reliant on a single product for most of their revenues. Meanwhile, regions in the extremities of the UK such as the South West and Scotland perform less well in geographical diversity, with the vast majority of SMEs surveyed operating solely within one region.

Gavin Opperman, Group Customer Banking Director, at CYBG, said: “The health of UK SMEs is pivotal to the success of our wider economy, and the picture painted by the results this quarter was mixed. We saw a fall in the headline index to 41.9 in Q2 2019, as businesses were tested by heightened uncertainty, moderating economic growth globally and rising costs. Declines were recorded across GDP, business lending and confidence indicators, amongst others.

“While on the surface things may look a little gloomy, cause for optimism can be found. The labour market has remained resilient, with SMEs continuing to hire, and wages continuing to grow, despite the tougher conditions. Further, an analysis of workforce composition, customer base and supplier relationships has revealed some encouraging insights on SME diversity across many parts of the country, indicating a good ability to handle sudden change or shocks.

“Here at CYBG we are committed to helping UK SMEs prosper and grow. We are optimistic that with a careful strategy and access to adequate support, businesses have the resilience to weather the storm.”

Interest only mortgages maintain their place in August’s most popular mortgage criteria searches, reveals Knowledge Bank

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Interest only loans, having made their very first appearance in July’s index, maintain their place in the top five most searched for criteria in August, says criteria search specialist Knowledge Bank.

Interest only loans have been under increasing scrutiny over recent years and although UK Finance reported that these loans fell by 13% in 2018 there are still a reported 1.7million active interest only mortgages. As a result of growing pressure from the regulator new products such as lifetime loans are being pitched as a solution for borrowers who may end their mortgage term with no repayment vehicle in place. As this is such a changing landscape it seems brokers are finding out which lenders will consider their interest only clients at the very start of the process with a criteria search.

The Knowledge Bank criteria activity index is unique in that it reveals brokers activity in trying to meet the loan aspirations of their clients. The data produced by Knowledge Bank shows the cases brokers are trying to place and so offers a unique viewpoint on demand as well as supply. As the largest mortgage criteria search system in the UK, Knowledge Bank holds over 91,000 criteria from over 200 lenders and there have been almost 30,000 changes to mortgage lending criteria in the first half of 2019.

Other activity in the residential sector shows a short-lived appearance for searches on ‘right to buy’ loans which made their first appearance in the top five in July but dropped out of the index in August. However, recent press statements by the shadow chancellor regarding giving tenants the right to buy from private landlords seems sure to make this a hot topic in future months and one to watch.

It was all change again in the Bridging category, with regulated bridging once again rising to the top and maximum LTV sinking below searches for minimum loan amount. The fact that brokers have been searching for lenders that will lend a lower amount perhaps shows that borrowers are looking for bridging loans for smaller projects such as refurbishment. Something that the most recent Bridging Trends report appears to confirm, with refurbishment accounting for 12% of all bridging loans in the second quarter of 2019. It is interesting to note that the same criteria search for minimum loan amount also moved up the rankings to second place in the commercial category, possibly for the same reason.

Nicola Firth, CEO of Knowledge Bank said, “We are entering an unprecedented period of change in the country both politically and economically. The mortgage sector has never been more fluid and we can see from these results that product types rise and fall in popularity from month to month. As a result keeping up to date with products and their accompanying criteria has never been more challenging.

“It is worth repeating the startling fact that there were almost 30,000 changes to criteria in the first half of 2019. As Knowledge Bank knows from working with the FCA, the regulator is well aware of the pace of change in our sector. However, there is little doubt that in a market of such product volatility there remains the risk of a tsunami of accusations of inappropriate product recommendations in coming years.

“That is why it is so critical that brokers compile the strongest possible evidence now, during the advice process. In five years there will undoubtedly be sourcing evidence that a ‘cheaper’ product was available but not necessarily the understanding or evidence that the client did not meet the qualifying criteria. Solid compliance evidence of criteria searches is now a business-critical activity.”

Together announces new director appointment

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Specialist lender Together has appointed Liz Blythe as a non-executive director for the group’s personal finance business.

Liz, who has more than 25 years’ financial services experience, will start her new role immediately.

She will bring her broad experience of finance, governance, risk and audit to Together and joins from Skipton Building Society, where she has been chief internal auditor since 2007.

Liz said: “I’m delighted to join the personal finance board, supporting the business as it reaches its 45th anniversary. It is a very exciting time for Together and I look forward to being involved in the future growth and development of the business.”

After graduating from the University of Hull, Liz qualified as a chartered accountant with Ernst & Whitney (now Ernst & Young) in 1991.

As Skipton’s chief internal auditor, she held responsibility for assessing and providing assurance on all risks facing the business. She was previously finance director of Homeloan Management Limited, a subsidiary of Skipton.

Liz is also a Non-Executive Director and trustee at global software development company, Lhasa Limited. Additionally, she was a founding member and Chair of the Mutual Sector Internal Audit Group, which shares best practice in internal audit across the building society sector, and acts as the formal negotiating body with regulators regarding issues affecting the sector.

Richard Gregory, chairman of Together’s personal finance board, said: “We are thrilled to welcome Liz. She brings a wealth of experience in the financial services sector, and in regulated roles, to support our sustained growth. Liz has an impressive track record as an accountant, internal auditor and risk professional and makes a great addition to the board.”

How can the industry change for the future?

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The prospects of how important new technological advances can improve the future of the industry is a crucial industry looking forward, and it will be the subject of a major new study.

CCRMagazine and Data Interconnect will work together to review such questions as: what is important when considering change? What are the key barriers to change? What does the industry need from its new solutions?

What challenges are being faced by business? And how is the industry able to build successful business cases that will convince senior leadership?

Stephen Kiely, editor of CCRMagazine, said: “It has become something of a trope in the credit, collections, and enforcement industry that technology is an essential part of the future, but our aspect of the economy can sometimes struggle to access all the options that is needs.

“So issues such as best practice advice on how to build a business case is very important, and we need to get a feeling for what it is that the industry needs. So I do hope that our readers will want to take part in this important research project.”

  • To fill out the short survey, please go to this link. It should not take any more time than that and, as always, all responses will only be reported as aggregate figures.

FCA compliance survey to assess progress

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As the credit, collections, and enforcement industry works to push even harder for strict compliance, a new piece of research will assess where creditors and collectors feel that they are, and whether the industry believes that it has the right tools for the job.

The research, which will be run by CCRMagazine and TriLine GRC, will ask crucial questions such as: what are the key regulatory compliance supervision challenges facing firms, how do firms currently manage and evidence FCA SYSC compliance and risk management governance controls, and whether firms are already in the process of implementing the FCA requirements under the SMCR.

Stephen Kiely, editor of CCRMagazine, said: “It is no secret that compliance is at the heart of everything that the industry does, it is a huge concern, which is why this month’s edition of CCR2 is covering this subject.

“But the practical reality is that ever more regulations are being placed on the industry so creditors and collectors will need to continue to adapt and evidence that they have complied in an appropriate way.

“This is an important piece of work, which we are proud to be collaborating with TriLine GRC on, and I hope that readers will want to take part in the survey.”

  • To fill out the short survey, please go to this link. It should not take any more time than that and, as always, all responses will only be reported as aggregate figures.

UK businesses investing £3 million each in AI but struggling with lack of strategy and skills

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UK companies are currently spending an average of £3.1 million per company on AI technologies, with large businesses investing over £6.5 million, new research from content IQ provider ABBYY has found. The UK’s investment in automation projects averages at £1.2 million per company, but more than two-thirds (67%) aren’t educating staff well enough on how to use it and 1 in 6 said their business had no strategy in place or that they weren’t aware of one. Across the automation stack, the research found that content-centric process automation is a particularly promising area delivering benefits for businesses, and creating huge opportunities for early adopters of new-generation technologies.

Efficiency was the highest-ranking benefit for these technologies, with a majority of businesses already seeing improved efficiency from their automation investments. Content-centric process automation in particular impressed on efficiency – with over 62% seeing efficiency gains as a result of implementing the technology.

It also provided higher ROI than general AI technologies when it came to productivity, revenue growth and business transformation (see Figure 1). What’s more, content-centric automation beat businesses’ expectations, helping businesses grow their revenue, increase market share, and get ahead of the competition by 15% more than anticipated before deployment.

It’s clear that the majority of UK companies are still at the start of their automation journeys –on average, UK businesses use only two types of automation, and only 1 in 20 use the full automation stack. This demonstrates that there is still a way to go before the full potential of automation can be realised.

A potential reason for this lies in a lack of training – two thirds (67%) of those surveyed feel their organisation isn’t educating staff well enough on automation technologies, and a quarter (27%) of those who have not invested in automation admitted this is because they “wouldn’t know what to do with it”. This indicates a substantial automation skills gap in the UK. An increased focus on strategy would also benefit businesses struggling to make the most of automation and AI, as 1 in 6 said their business had no plan in place or that they weren’t aware of a plan (15.4%), and 61% of businesses only have a plan for up to 5 years.

“Automation isn’t a panacea – but the potential of automation technologies to transform businesses is abundantly clear. Making it work requires not only monetary investment, but also a watertight, long-term strategy and the right people with the right skillsets,” said Neil Murphy, Global VP at ABBYY. “But many businesses are still not adequately educating their staff on technology, and as a result, the technologies that deliver the most ROI are often overlooked. It’s no wonder that the benefits of AI and automation aren’t yet being fully realised.”

Tapping the full potential of automation for businesses requires a long-term strategy. AI solutions need to be trained and customised to fit the company’s specific needs, focusing on accuracy, reliability, and speed. Therefore, ABBYY is encouraging businesses to choose a provider who can offer guidance in training a system, and in full solution lifecycle support.

For solution providers, it is important to eliminate barriers to AI adoption by developing platforms and solutions that are easy to use, that minimise complexity, and that reduce dependence on IT experts for configuration. This is why ABBYY is focused on building powerful content IQ technologies and solutions that are quick and easy to set up and use.

Murphy continues: “Businesses aren’t providing adequate training on understanding the benefits of the whole automation stack, or how to train AI and automation solutions to fit their specific business needs. This, coupled with a lack of strategy, means businesses may be unable to reap the rewards of their innovation. Enterprises must focus on improving education and strategy to avoid missing out on the automation solutions that could truly transform their business, and to help them succeed on their digital transformation journey.”

Two year low for small business confidence

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The proportion of small businesses predicting growth for the next three-months has fallen to 34% – its lowest level for eight successive quarters and, for the first time, the proportion of businesses predicting significant expansion has fallen below 5%.

The new research from Hitachi Capital Business Finance asked a nationally representative sample of 1,184 small business owners to forecast their growth outlook for the three-month period to 30 June. Whilst the percentage of small businesses predicting growth held firm at 36% over the previous three quarters – through a period of extreme political and economic uncertainty – this month sees the first fall in the number of small businesses predicting any form of growth – whether significant expansion or modest, organic growth.

This time last year, the spring months saw an annual high in business confidence, as businesses started the new tax year with bullish plans for the year ahead. This spring, confidence is sliding.

Hotspots where confidence is falling

  • Sole traders were least confident in their business outlook – only 28% predicted net growth for the period to 30 June, compared to 46% for those larger businesses with 10-50 employees. Similarly, sole traders were almost twice as likely to predict contraction than these larger firms (19% Vs. 11%).
  • Transport, agriculture and hospitality were the sectors where businesses were least likely to predict growth – 25%, 27% and 29% respectively [see note to editors for full table]. Compared to three months ago, the sharpest fall in growth predictions was noted in the Transport/Distribution sector (down 13% to 25%).
  • Significant variations were also noted by the age of businesses surveyed. Whilst young businesses in their first years of trading were those most confident in their net growth predictions (45%), older businesses that had been trading for 20 or more years were significantly less likely to predict growth (27%).

Asked what the barriers to growth where, market uncertainty (31%), unwillingness to embrace risk (17%) volatile cash flow (13%) and the cost of labour (12%) were all key factors. Further, when asked which initiatives small business owners were taking in order to secure future growth, key initiatives mentioned included: keeping fixed costs down (41%), improving cash flow (22%), tackling late payment (28%), expanding into overseas markets (16%) and investing in new equipment (12%).

On the upside, the north emerged as the country’s engine room for growth, with small businesses in the North West (43%) and the North East (41%) most likely to predict growth – compared to the national average of 34%. In contrast, small businesses in the west were the least confident: Welsh businesses were least confident about the future, closely followed by the South West – 23% and 28% respectively. In only three regions had the growth outlook of small businesses improved since the start of the year.

By sector, quite a lot of movement was noted since the start of the year. Despite a January of bleak trading announcements from the high street, the latest Hitachi Capital data reveals a sharp improvement in growth outlook from the retail sector among small businesses (up 9% on Q1 to 40%), with confidence in Real Estate rising by 17% since January. Conversely growth forecasts have fallen most sharply in the Finance/Accounting and Transport/Distribution sectors (falling 9% and 17% respectively).

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance said: “We are all living through a period of unprecedented uncertainty and, within that context, it is not surprising that small business confidence has taken a knock. It is too early to tell whether this is a short-term blip or the start of a trend.”

“The crucial subtext is how small businesses are reacting to how they are feeling. What is encouraging from our research is that whilst around four in five small businesses can identify current challenges, the vast majority are adapting by making new plans to achieve future growth. Investing in new equipment, expanding into overseas markets and tackling late payment are key issues that small businesses are prioritising to move their businesses forward – and now is a vital time for the banking and specialist finance community to be backing the small businesses that have the ideas, the plans and the passion to see market uncertainty as an opportunity to grow.”

Qualco technology debate for the industry

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As the credit and collections industry continues to go through a period of intense change, senior professionals are set to gather to discuss some of the major trends in Collections Technology, in association with Qualco.

The debate will focus on several key pillars: framework and methodology, regulations, data, people, and how this reflects from the C-suite through to the collections floor.

The latest of CCRMagazine’s informed discussion events will again see the industry share its ideas, perspectives, and knowledge.

Stephen Kiely, editor of CCRMagazine, said: “In the ever-changing environment, it is crucial to share experiences, and consider whether your view of how you see the future is shared by other industry experts.

“We are proud to be working with Qualco on this discussion that we hope will be both thought-provoking and extremely interesting. Collections technology is hugely significant for the industry, so this debate promises to provide an opportunity for knowledge-sharing and insight. There is always a positive future for the industry, but we can only get there via debate.”

More than half of all landlords will purchase next property through a limited company

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The latest landlord research from Foundation Home Loans, the intermediary-only, specialist lender has revealed that of those landlords who intend to add to their portfolios over the next year, over half are likely to do so within a limited company vehicle.

Foundation says that the research – undertaken by BVA BDRC and carried out in March 2019 with the results based on 829 online interviews with landlords – also shows that portfolio landlords (those with four or more buy-to-let mortgaged properties) are even more likely to purchase via a limited company, with almost seven in 10 of landlords with more than 11 properties in a portfolio, intending to do so in this way.

Just over a quarter of landlords intend to remortgage in the next year, although this rises to one in three for portfolio landlords. 29% of all landlords took out a new remortgage in the last year.

The use of mortgage advisers by landlords to secure their property finance also remains strong, with the research revealing that seven in 10 landlords used an adviser to arrange their most recent mortgage, however 23% did deal direct with a lender. Foundation believes mortgage advisers could utilise a strong marketing campaign to secure greater activity levels with those landlords who have previously gone direct.

When asked how they had first come across their mortgage adviser, 44% of landlords said it had been through a recommendation, 13% through an internet search and 9% via membership of a landlord body.

The research also reveals a number of key financial measures with regard to the ‘average’ UK landlord – the typical one has 10 properties in their portfolio, over half of which are owned via a buy-to-let mortgage, with the average LTV of those mortgaged properties down below 50%.

The average market value of a portfolio is £1.4m with average gross rental income of £66k. The amount of borrowing for each landlord is £427k across their portfolio, although there is a marked difference between those who own only one to three properties (£334k) and those with more than four properties (£1.073m).

Finally, 19% of landlords said they had seen an increase in tenant demand over the last three months, down 5% from the last iteration of the research. 37% had seen no change, 21% had seen demand fall and 22% were unsure. Those landlords in the Midlands are currently reporting the strongest tenant demand in the UK.

Jeff Knight, Director of Marketing at Foundation Home Loans, said: “Overall the report back from landlords seems pretty positive albeit with obvious concerns about falls in tenant demand and how existing and future regulatory and economic change is going to affect their portfolios.

“What we are clearly seeing is far more portfolio landlords active in the sector, and while there has not been the great exodus that many were predicting, it’s less likely that those with only one or two properties are going to add to them.

“Overall, portfolio landlords are showing serious ambitions for the future, while holding relatively low levels of mortgage debt and therefore risk for lenders. The market value of their portfolios is solid as is their annual rental incomes and, looking at these numbers, it’s obvious to see why they stress they’re in this market for the long-term.

“When it comes to both anticipated purchase and remortgage activity, many landlords intend to do either or both within the next 12 months – which is clearly good news for advisers – and for purchasing especially this is now far more likely to be within a limited company structure, plus we have more landlords remortgaging properties out of their individual name into a company. Advisers do however have an opportunity to pick up more business, given that over two in 10 went direct to a lender for their last buy-to-let mortgage.

“The growth in portfolio activity certainly chimes with our own business results for April with 62% of all our mortgage applications coming from portfolio landlords and 53% for limited company business. Our focus therefore remains on ensuring that we support advisers with these clients with an easy-to-understand limited company/portfolio landlord proposition that takes away much of the administration demands and presents products with flexible criteria and highly-competitive rates which are not higher just because the client is utilising a limited company.

“We believe the market will continue to head in this direction and our specialist focus in this area will continue to help advisers who are likely to see a growth in client numbers over the months and years ahead.”

Foundation’s range of buy-to-let products for those who are purchasing or refinancing through a limited company is currently available up to 80% LTV, is offered at an ICR of 125 times the pay rate for five-year fixed rates, has no maximum age, accepts newly-incorporated limited companies, and has a maximum loan size of £1.5m.