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The final rounds of numbers for the year are out from the Bank of England’s Quarterly Inflation Report. To recap a recap, unemployment has seemingly been the guiding light of the indicators and, although falling, the rate of unemployment remains at 6%. So to wages, with the average weekly earnings growth showing slight (a word that carries much debate – you say tomato, I say tomAto) increase, the indicator beam might be turning towards a new focus.

To recap a recap, growth was predicted as 3.1% and has been now cut to 2.9% and rate rises, anticipated by some as happening now, being pushed by the same ‘some’ to next August or beyond…. Internal rumours abound that it could be early 2016.

To recap a recap, figures, blended with opaque measurements, leave another year of the economy in stagnation…. but compared to other countries the UK appears quite buoyant.

Images and Article credit: Copyright SUF © 2014

InflationReport1November2014

 

How Squeezing In Your Business Works

Market trends continue to be inconsistent with the consequential effects showing a lack of consistency. No, really!?  Who’d have guessed?
And then what happens with such elementary information during our times?  Yet more talk of the better business bastion: planning? Pleeeeze….Change the story!

Shifts happened. Measuring returns on investments can be a nightmare, marketing can look like a sink hole and the 80/20 rule… what’s happened to that? Profits continue to be challenged because margins are squeezed, margins are challenged because profit is squeezed – it’s obvious, isn’t it?  Talk with anyone, being squeezed is par for the course of business life, however, talk with someone whose own, and their employees livelihood, is dependent on a business which has gains that aren’t worth the resources they use up, any squeeze can easily feel like choking.

Entrepreneur or in general business practice, when it comes to making a move, if you can’t measure it, don’t buy it.

Be it marketing, making a purchase, recruiting staff or any other of the key ingredients to a business, the conditions a proposal enters under alters the angle of the route taken for that proposal: vertical barriers create steeper angles to reach a goal.  Without the right entry points and contacts, barriers make unfamiliar practices considerably more difficult, whereas with the knowledge that practice and experience brings, because the ‘solution’ is understood, the difficult steeper angle is prevented and the barriers are reduced.

Steep angles can’t hold much information, they’re the deal breakers.  InformationSuperhighway

There’s no shortage of businesses out there wanting to ‘help’ us become profitable (you might even be one of them). My perspective (in terms of finance for business owners) has lenders who measure (by differing methods) the cumulative impact of investment and risk, the saving of a few pennies is significant to them and the bottom line is, `can’t measure it, don’t buy it’.  In the main, my and your customers do the same (as a customer I do), we want our money’s worth; can’t measure it, don’t buy it.

Why then do some business owners deny themselves such a simple tool when they’re readying for the right moment to strike out; are they sincerely unaware of the wider contexts of business? There might, for the entrepreneur whose waiting in the wings surveying opportunities, seemingly be advantage over the established business owner, whose misinterpreting reliance on formulaic for reliable. But does that make either of them any safer when they’re being measured, than those having the squeeze put on them?  Does being overlooked make a business less or more vulnerable in the greater context of business?
Taking my cue from a 3 year old  in a squeeze, trying to reason with his mum the necessity for a cupcake, Listen! Listen!  You’re not listening to me!  Developing control over his world, `You can trust everything at Grandma’s house’ is his assertion in defiance of his mum. He’s expresses his opinions, questions, shares his thinking and after pleading with his mum for several minutes, she gets the measure of him ‘I’m the parent…I’m done arguing with you!’ and he gets the measure of her, ‘I’m done arguing with you’.

Who bought it?

TheBoss3

Image and Article credits: Copyright SUF © 2014

B of E has said that mortgage approvals for house purchase fell in September, from August, with the biggest drop since July 2013. A tougher leverage ratio is anticipated in specifying the minimum amount of core capital a bank must hold as a proportion of is total assets, regardless of how risky or safe a lending policy may be, as part of the Basel 111 reforms. The ratio is set at a provisional 3% but there is an expectation, for some, of between 4% and 5%. There is an argument from some Building Societies that their balance sheets, whilst large, are made of low risk home loans; a high leverage ratio is unfair.

Although no UK banks failed the EBA tests, the upcoming Bank of England tests (results due 16 December) may prove differently with their focus on the UK economy.

Change in Gross Domestic Product (GDP) being  the main indicator of economic growth showed an increase of 0.7% in Q3 2014 compared with growth of 0.9% in Q2 2014, with output increasing in all four main industrial groupings ; services, production, construction and agriculture. The next estimate is due 26 November.

Sweden has cut its interest rates to zero, stating that inflation is too low. Meanwhile, back at the ranch, one of the Bank of England’s policymakers has said interest rates should increase for the UK, in order that it’s kept ‘gradual and limited’.  MPC minutes show members voted 7-2 to hold interest rate at 0.5%

Quantitative Easing (QE) has left the room  of the US Federal Reserve; there will be no more purchasing of bonds, as happened after 2008. Closer to home, Europes’ bank stress tests  gave, in effect, ‘nil points’ to 25 of their banks. The ECB hasn’t fully implemented QE however, with persistently low inflation; there is some chatter amongst the chattering classes of action that encroaches into the area of QE.  Introduced in the UK in 2009, the B of E purchased £375bn Government bonds up to 2012.

The DCLG (Department for Communities and Local Government) has amended Planning Practice Guidance  for councils on identifying appropriate land to meet development needs.  A question put forward (not in isolation) is `Do housing and economic needs override constraints on the use of land, such as green belt’?  The changes from the Right to Build plan mean that, for those wanting to build their own home, the council should be able to help in identifying a suitable plot.

Image and Article credit: Copyright SUF © 2014

How to Match Science with Finance

 

Pure gold, my Sunday lay ahead with no pressing commitments…. and what better start than good coffee alongside pastries in sufficient size to alert the diabetes police. This is the time my brain gets to defrag, even occasionally managing its level of a Newton moment (akin to looking at the famed apple tree).

SundayRead

I read.  It was an article which reinforced the notion that nothing stays the same.

 

Kilogram measurement, the metric measure normalised as a physical object (called International Prototype Kilogram IPK), is kept in Sevres, France (a replica is in Britain’s National Physical Laboratory) and it is the last SI unit (Systems of Unit) that is defined by an artefact rather than physical constant. So far, so good?  Take the original IPK and six copy IPKs, then leave for 125 years. What do you get? A  reaction, not dissimilar to leaving me with a plate of Danish pastry. The caged kilogram is no longer the same; it, and its clones, increase in mass.

 

 

And, where there is change, there is disruption and where there is disruption, there is opportunity.

By redefining the IPK, theoretically, everyone in the world of science will have access to (if I understand correctly) uncertainty.

The article managed to explain how the change – to something which sounds like performance motor engine oil (Plancks’ universal quantam constant) – would benefit all the other SI units on the outside looking in;  they’ll be certain to join the party of scientists, calibration laboratories, pharmaceutical companies and electrical engineers who’ll have something to celebrate. It also managed, with a swift scientific phrase or two, to take me back to the workings of business: Two ‘methods’ need to agree… at a level to be confident in the results…the moment there is a single point of failure in the system…there isn’t another one. Additional ‘management speak’ endorsed my thinking: ‘define the Volt…elementary charge will have zero uncertainty’.

 

 
 
Weightlifter

Deservedly famed for his observations on weight, motion, gravity, the cosmos (and being a fantasy dinner party guest), Newton was distinctly aware of change and applied opportunity arising from it to his working life.  At a time when the weight of minted money had fallen to half the legal standard, fakes were a-plenty, silver from coins was worth more in Europe than the coins, so those coins were being melted down and their metal shipped abroad, with the proceeds used to buy more coins.

England’s silver currency was in crisis. The economy was in crisis.  ‘Who ya gonna call ?’   The man with a mind that could redefine the way we think about our solar system – that’s who. Newton became Warden of the Royal Mint and turned detective on the massive counterfeiting operations to thousands of pounds, England’s silver was to have re-coinage.

One particular successful counterfeiter had a plan, which, activated, would be sufficient to bring down the currency. He was in a powerful position, so a pamphlet was prepared and, inferring Newton as incompetent, he declared to Parliament that the mint had within it ‘villains’ (you can almost hear the boo! hissing!). The counterfeiter should be permitted to demonstrate his claim, to provide a new counter-proof method of making money (for if anyone knew the workings, he surely did). What he hadn’t expected was that he’d be working with the Warden, who was a meticulous record keeper, keeper of accurate accounts and had methodically started at the bottom of a pile of suspects and worked his way through the gangs (his criminal detection expenses 1696 – 1699 reach over £626 – somewhere in the region of four times the national average  annual salary for the time).  Newton, possibly the greatest mind ever, had, similar to the seasoned entrepreneur, experience of having his ideas quashed. He understood what he was up against and probably, (being a superb scientist) made a mean cup of coffee to add some adrenalin to his genius.

The two ‘methods’ needed to agree. Certain he was confident in the results, because if there was a single point of failure in the system, he wouldn’t have another opportunity. Finance was to meet science.  He acted upon the opportunity that change (no pun intended) had given him.  The counterfeiter was taken to the gallows. Newton secured the lucrative position of Master of the Mint.

 

If I didn’t know I only manage to confuse myself,  I’d try to finish by noting  history repeats itself hence the only constant is change. The problem is that the devil is on one shoulder and angel on the other, both are slugging out the argument that shaming and blaming is counterproductive…. all while I’m reading financial news and eating pastries (plural!).

Pastries

Credit: Newton and the Counterfeiter (Levinson)

Image credits: DonkeyHotey, Joe Goldberg, SUF.

Article credit: Copyright SUF © 2014

It’s anticipated that sometime during October the Government-run British Business Bank will unveil its first deal with a lender.  The scheme offers to share the risk of certain losses on a portfolio of new loans made to small and medium-size businesses. In effect the smaller banks (i.e. challenger banks) could be enabled to lend more ‘easily’.  Over to you, lenders.

If you’ve seen anyone hawking tax disc holders cheaply it’s because the paper tax disc is no more. As from October 1 cameras will be relied upon to detect number plates and DVLA will rely on digital records.  Unless people turn to displaying their nearest and dearest on their windscreens, the space can be officially cleared   as part of the DVLA’s promise to be more efficient for the motor trade and  ‘a better digital platform enabling more self-service’.  Over to you Motor Traders.

The Financial Policy Committee will be publishing it’s response to the Chancellor’s request of advice, on any new Direction powers to guard against risk in the housing market, and it’s annual review of the Help to Buy Mortgage Scheme. Over to you BoE.

New rules for Lettings Agents, who from this month, must be a member of one of three government approved re-dress schemes, similar to the Ombudsman. Members can be expelled for misconduct and compensation awards made to victims as part of the consumer protection measures. Over to you Landlords.

Changes to stamp duty and land tax relating to valid Local Authority codes mean that paper returns with a non-valid code will be rejected. Over to you Solicitors.

Sobriety is being encouraged with a sobering October of no hangovers. Go Sober for October the charity initiative given to this month, along with Stoptober (no smoking). Over to you willpower.

Image and Article credit: Copyright SUF © 2014

I love percentages, they tell you nothing.

Big companies can be found looking to their top line (sales turnover) and reaching to their bottom line via the percentage routes of scale and margins. Whereas the top line for the smaller business is looking to their bottom line: the net profit.

Percentage margins for sales growth aren’t the profit amount; neither is the profit amount a percentage of margins for profit.

Big companies think about their profit margins. When revenue is down, and margins are hit, job cuts are made. The smaller business owner has been known to fail in looking at their margins as a business metric, so the percentages can overtake. Their response? Sometimes it’s to mimic larger companies. They turn to wanting to increase volumes (looking to higher percentages) rather than looking at the percentage (or profit margin) on each unit, sale, or invoice. Or, making staff cuts before looking at what the staff member is capable of as value to the business (percentage of sales turnover).

The measurement tells you everything.

Image and Article credit: Copyright SUF © 2014

Bank Rejects’ Offer

 

When does the one syllable, four-letter words into minute-long sentences, yelled out in single syllable breaths monster surface?

Think about the last time you were on the receiving end of rejection.Finger

Did the ‘it’s- not- fair!’ Monster surface when you were reminded that the world’s not fair, and this time, it’s not fair in your favour?

Deserved and fair or undeserved and unfair, it’s an uncomfortable place to be, with an uncomfortable word placed hanging in the air: Reject.  A powerful word with disrespectful connotations that’s used in high places and, the considered term for those whose bank loan application is turned away: the rejects.  However, any bank rejects may feel slightly more comfortable about their tag when they hear about the proposed forcing for some banks to close the Billy-No-Mates zone and offer their cast-offs to other lenders.

Can you go forcing something if it’s just not right?

Mothership
Apparently ‘tis so, the plans have been confirmed. The Treasury is drawing up their strategy in preparation for legislation and announcements during the Autumn (sometime when leaves are on the line, hay fever has turned to flu, blankets are being brought out because there’s a reluctance to put the heating on, and an Autumn Statement is due).

I can’t even begin to guess how many business groups and trade associations are linked with recent business statistics that show there are 4.9 million UK businesses, of which 4.7 million are categorised with micro status and  (though some are incorporated for deposits) there are somewhere in the region of 181 ‘banks’ (not including Building Societies) listed as active in the UK by the Bank of England. From amongst all those glorious numbers there were a magnificent ‘over 45 responses’ (I’m not certain whether ‘over’ means 46 or whether somebody decided 45 was enough before it was time to put the kettle on) rallying to the call from the consultation, to answer questions on  ‘help to match SMEs rejected for finance with alternative lenders’. WatchOut2

Sounding remarkably similar to the processing of victims in stocks (although it’s an image that might work for some, that would be the wooden pillory variety not the trading type) the proposed linking to ‘alternative lending opportunities’ suggests, for the mandatory process, ‘SME’s will be forwarded on to platforms’, whenceforth by their visibility, be sped to open market (I added that bit).  Similar to how some banks already operate (i.e. Santander and Funding Circle), ‘rejects’ will be asked if their details can be shared on Government designated private sector platforms for exposure to those who have an interest in staking their claim for a lending opportunity.

It wouldn’t surprise me if the mandate wants a `Guide for the Innocent’ creating which would be placed at various points of the youthful open spaces that have replaced privacy discussion areas in banks; no applicant will be left unturned and no applicant will be deemed capable of understanding why (notwithstanding unfavourable times) their business might be viewed by a particular lender as unfavourable. The leaflet’s headings likely something along the lines of How to improve your Chances for a Successful Application, Prepare your Business Plan, Know your Numbers, to a final If Your Application Fails. Then, more Disney than Dragon a simple statement ‘don’t worry, somebody will want you – ubiquitous smiley face’. 

Smiley
Finishing with:  If Your Application Fails:  OK, expect to see the taxi with no brakes waiting, not certain how much fuel will be in the tank. Destination? How should we know?  We want to close the door ASAP, you’re an unwanted guest. No guarantees but, if you’re lucky someone will pick you up, to cosy up over the spreadsheets, won’t (but maybe should) happen.

Despite HM Queen Elizabeth II stating (4 June 2014) ‘The Bill (Enterprise and Employment Bill 2014-2015) will support small businesses by cutting bureaucracy and enabling them to access finance” I humbly ask (not wishing to spend any time in those stocks), am I alone in an ever sceptical viewpoint?

Any bank, with new goals of bigger fish, being forced to share data with other parties about an applicant they deem a reject will definitely cut bureaucracy. But, (and this is the big but, possibly with a double T) to manage a referral system that treats all applicants equally, that is mindful of them falling down open gaps left over from perceptions of ‘non-quality’ custom, that ensures the Guide for the Innocent has all the lines in between read, that clears the applicant’s path of stumbling blocks to avoid a missed opportunity, means managing the difference of enabling them to access finance and enabling finance to access them.

Businesses (and not forgetting that lenders are businesses) are exposed to all manner of risk; market, operational, financial, consumer and pure liabilities; all contributing to continual and continued exposure.

Some businesses will manage to hide from some risks, some are on a hiding to nothing; the risk is, what do you expose and what do you reject?

 Image and Article credits: Copyright SUF © 2014

Some statistics  and studies for September – Make of them what you will…..

56% of a recent Future of England Survey felt public spending in Scotland should be reduced and 66% think Scottish MPs should be prevented from voting on English laws if it decides to remain part of the Union after the Scottish Independence Referendum.

Giving a balance of plus 25, a CBI Survey shows retailers optimistic about sales, with more shop owners with expectations of sales rising over the next three months than expectations of sales falling. The highest figure since May 2002, sales have grown at their fastest pace in six months.

London owes the highest amount in mortgages according to The Royal Mail Postcode 40th Anniversary study. The Royal Mail’s online Postcode Finder is one of the UK’s most used webpages with around 100,000 visits a day – more than 40 million a year.  There are 3,000 postcode districts in the UK. The postcode HD7 5UZ in Huddersfield, West Yorkshire, covers seven streets, more than any other in the UK and Westfield Shopping Centre in Stratford, East London, is so big it has its own postcode, E20, which was previously the fictional location for BBC soap EastEnders.

14% of the 993 of Europe’s largest public companies Accounts showed improved days working capital (DWC) for three consecutive years, shows the European Working Capital Survey.  Businesses are benefiting from an increased focus on working capital but sustaining working capital remains a major challenge.

The results of a study in Australia  (the first country to standardise packaging for cigarettes) suggests there  is ‘no evidence’  behind many of the “fears” proposed by opponents of standardised ‘plain’ packaging of cigarettes and that no evidence was found of small retailers being hurt by the change.

House prices average is now £189,306  according to Nationwide, with a +11% comparable to August rise. Property values were +0.8%, a sixteenth monthly increase and Land Registry figures suggest price increased by +1.7% in July, the biggest monthly upswing in five years, with Merthyr Tydfil beating London as the area with the strongest house price growth at local authority level.

Image and Article credit: Copyright SUF © 2014


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