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As from 1 April 2014 the Competition Commission is being taken over by the Competition and Markets Authority (CMA) and will assume the consumer functions of the Office of Fair Trading OFT concurrently with Financial Conduct Authority (FCA) who will hold the law powers in relation to financial sector activities  for over 50,000 applicable consumer credit regulation firms.

 

As from 26 April 2014 new lending rules will be applied as a framework for lending when the Mortgage Market Review (MMR)  comes into full effect. For all types of regulated mortgage contracts, lenders will be looking for the ability of all borrowers to afford the loan at both the current rate and, additionally, if there were rate rises. It applies to staying with the same lender; repayment methods, further advances, part or full redemptions and equity transfer, as well as considering a new lender and non-bank mortgage lenders subject to risk-based capital requirements and liquidity risk management controls. Using detailed scrutiny, this advice driven model in essence focuses on responsible lending and affordability assessments.

 

‘The more organised you are and the quicker you can get to the point of exchanging contracts, the less time there is for movement in the market.’  Although we haven’t seen it recently, apparently gazumping is on the rise.

 

And …. crazy prices continue….

£1M for a `smaller than a tube carriage’ flat

£150K for a solar powered beach hut.

£115K for a very messy house.

Image and Article credits: Copyright SUF © 2014

The banking industry has seen a rise in consumer confidence for two years in a row, according to a new survey of 32,000 banking customers in 43 countries. The study around the world showed confidence increasing most in India, followed by Saudi Arabia, with confidence falling the most in Ireland and Spain.The survey showed 60% of respondents aren’t planning to close or move their accounts, which, according to Ernst & Young highlights that this isn’t necessarily because they are confident that they are with the right provider, with some respondents stating they a change would be too difficult or time consuming.

“Bank customers are not being actively retained; they simply remain with their current provider through inertia and are therefore vulnerable to competitors“.

According to another global study the Arts, Entertainment and Hobbies market sector was 60% more competitive January 2014 compared to January 2013 and Financial Services 60% more so, whilst Sports & Recreation was 121% less competitive in January 2014 compared to 2013 in relation to digital advertising

The three months to February saw a highest level since 1998, in the Confederation of British Industry (CBI) quarterly Service Sector Survey.   Optimism indices for consumer services (including hotels, bars, restaurants and leisure) rose to their highest level amongst 139 companies and at the quickest pace since 2005.

The ONS has confirmed the UK economy grew by 0.7% in the Quarter with business investment rising by 2.4% from the previous three-month period and rose 8.5% from a year earlier.

The BBA  (British Bankers Association) has said that mortgage lending was 38% higher in January than a year ago and ‘continues to rise compared to a year earlier’. It is widely expected that the Bank of England  will raise interest rates by the end of next year, with an inevitable knock-on effect on mortgage rates.

Finally, not certain if this is a record or not but Royal Bank of Scotland has lost all the money  invested in it by the taxpayer six years ago with total losses since its bailout now drawn level with the £46bn put in with 81% stake, in 2008 and The Co-op Group’s losses  for 2013 are expected to be greater than £2bn, by far the worst in its history.

Image and Article credits: Copyright SUF 2014 ©

 

 

With inflation falling to the Bank of England’s 2% target for the first time in four years and numbers from Bank of England Credit Conditions Survey (2013 Q4)  continuing an upward trend, the notion of  ‘positive’ outlook has (for some) been reinforced.

Could it be that Default Rates on lending to small businesses  being reported as ‘fallen significantly in Q4’,  with  medium-sized companies unchanged and large PNFC’s falling over the quarter,  was due to re-structuring of existing facilities being part of the reclassification for 2012?  Alongside a statement which shows spreads on corporate lending falling in Q4, with  ‘significant reductions’ for medium-sized companies and large PNFCs, and a slight reduction for small businesses’ it’s worthy to  question an attribution to re-structures into the figures behind the numbers.

Depending on the questions asked and the answers given some results are ‘not directly comparable’ therefore perhaps some statements are too narrow?  Maybe an insightful survey is one that focuses on the survey participants’ business attitude, their plans and strategy in achieving that objective. Would that offer a stronger perspective and wider field of vision into the UK economy or would it  tell us what’s happening in business rather than what’s happened?

Image credit: Pilot Theatre  Article credit: Copyright SUF 2014 ©

The Banking Reform Act, ring fencing retail and investment banking, and implementing recommendations of the Parliamentary Commission on Banking standard (including criminal offences for senior bankers misconduct), has become law.

As is said, this is just the beginning.

Although, ring-fenced banks will not be able to hold or own the capital of other non ring-fenced banks etc., it won’t be fully in force for another four years during which a new authorisation process for staff will be introduced and effectiveness reviewed.

And, a banking union plan has been agreed for managing Eurozone banks (UK plus 10 other countries are not part of the plan). The ECB (European Central Bank) has been put in charge of European Union regulation rules for banks in the Eurozone

Image credit: WetWebWork  Article credit: Copyright SUF © 2013

The pound has risen, there’s optimism amongst the financial industry and sterling is looking strong as record low interest rates are still in place  – Business surveys have recently been consistently positive; retail sales are up, car sales are good, mortgage approvals have increased.

But…..

Most of these figures are set against previously declined figures, therefore it’s not unrealistic for Step-Up Finance to keep hearing the ‘concerned about cash flow’ chorusing from small businesses amongst the commercial finance and funding concerns.

Needing a jumpstart, some of these business have tried finding a solution by turning to bridging finance or loans, while others have used their own reserves or drawn-down from their business.

Some have managed to reduce the stresses and stabilise their situation.  Some have made it worse by not being realistic about the amounts needed, gateways to those amounts, or exits routes from those amounts.  Some measured the amount of finance that can be taken from a business without leaving it worse off. Some missed the main measurement for cash flow and business value.

The sum total is some have cash and will survive, and some haven’t been strategic, and likely won’t.

Image and Article credit: Copyright SUF 2013 ©

The sun had hardly set on an announcement that RBS, the bank with kinetic pull from politicians,  could see itself and Lloyds Banking Group going out to ‘public’  ownership when RBS’s CEO, with a mixed public image, built around a £45Bn public bailout to turn around a failing bank   and  added  contentious bonuses, ( Stephen Hester ) announces his resignation.

The ride isn’t over yet. 

Image credit: Elliot Brown  Article credit: Copyright SUF 2013

No surprise that less than one in five respondents believes ‘a business or governmental leader will actually tell the truth when confronted with a difficult issue’, as shown in the 2013 Edelman Trust Barometer.

`Academics, technical experts and a person like yourself ‘ were revealed, in the global survey, to be nearly twice as trusted as a Chief Executive or Government official. With the driver cited as unethical behaviour, banks and financial services were the least trusted sector. In the UK 78% were aware of banking scandals (which statistical 22% were unaware?) and the most trusted sector was technology.

And what of small business?  The most trusted were in the West, with industrialised countries trusting small business 30% more than big business, and developing countries trusting big business more than small business (only by a small margin).

Building on an ability to (almost) immediately connect with us all, and being always available therefore dependable (a bit like how we most of us like to see ourselves and our friends), plus it’s a kind of technical expert, there’s little wonder In Google We Trust .

Article credit: Copyright SUF 2013

The Answer Is Out There – It’s The Question That Brought You Here: Financing Business Matrix

Little wonder the micro and small business owner can feel their brain turning as cavernous as an empty warehouse, when they hear the stable interview question: where do you see yourself in 3-5 years? An unsurprising response because looking at what-if  moments is heavy going, with few in smaller business having the luxury of time or situation. It’s adversity that injects us with a drive to sit up and take notice.

What-if moments are unattended areas – some abandoned altogether – until, an event or circumstance occurs which has potentially damaging effect.

The shock of the situation’s potential consequences can be enough to triggers a reaction – usually played out with some matrix-type wall running and freeze frame time effects movements – forcing the situation to be considered relevant for attention. The impulse is to want to understand the consequences of the complicated that wasn’t on the taken easy route: Why? … and…  How? … and How? … and Why?

For example, as a consequence of banks ‘reshuffling’ their capital the trend is for overdrafts to be called in (repayable on demand). Having defined their problem, the bank reclassifies the borrowings as part of their risk assessment to (sometimes) a bank loan, which for the borrower is usually a reclassification they don’t want – it doesn’t hold the same incentive of the overdraft i.e. the interest rate – it’s going to get complicated. Recognition of any complication, might be called in, had gone unnoticed in the first instance; overlooked for the less complicated preference. This took away an ability to speculate, hence, when ‘driven’ to an alternative financial product,  opportunity can be missed again….  for as many times as ostracising behaviour is repeated.

And, the circumstances can also dictate the response that instigates a leaning towards uncomplicated. In the same example, inviting a view of being penalised for no wrongdoing, the annoying situation needs knee-jerk reaction, some stomping around, finished with some air hand-throwing and a resolved ‘what can I do?!

Distinguishing between a problem and a challenge, the balanced approach, is discarded.  There is no right or wrong question when defining a problem:  the challenge is to use a combination of knowledge, experience and data as a ‘framework’ for considering what the basis of the problem is, in order to define the challenges:  a problem is associated with conditions or situation whereas a challenge relates to the necessity of effort – problems are conflicts whilst challenges are the questions that break down a problem and can make a difference to the business numbers. Which, returning to the overdraft example, could mean a problem is considering what alternatives are available for the business’s circumstances, when a) that which could offer alternative has been prejudiced  and side-stepped b) the preference for overdraft has become reliant upon, part of a routine and familiar. And, as most of us are creatures of habit, the challenge is altering a mindset to put the business owner back in control which can all appear too complicated without a translator, or when your mind-movie has you bent backwards dodging that slow-mo bullet.

In shock, judgement is unstable therefore it alludes to different question types, which consequently hold different answers which result in different courses of action.  A reluctance to overcome innovation in the commercial financial arena has been further supported by ‘shocks’  it’s experienced, the resulting choices placed before its consumers are, in part, as result of the surrounding instability in this market driven area, which provides choices for its mechanisms benefit – not for customer benefit. Therefore, as a customer, to achieve any benefit, is dependent on understanding those choices available.

Actions can achieve objectives, however, because it’s only possible to predict to a certain extent, sometimes the best laid plans  go askew. The positive/productive business practice is revisiting the business’ plan to revise areas that have become or considered becoming unstable. A shock holds implications. Any questions that follow are in context to those immediate affects; they will apply to the specific position or circumstances of that time and are, therefore, often of the knee-jerk reaction type. These have limited value compared to questions posed to prevent incident, made in preparation to avoid incident, or seek to limit damage of an incident.

Independence is perceived as a primary motivation  for going into business.  Fuelled by self-knowledge, understanding the processes of running the business smaller enterprise, owners and self-employed who are able to project where they’ll be in 3-5 years resonates an ability to project a partly abstract concept; without which a business becomes disadvantaged in a situation when resilience is essential.

Self assistance can be an investment for smaller businesses, however, when a route preference is made (in this case financial structure) which is dictated by blind consideration i.e. no safeguard advice has been taken, being in control is a misconception.

An approach which can, for some areas of business, be ambiguous and temporary because it underestimates the problems and challenges of the changing business and financial environment relative to the information matrix.

Image credits: SUFMC Quinn,   Global Adaptation.      Article credit: Copyright SUF 2012

 


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