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For they surely will….

Inflation Report Recap.

  • August 2013 – Forward guidance would use several indicators, mainly based upon unemployment, labour market, working hours and surveys of ‘spare capacity’  in companies. The degree of spare capacity would reflect upon any increase in Bank Rate.

  • 18 additional indicators were added for degrees of space to the projections.

  • The last report (May 2014), a goal setting football analogy, indicated no early rises and there was a general consciousness towards it being after the General Election (2015), when rises would be up to 3% between 2015 and 2017.

The latest Report  states that it expects Interest Rates to rise in line with market expectations, with an emphasis on gradual rate rises. There are suggestions of a Rate Rise around the 0.75% mark during the 4th quarter, followed by increases to 1% by early 2015, with slower increments to reach about 2.5% -3% by 2017 (Mark Carney’s speech  at the Mansion House indicated there might be necessity for an earlier rise).

Supporting indicators of an Inflation Rate jump in June, from 1.5% to 1.9% (the target is 2%), Press giving out  business optimism as being high for economic growth, figures from the ONS showing growth, unemployment figures showing falls (although wages are slowing) blended with opaque measurements, leave the question hanging, “When will Rates start to rise?”

Anyone selling crystal balls might do well over the next few months.

Image and Article credits: Copyright SUF © 2014


Money Spiced with Llama Spit

Some fifty four pages of analysis, trends and developments across the economy are patiently explained and in a matter of fact manner, and inflation projections are translated by a patient and informative Agent….  yet, even with an A4 glossary, I left the meeting with my brain shrieking the same way it does reading isolated EBIDA figures.

I’d been to the Bank of England quarterly inflation report meeting where coloured diagrams and graphs that appear to go all over the place, at one brief point illustrating seismic waves for an earthquake potential, are shown.

There are no instructions for reading Inflation Reports (or EBIDA figures) and no warnings stating `This is an educated appraisal which contains potentially nuclear information, therefore as you may not be fully informed, you may experience a sense of foreboding’.


As financial needs for a business owner are as different as a full economic analyses and ‘our survey said’, or a single EBIDA figure heading up a report and the same figure coming after the pluses and minuses, although full analysis or single figure are created to give some clarity, without an accompanying mix of information that can set the full picture, and stop me feeling as though I’ve just swallowed something that tastes like lavatory cleaner spiced with Llama spit, they may as well be written in hieroglyphics.

As well as being at the heart of my business, the smaller employer  is close to my heart (my grandparents and parents owned and were involved in operating smaller businesses, my extended family have local businesses or service-based businesses) and the non-corporate business is incredibly important to our economy. I don’t understand everything about the economy  but…..  Brace yourself if you’re of a nervous disposition about your business…. I’ll tell you what I do know…. and I’ll try not to be too graphic.


The day after the meeting when I got to speak with a mix of business owners and lenders’ people and I was unsettled, in a full-face Llama cleansing way. There was no mention of mention of the economy (…and some weren’t aware of EBIDA figures, single or full).

With that purple line, on the current B of E probability of inflation above target chart, being almost as straight as a straight road named Stagnation,  unless those earthquake potentials are realised, interest rates are in a good place for businesses to set their stalls for their futures. And, because some lenders traditionally set their stalls as a ‘one size fits all’,  being aware of EBIDA type metrics  is an essential for the business that wants to successfully negotiate a way through finance and funding options for their future.

I’ve likely told you about the same as you’d tell me: there’s no explicit detail about what’s going to happen in the economy and as boring as it is for a cow to chew its cud, financial forecasting is a necessity.


Parts of our financial system haven’t changed; from the good ‘ol days of the local bank manager, through the dark days of the five horsemen of the apocalypse and into the IT platform future, they’ve just got a whole lot more value attached to them for anyone who wants to stay ahead of times that are-a- changing.

I can’t promise that, by understanding how the cash flows: the differing forms, uses and structures, seat belts would be needed for meteoric rises but I will say that small steps moving further away from running on empty is, when (as someone noted) ‘this is all temporary’ (would that be the same person who said ‘who knows what tomorrow will bring’?), a way to get an extra gear …. which,  as far as I can tell, is better than being stuck in first gear when you’ve an irritated Llama closing in.

Images and Article credit: Copyright SUF © 2014

The latest Bank of England Inflation Report  has altered Bank of England Governor Mark Carney’s Interest Rate Policy since the first Report (August 2013).

Now, reflecting the falling unemployment and economic recovery, policy will be determined by a wider range of indicators other than the previous indicator of unemployment falling to 7% or below. The report says the ‘Bank Rate may need to remain at low levels for some time to come’ and considers ‘economic slack’ being ‘substantially reduced’, in taking a gradual approach to rate increases.  ‘When Bank Rate does begin to rise, the appropriate path so as to eliminate slack over the next two to three years and keep inflation close to the target is expected to be gradual’.  Sterling rose to an almost 3 year high  following the central banks forward guidance.

Although, with the ONS (Office of National Statistics) using some B of E Data, it will be interesting to see how they interpret the effects of the recent floods in their measurements: moving from Cornwall into the Thames Valley, M4 and M3 corridor. Mark Carney has said  although the floods would influence the short-term outlook, there was unlikely to be any effect on overall growth – currently forecast at 3.4 per cent this year.

Will the UK still be seen as being in a bad but improving place?

Image and Article credit: SUF Copyright 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 ©

Currently ‘forward guidance’  has been given that, providing unemployment remains above 7%, interest rates will not go above the four year static 0.5%, which theoretically could mean interest rates staying at 0.5% for yet another couple of years, which has been a ‘norm’ for the past few years. Although low rates haven’t proven to assist stagnation in many areas of the economy, would the alternative of raising interest rates encourage growth any quicker…?

Image credit: West Virginia Blue  Article credit: Copyright SUF 2013 ©

Knowing enough to know, that we don’t sufficiently know enough to know how the Funding for Lending  is working, is sufficient to know we know enough to feel reassured, after listening and watching an increased floundering from a variant of lender managers, working with the scheme, as a  gurgled excuse (not reasoned response) is the suggestive qualifying factor -  There’s a new order within their employment arena.

It might be there is a threat of being taken out to the dog’s home hanging over them because Andrex-puppy enthusiasm is in short supply. A metaphoric ball we recently rolled the way of a lender, whose bright eyes and wet nose indicated a healthy ability (that too was a metaphor – not the symptoms of hay fever), after pawing (metaphor again) it around a while, the killer response was ‘not willing to support it’ – which we read as ‘can’t be bothered’, ‘not worth the effort’.

FFL ‘should allow banks to increase the availability of credit’  but, from the figures given out (August to December 2012), the imbalance between the  BofE suggested £14bn withdrawn from FFL, and the lending figures for the same period, it didn’t happen. Now, BofE  has finalised plans to extend FFL:  2015 not January 2014, additionally, during 2013 every £1 lent out offers access to £10 drawdown. But is this a clue as to why excuse and not reason was given from the business manager who takes his orders from above (another manager – not to be misconstrued with God)?

Or is it that to unravel the new order of supply and demand it’s enough to know that nobody knows enough? 

Image credit: den99   Article credit: Copyright SUF 2013


Probably, down at No.11 after some gradual stretching exercises and a crack of the knuckles, Mr O’s  spring in his step bounce downstairs turned to frantic running around; throwing things out of the cupboard under the stairs, and shouting “who’s moved the red bag again?” ……Because, as we’ve heard from pre-budget snippets, it’s a visit to Grimsville again – and the red bag  could be the brightest thing on the day for the man whose made his first Tweet  –  on Budget Day – ‘Today I’ll present a Budget that tackles the economy’s problems head-on, helping those who want to work hard & get on’ – Clearly he’s got a lot to do.

Read more budget news:

The Treasury:
The Guardian:
The Telegraph:

Image credit: stevendepolo  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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