Blog Archive

Home
Market Update

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

 

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

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

InflationReportAugust2014

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’.

WatchOut2

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.

  Gingerbread

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

 


1 2 3 4 12
Copyright 2013 © Step-Up Finance | Financial Services Register: 303044 | CCL: 615495 | DPA: Z4997922