Business As Normal…
Small firms are on the whole still feeling austerity chomping at their heels from which many are facing heavy additional burdens. Consequently, doing the bare minimum to get the job done means ‘right’ or ‘wrong’ decisions aren’t always considered, and we’re seeing a distinctive two-camp pattern of those who acknowledge that changes continually happen, therefore they have or are prepared to adapt….. and, those who prefer to put their head in the sand.
Notice any parallels with the endless financial headlines?
For example, LIBOR (London Interbank Offered Rate), the wholesale market interest rate for lending between lenders (banks), once perceived as a reliable benchmark, was recently subject to claims of manipulation. Did it adapt or put its head in the sand? Whichever, it’s now being forced to look at change.
Base Rate has current ‘forward guidance’ giving that, providing unemployment remains above 7%, interest rates will not go above the four year static 0.5%. When the MPC (Monetary Policy Committee) make their decisions for setting the Base Rate (BoEBR) to meet inflation rate targets, the objective, based on variables, is to maintain price stability whilst supporting the Chancellor’s objective – In essence to strike a balance between keeping inflation down, yet not pushing up interest rates higher than would be healthy for inflationary pressure. Theoretically, interest rates could stay at the norm 0.5% for the next few years. Dependent on how they are interpreted, dependant on which numbers are used, the shift around could be viewed as ignoring the facts or being ‘forced’ into change.
This Interest rate, for short term money lending by the Bank of England to commercial financial institutions, (who in turn set their own interest rates for their borrowers and savers), was changed between 1997 and 2005 on 30 occasions - 26 came in the form of quarter-point changes in either direction, and the rest were half-point changes - from 1971 to 2013, the average rate of interest was 8.19%…. and, with a potential forced change for mortgage lenders, (consequence of EU rulings); which could have mortgage lenders having to tell borrowers ‘the maximum interest rate they have charged during the past two decades’, this APR could arguably contribute to already confusing information, with both lenders and borrowers wanting to bury their heads as preferable option to advertised loans and their Klingonesque small print : ‘Interest rate of a maximum of a charged during past two decades’.
What could curb all this confusion? What could possibly give those in business an opening to consider the ramifications of not considering? ….got me to thinking about the derogatory term: Normal for Norfolk.
For any not familiar with this reference to a county, it’s used when describing an action (or less sensitively an individual) which is seen as so ridiculous it could only have been born as a result of inbreeding; the implication being it’s a stupid action. Scratch away at the letters (distraction technique for mounting paperwork) and it takes only the removal of a few consonants before a couple of useful phrases alight.
The new normal (following 2007-2008) for business could utilise these phrases as clarity from many a powerful body: this is ‘Normal for No Folk’ or this is ‘Normal for Folk’. ‘They’ (those who issue the statements) should be able to see clearly each time, by the response they get, that we (those the statements apply to) understand what it is we’re being told. The phrases could help us to understand whether something is a long or short term expectation, or acceptable or unacceptable situation - We’d be able to clarify whether they do or don’t know what they’re doing. They could go about their business realising what they perceive as ‘Normal for Folk’ is anything but normal…. and we could go about ours, understanding ‘Normal for No Folk’ is anything but normal.
01 08 2013
The month opens with the UK Bank’s Interim results being issued. Barclays’ boss had previously suggested it may cut lending if it has to meet new demands (discussed with the BoE/PRA) that plus other updates, including capital-raising is expected to be announced alongside the profits report. Lloyds’ announcement could report a jump in profits which would see it coming out of the red and looking to prepare selling off the taxpayer’s 39% stake. RBS might announce a new boss (Stephen Hester’s replacement). Meanwhile a group of City investors is looking to close in on Project Rainbow (Codename for the 316 RBS Branch Sale EU State Aid requirement – Lloyds 632 branches codename Verde).
The Bank of England will be having its Monetary Policy Committee Meeting and Announcement of effective interest rates on 1st August. These are the actual rates of interest ‘received from borrowers and paid to depositors in various economic sectors’. The Bank’s Quarterly Inflation Report is also due out this month – with an overview of economic developments and the quoted interest rates ‘which are the advertised rates offered to households on a wide range of secured and unsecured lending and deposit products’ will be announced later in the month; this is expected to be the announcement of some kind of ‘forward guidance’.
NS and I have announced they’re to reduce their prize fund to reflect market trends. Premium Bond prize fund rate will reduce by 0.20% to 1.30% on 1 August and odds will change to 26,000 to 1 from 24,000 to 1.
There’s a Bank Holiday this month … Stansted faces a threatened walkout by baggage screening staff and August is the time for holidays and shopping for back to school items, except this year, apparently, some might be focusing on college-bound kids instead of the crayon set. Interesting marketing insight via Bloomberg and how things are happening in the US ( If it can happen in America it can happen here).
Image and Article credit: Copyright SUF 2013
01 07 2013
On July 1, former Bank of Canada Governor Mark Carney will replace Sir Mervyn King as Governor of the Bank of England with a first Monetary Policy Committee (MPC) meeting on July 3 and 4. Mr Carney sees that an important role for Central Banks is to offer “forward guidance” when the economy and monetary policy face exceptional challenges. He’s also said the Bank has has no intention of dropping women from Britain’s bank notes after a decision in April was made to replace Elizabeth Fry with Winston Churchill on the £5 note in 2015 – leaving (not including the Queen) no British women on our banknotes.
Flood Re has seen a deal being reached between Insurers and the Government. Flood insurance premiums will be capped and linked to Council Tax bands. All UK household insurers will pay into a fund that can be used to pay claims for people in high-risk homes. As part of the Water Bill, the SoP (Statement of Principles) was extended from ending 30 June to 1 August which will now continue until the new system comes into force. The cap on the amount households will pay for flood insurance premiums will start at no more than £210 per annum in Bands A and B, rising to £540 per year in Band G. The minister responsible for negotiations between the ABI (Association of British Insurers) and the government will deliver a keynote speech July.
New employment tribunal rules of procedure are to be introduced at the end of the month: 29 July which sees claimants who issue a claim against their employer in an employment tribunal being required to pay a fee to issue a claim and a further fee to proceed to a hearing. The rules have been revised to simplify and streamline the employment tribunal claims process.
The world’s only conference dedicated to passwords is taking place in Las Vegas in July at which ‘password fatigue’ is being debated and informed solutions in the pipeline are discussed along with the ‘password pill’.
Will July 20 be the day Trafalger Square sees a controversial blue cock installed among the pigeons? The national symbol of France, a cockerel, has been made as a 14ft high representation of ‘regeneration, awakening and strength’ however, for some, placed on the fourth plinth under Admiral Lord Nelson (he of Battle of Trafalger fame) it’s not viewed in the same light.
Image and Article credit: Copyright SUF
01 06 2013
The Bank of England’s Financial Stability Report (second for the year) is published 26 June, under the guidance of the Financial Policy Committee. Doing what it says on the tin, it gives an assessment of the financial sector: stability and resilience, plus any actions that it advises to reduce risks to stability.
Plans by the Co-op Bank to expand (buying Lloyds branches) proved too much too soon as many of their Britannia Building Society acquisition loans went sour, leaving a weakened bank now selling off its Life and General Insurance operations as it tries to fill a black hole. The risk-averse attitude has also been extended to new business customers…the door has been closed. Will this mutual model disappear from the high street?
Google is to retire it’s Meebo bar publishing tool on June 6 (foreign language to us but as it’s aligned with advertising and social networking thought we’d mention it). Web publishers apparently use it to help visitors ‘discover, browse, and share content on their site’. Those in the know can explain
Existing insurance arrangements for home owners in flood risk areas might have altered after this month with changes impacting consumers and, potentially, mortgage lending. SoP (Statement of Principles) between ABI and the Government was to come to an end 30 June but has been extended to 1 August. In essence, ABI members are committed to make flood insurance available for domestic and small business properties as a feature of standard policy, providing the Environment Agency continues to provide flood defence measures (which hasn’t happened). Therefore premiums will potentially be charged and policy terms applied which reflect the level of risk. Mortgaged properties, which require buildings insurance as part of the mortgage for the term of the loan, could become an unaffordable situation for some. Identifying flood risk and mitigating property transaction risk is of great value for many in the process but, to date, no agreement has been made, leaving potential property transactions (buying and selling) uncertain.
The G8 summit is taking place this month, with the UK assuming the one-year Presidency with a priority of the global economy. The high profile event, held in Northern Ireland, will focus on open economies, open governments and open societies to support free trade, tackle tax evasion and encourage greater transparency and accountability.
Image and Article credit: Copyright SUF 2013
02 04 2013
The automatic Escalator Tax (alcohol and cigarettes) which was to be applied this month (by at least 2% over inflation until 2014) was removed for beer in the recent budget. CAMRA had been vocal in pointing out that beer duty has risen 42% since 2008, the beer industry had cited the tax as reason for pubs going out of business and The Chancellor noted 10,000 pubs have closed in the last decade. Although duty for beer in general hasn’t been cut, the escalator stoppage and a duty cut of 1p has been seen as going some way to support the beer and pub industry. Also a planned 3p rise in fuel duty scheduled for September has been scrapped altogether.
Real-time PAYE reporting rolled out this month, seen as an HMRC concession, in that those employing less than 50 people are able to take longer with the increased frequency of PAYE filings until 5 October 2013. During the extended time it’s anticipated that any circumstantial problems for small businesses will be identified.
Research carried out by, in part, the Institute for Family Business with UCG (IFB) has revealed that family business owners don’t feel traditional technical qualifications alone are sufficient for a competent business advisor, and citing the ability to effectively deal with various personalities in a complex family situation as being equally important. Family-owned business ‘face specific challenges that are different from those faced by private individuals, limited companies or PLCs’…… ‘Being highly proficient or highly qualified … is only the baseline starting point.’
Following through the Financial Services Act, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) take over from the FSA, at ‘Legal Cutover’ 1 April (note this is not a joke). Financial Services (Banking Reform) Bill, the new regulatory framework, was sent to Public Bill Committee for scrutiny in March.
Lonely Planet, BBC’s travel guide business bought in 2007 and 2011 (no taxpayers’ money was used), has been sold on to a US media firm and, with a loss of almost £80m, the BBC Trust has ordered a review of ‘lessons learned’ with the Vice Chair saying “Although this did not prove to be a good commercial investment, Worldwide is a very successful business”.
……Wonder how many small businesses would get away with that comment?
Image and Article credit: Copyright SUF 2013
03 03 2013
Deciding factors for shopping commonly include price, quality or choice. Deciding factors for personal banking might be interest rates, additional services, convenience or, it seems from Sainsbury bank’s pre-tax operating profit increase of 40% last year, the loyalty card points.
Ways to tap into potential customers: It is our business to quickly restore value-added infrastructures that provide key differentiators between us and our competitors, may have been discussed at the annual review before the decision to expand the roll out of GP Services. Much like ‘Tesco Law’, ‘Sainsbury Surgery’ might be perceived as a game changer but picking up the tea-and-sympathy biscuits after minor surgery, or experiencing a checkout process with the walking-wounded nearby, will depend on what the customer wants…. or is driven to.
The idea of a rent-free surgery in the calculations might be sufficient for any wanting to consider one of the seven additional practices but with no mention of double points, or who’ll eventually take up the slack for the rent, will it have sufficient benefit? It may be that co-payments further down the line of the Health and Social Care Act 2012, coming into action (April), will fill in the gaps.
Being a driven customer is the latest experience for the TMW (The Mortgage Works) landlord applicant where tenants receive housing benefit. No longer will borrowings be available after Nationwide made the decision to clarify their policy. We seem to be making headway against competition benchmarks. Have we checked that they haven’t changed direction? And yet, within two days, they completed a massive U-turn, apparently listening to the market….
And so it is for some loan customers of, Australian owned, Yorkshire Bank, following the calling-in of loans that haven’t reached their termination date. The drive to find alternatives might have assisted in reducing the bank’s portfolio by £300m – due to loans reaching maturity, or exits from customers. Excellence carries a significant risk of over-reach. By targeting and repurposing mediocrity our risk profile becomes excellent.
It’s been a ‘choppy’ year for RBS with only £600m in the bonus pot and they’ve agreed to cut down the size of their US investment business, by selling part off (in the next two years) and restructure capital buffers in response the FSA. The State-backed bank intends to focus on the UK economy; lending to British households or small business.
There was a crooked man, who walked a crooked mile. We made him Head of Finance, and now we’ve made a pile.
All quotes attributed to @managerspeak
Image and Article credit: Copyright SUF
01 02 2013
According to the Accountant’s I’ve spoken with, HMRC’s deadline for self-assessment gets the papers flying around quicker than a pile of leaves covering a hedgehog who’s spotted its first slug in 6 months, for those well-meaning businesses with a late-starter attitude in discovering the difference between paper shuffling and paper moving. It seems for some it’s the schedules, for others its spreadsheets and for others it’s general paperwork that’s their Achilles heel lurking amongst the well meaning ‘to do’ files and piles (that masks the stresses and compounds the disorganised). But ‘papers’ will be heard rustling beyond the busy season (31st January) deadline, as the VAT returns, tax liability payments, PAYE and capital gains tax continue for the micro and small business, alongside notifications to Companies House and preparation for RTI – the electronic PAYE returns to HMRC.
A large proportion of some businesses outgoings are business rates to which Small Business Rate Relief (Non-Domestic Rating Amendment Order 2013) comes into force on 11 February. There are no changes to eligibility criteria but the temporary increase in the level of rate relief is extended to 31 March 2014. Business occupying premises with a rateable value of not more than £6,000 are provided with 100% relief; with decreases between £6,001 and £12,000…. the benefit MUST be applied for. Properties that fall beyond the £12,000 limit (think about small businesses under stress and trying to keep a grip or businesses looking to expand) – the cap doesn’t apply.
Also 11 February, the first Business Planning Week, which could be ironically titled for existing businesses, weighted down with commitments but also available for start-ups wanting to look to business planning templates until 17 February.
Image and Article credit: Copyright SUF 2013
04 12 2012
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.