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Let’s start with what we Brits seem to like talking about instead of leaving it until the end as an …and finally…. the weather -   June was the wettest on record, ‘Nuff said!  Although water restrictions have been lifted, some farmers, such as apple growers in Sussex  might be counting the cost of their crops being dampened whilst some strawberry growers  claim its all come to good, others with PYO  are counting the cost and the damp conditions have driven bee colonies to struggle with near starvation.  Summer clothing sales  started early because of subdued sales but the sale of waterproofs is up.

 

The MPC (Monetary Policy Committee) meeting this month is anticipated to be bringing out QE  (quantitative easing) in response to latest economic indicators and at the recent FSA’s Annual Public Meeting  chairman Lord Turner described the Libor scandal `column inch filler‘,  as a huge blow to the reputation of the banking industry.

 

Banking activity is set to create an even huger blow over the next few weeks as the Libor scandal  unfolds with BoE Deputy Paul Tucker  being cited by one scuffed Diamond Bob, as involved in rate rigging actions. The current Banking scandal takes over from NatWest’s meltdown.  CEO Hester has agreed to forgo his £963,000 bonus this year because of the chaos following the computer glitch which has raised fears that customers may have had their credit ratings unwittingly blotted,  corporate hospitality at Wimbledon was scrapped and duplicate mortgage payments mistakenly taken from some customers have achieved an I’m sorry from RBS, as they promised no one would be left out of pocket…..  Interest rate swapping by RBS, Lloyds, Barclays and HSBC  as reviewed by the regulator had all four British banks on the naughty-chair and forced  to compensate their customers caught up in  the mis-selling of  complex derivatives; which were supposed to protect them if interest rates rose…..

 

A year down the line  from nationalised Northern Rock’s potential sale making its way into the news, sale done, it’s still hanging around the financial headlines as the CEO of the FSA claims he recommended Lloyds TSB be granted a loan from the BofE  to facilitate a takeover which could have changed the general climate, but, Governor Mervyn King he said …NO!..   Lloyds preferred bidder for their Verde sale remains to be The Co-Op , while Moodys’ is about to place a downgrade on Santander which would remove any parental support from Banco Santander.

 

London Borough, Southwark Council, is set to be the first UK local authority to impose a rent cap  for private landlords who accept housing benefit tenants - There are 30,000 private rental properties in Southwark, of which 5,340 currently accept LHA tenants.  Newham council’s plan, to become the first borough in the country to licence all private landlords,  has attracted criticism from the NLA (National Landlords Association). Due to come into force 1 January 2013, some 35,000 private tenancies will be affected. The NLA has said…..such drastic proposals will….only increase the burdens on those who already comply with the law, without having any bearing on those who blatantly ignore it. Private landlords will pay £150 for a five year licence if they register before 1 January, 2013, otherwise the full fee is £500. Landlords who fail to license face fines of up to £20,000. Shelter responded with `We urge other local councils to follow Newham’s lead in sending a clear signal that enforcing the law against rogue landlords is a priority’.

And Finally…. The Weather…. It’s still raining.  ‘Nuff said…. 

Image and Article credit: Copyright SUF 2012

 

The Queen’s Diamond Jubilee has brought about much retrospective - Looking back at the economy  and thinking about how businesses were run very differently. There was the similarity of difficult economic times being shared 60 years ago, a time of hardly any FTSE 100, 250 ,or similar indicators, amongst a stock exchange that was similar to a club and difficult to imagine when we’re now in a time of the B-of-E’s MPC (Monetary Policy Committee) making decisions about pumping money  into a recession hit economy.

Following much data and statistics, the MPC meeting this week is expected to keep its key lending rate at the record low 0.50 percent although questions have been raised about the health of the economy with regard to consumer spending, austerity cuts and trading partner, Eurozone, continuing crisis. It seems that quantitative and easing will be the words to watch for June. The first Open Data Institute (ODI ) has been announced, to support the growth of new businesses on the back of Government data. It is intended as the place to go for those using data to drive economic growth and exploit the commercial value of open data.

Banks, building societies and credit unions  will be required  by the FSA to display information explaining deposit guarantee schemes to their customers. They will be expected to explain which schemes apply to their customer’s deposits; currently the Financial Services Compensation Scheme has a limit of £85,000, with further deposits not being covered included, for example European banks which operate in the UK. The ruling comes into effect 31 August.

A licence to landlord may become the necessary accreditation to being able to operate in Wales, under reforms being proposed. The white paper includes a ‘fit and proper’ test being carried out on landlords before full registration status and LA’s being given discretionary power to increase council tax on properties empty for more than a year; there is also to be a Code of Practice introduced.

The short term prospects for mortgages and other loans remains in jeopardy if the Eurozone crisis persists, according to the CML (Council of Mortgage Lenders). As the ‘cross-border nature of banking means that UK banks cannot remain immune to what happens in the Eurozone’. Mortgage lending dropped away in April and gross mortgage lending fell by 19% against March.

A government initiative, Start Up Loans, for 18 -25 year olds, is the new kid on the block for assisting start-up businesses in the hope they can put some vitality into our dull economy with their new businesses, although some might turn prematurely grey when they realise the rules and regulations  that some business types have to go through, and,  before they even begin with any ongoing red tape such as the recent ‘pastygate’ VAT row  which saw thermometers being readied for action only to be placed back down; following the U-turn about which product had what temperature at the point of sale. But, proving that entrepreneurs and small business go together (since at least 1952), a nine year old American was reported, in June 1952 of selling last year’s snowballs in that summer’s heat wave!

(Image and Article credit: Copyright SUF 2012)

 

 

Old news, the UK is in recession (again)  as the Office of National Statistics said Britain’s GDP fell 0.2% in the first quarter of 2012 after contracting by 0.3% at the end of 2011, forecasts were upset by a big fall in construction output and industrial output. Therefore, with a sinking-ship type economy, apt news via an Australian  whose planning on constructing Titanic II  in late 2013, with a maiden voyage planned for 2016.  With an interesting and pragmatic approach towards his new state of the art venture, that only a billionaire could have in such times: “of course it will sink if you put a hole in it”.

The Taxpayers stake in RBS could be sold off  before the next general election but, according to the Treasury, not before “it delivers value for money for the taxpayer”.

The Bank of England  are on the move with 1,000 FSA staff  from Canary Wharf to JP Morgan offices for their Prudential Regulatory Authority role.

The latest BoE Trend in Lending Report showed that bank lending to businesses was down 3% over the latest 12 months; with lending to small businesses down by approximately 10% in the latest 12 months.

Landlords and their tenants are being considered for a Government charter  which could include legal fire and safety standards, and rules governing anti-social behaviour, as part of a central standardised document of landlord/tenant responsibly.

Google UK is to launch its financial comparison service  for credit cards and savings accounts.

Diamond Jubilee Year sees the Queen’s speech 9 May  and will likely to focus on Bills passed and those in progress; the Finance Bill regarding tax measures and stamp duty, the Financial Services Bill which aims to overhaul financial regulation, the Localism Act  which introduced local authorities to being able to grant discounts on business rates (provided they are funded locally) and the Grocery Code Adjudicator Bill  that aims to monitor the grocery supply chain.

(Image and Article credit: Copyright SUF)

 

 

 

For all businesses, fuelling news, likely to overspill into the coming months has got to be the implications  of a potential strike by tanker drivers; with direct effect on small business and the economy because of limitations on the movement of goods and staff, coupled with the price  of petrol and diesel.

The 2012 Budget has been well covered with small business coverage and comment  including the seeming highlight for small biz of Tax simplification for firms with a turnover up to VAT threshold £77k  and  Planning law changes relating to building and construction of sustainable housing, not general building work.

From 22 July to 9 September, Sunday trading laws are to be relaxed to allow high street and other stores with floor space of more than 280 square metres to open for more than the allotted 6 hours (shops with less than 280 sq.m are already able to stay open).

Pay Rates, accepted recommendations by the Low Pay Commission (LPC), will come into effect from October 1. Minimum wage for adults will increase to £6.19 per hour, 18-20 and 16-18 rate remains the same at £4.98 and £3.68 per hour respectively, apprentice rate becomes £2.65 per hour.

Following on from the failed Project Merlin, The National Loan Guarantee Scheme (NLGS)  is designed to give SMEs access to £20bn, guaranteed by the government, over the next two years; with a theory of cheaper funding being passed on. An initial £5bn ( with subsequent funding determined by demand and administered by the UK Debt Management Office), will be determined by each bank in the scheme in regard to what products it wants to offer for new term-loans, hire purchase and leasing arrangements under the scheme, rather than where credit shortfalls are in businesses, with a turnover not exceeding £50m.

After being ‘packaged’ by an agency, the next consideration could see a market for small business loans being bundled together and sold on to investors.

Green regulation, for sales and lettings particulars, comes into effect 6 April as the Energy Performance of Buildings (Certificates and Inspections) Regulations 2011 amend Regulations 2007. A complex amendment  which ensures EPC being commissioned prior to any marketing of a property, along  with a reduced 28 to 7 days allowance.

Conflict of interest still manages to reach the media. Bypassing bankers, recent  focus has turned to GP’s and the NHS  relative to the passing of the Health and Social Care Act which removes Strategic Health Authorities and Primary Care Trusts in England, replacing them with GP-led clinical commissioning groups with some £60bn of health service annual budget to organise, and an NHS Commissioning Board taking looking for £20bn of NHS savings by 2015.  Concern relates to GP’s, some of which are also on CCG boards, having financial interests in private or other non-NHS provider.

Heading towards the summer months, for some, hosepipe ban restrictions affecting 20m homes  begin 5 April, although not yet extended to commercial properties.

“Facebook doesn’t need bankers to wave any wands…. Facebook, for that matter, doesn’t even need bankers”.  Which meant that those that do, did; leaving Mr Zuckerberg able to choose not to give Bankers a usual reverence and staying away from his Company IPO meeting because Facebook views its “business” as a way to fund its product, not the other way around” ; maybe that was the moment he went off to think about the new button for Facebook, the hate button…. or maybe he spent the time thinking about an April Fool’s.

(Image and Article credit: Copyright SUF)

 

 

Anything is Possible, Not Probable: In Business. In Finance.

Any business managing to track a path throughout the last few years and get to now, which is the majority of small or micro business (and includes new entry), should be very proud.

What next, what’s the future of your business?

Why should you want to think about future business, you enjoy a peaceful life and don’t want to rock any boats, besides you understand your business sufficiently to distinguish between its needs and wants, you’re experienced sufficiently to adapt to market changes and who needs to grow when you’re paying your way? With a density of access to information and resources available it’s understandable that we think we can do it all.

Business Boss Budget Balance


Operating a business is the same as operating personal cash flow, even the translation of controlling expectations is the same; anything is possible, not probable.  The powerful effect of operating within your means effects the decisions you are able to make for the future of your business.

Disappointment for the small / micro business which can’t react to change means restrictive growth becomes further squashed by the increasing frustrations which pile higher to outweigh any allowances for change. Keeping the balance is something that only those leading and managing the business have the power to change.

No credit running through the business, ultimately means, no business, yet, talking with some business owners, their resounding areas of commonality are perceived as a lack of customers and reduced profits. No allowance has been made for any changes to their business model, either imposed or self generated yet few businesses can survive with such an attitude. Any ‘personal’ financial support does what it says on the tin therefore needs to be carefully planned to be maintained as a sustained budget balance.

What you offer your customers; what you enjoy doing, are good at doing and want to do, might not be those customers understanding of what you do. What your customers want;  understand that you don’t offer and don’t use you for, might be the misunderstanding of what you do.

 

Reality check; the majority of markets, whether shrinking or expanding, have customers who eschew most things that don’t have convenience attached. Any business clinging to old school has to fuse something to their business to ensure that it remains strong enough to move forward, or, have the value for a strong sale. It’s understandable to hear some businesses say they need more customers but that’s not the problem. Without the customers, there can’t be any more resources and without the resources customers are unlikely to be retained, replaced or grow.

To move forward, business owners need to distinguish between

  • Rocking the business boat and the business boat being rocked
  • The businesses needs and personal wants
  • Current reality and future reality

Because in business, as in life, anything is possible, not probable….. especially if the financial balance allows for change.

(Image credit:  chrisj_moore    Article credit: Copyright SUF)

 

 

Fuzzy Numbers…

2 signatures were missing from the EU Fiscal Compact,  UK and Czech Republic were the 2 out of 27 EU leaders who didn’t sign the new treaty, enforcing budget discipline and aiming to prevent huge debts and potential consequential bailouts. The ‘fiscal compact’, signed before any fiscal / transfer union or any devalue/ leaving, will now to go before national parliaments.

3 key driver variables for house repossession are the debt service ratio, the proportion of mortgages in negative equity and unemployment rate, according to an economic model which uses both national and regional data sources. The model, being used to influence government policy, the Bank of England and at least one major UK bank, demonstrates that even moderate rises in mortgage interest rates makes an impact.

£735 a year more is the payment that Halifax mortgage account owners are facing following rate hikes on May 1, going from 3.5% to 3.99% it will affect 850,000 customers.

£200m from Merlin banks and £400m from dormant bank accounts , which Big Society Capital used to set up as a social investment wholesaler in the support of a market growth for social investment.  With social as well as financial returns, they are now looking to multiply the launch funds.

£2.8bn was paid over to the government in a combination of interest, fees, corporation tax and loan repayments by UKAR; who manages the closed mortgage businesses of Bradford & Bingley and Northern Rock Asset Management.  Assisting the increased profits, by 145% to £1.09bn, was last year’s repossession of 8,800 properties.  So far, £3.1bn payments have been made from the ‘bad bit’ (NRAM) towards bailout loans.

£3bn  capital requirement is the latest challenge facing the UK’s biggest mutual, Co-op which has seen its Somerfield acquisition sales slipping 2.4%, faced £700m costs with the integration of Britannia Building Society and  now the possible requirement, to sign off the Lloyds deal, which will see it transform to a financial service dominated company.

£18bn has been wiped from the market value of  HSBC following financial regulations introduced after the banking crisis. CEO Gulliver said the Government’s new banking levy and suggestions that lenders hold enough cash to absorb a loss of up to 20% of their balance sheets would cost it 2.8 billion US dollars (£1.8 billion) in 2012; with equivalent to 17% being wiped off its market value.

£20bn, underwritten by the government,  as the National Loan Guarantee Scheme (credit easing), for the benefit of small business cheaper loans has had Brussels demand that the Treasury force banks to pay a minimum amount to participate.  HSBC  is contemplating withdrawing because of concerns of over exposure to itself because its lending is mostly out of customer deposits unlike wholesale banks such as RBS and Lloyds Banking Group.

£31bn is the amount borrowed by UK banks from the ECB’s second round of three-year loans. The 1% Central Bank’s trillion-euro Long Term Refinancing Operation was the most interesting to Lloyds Banking Group who took €13.6bn, Barclays had €8.2bn, RBS and HSBC split €18bn with a further 796 banks and financial institutions turning to the ECB for a total €529.5bn. The first phase of the ECB’s three-year loan programme helped boost market sentiment, as banks used the funding to refinance debt although the overnight deposit facility only earns an interest rate of 0.25%  it is therefore the hope that some of the money being injected into the banking system will start filtering down to the real economy, in the form of easier funding.

2012 Budget is 21 March, a day of more fuzzy numbers.

(Image and Article credit: Copyright SUF)

 

The Commonality of Business:

The economy has uneven impact, independent businesses have their own identity therefore there is no `best way’ or `single fix’ for the commonality of businesses in which no credit means no business.

Not too long ago, anyone on the streets of Wichita might have witnessed dollars raining down on them; dropped from a helicopter as part of a business event, to be swept along like Dorothy and Toto on the Kansas winds, people might have experienced the deciduous effect of the mythical money-tree were it not for Health and Safety issues.

Between March 2009 and January 2010, The BoE took out a financial metaphoric helicopter to make a maiden flight with the little known phrase Quantitative Easing.  The effectiveness of the complex currency (for there are no real bank notes filling briefcases stacked high on pallets ready for the supply chain)  remains out with the jury, presumably for a long time to come, with regard to to any health and safety issues for our economy despite BoE Working Paper Number 443.  Without QE real GDP would have fallen by even more during 2009 and inflation would have reached low or even negative levels, the result that the impact might have been even larger. Overall it was an effective policy option during the financial crisis,  having caveats. 
With no appeal other than the frequent occurrence of math symbols taking on the role of emoticons   (before any after-work drink), the white paper might have easily have read, smile of sarcasm, on the three month treasury bill :->  very angry factored in : -ll add some variable shouting :-V  result maximum wide eyed surprise  8-l  because during that time small business owners spoke with us repeatedly of being pushed to the edge, as their Banks of choice issued notices ‘requesting’ money back, outstanding against the business.

These weren’t Zombie businesses in fear of what was happening around them. They were small-Small Businesses facing every day challenges in an extremely unfavourable economy; how would they cope with their responsibilities towards their customers, their employees, and their business.  The biggest shock to them was the bombshell of their long term custom not being required anymore, the bank’s criteria to risk altering to rescind agreements. Assuming that their Banks had at the helm people who understood that although a business ideally should be in the black, reacting to markets, making impacting decisions (such as reducing staff hours), focusing on areas that would assist in driving the business forward, it was all the more extraordinary for them because business doesn’t always go to plan, those goals aren’t always reached on time and in one piece  ( ….thinks RBS ).

Mimicked onwards to its customers, in knee-jerk response to big banks unexpected attitude, small business would face stagnation if they adopted a similar retrenching response:

bb: ‘Without this facility you cannot survive but to obtain the elixir of life I demand enhanced payment’.

sb: ‘You’ve already got the majority of my net income and fixed business asset. Would you take my home plus my pension because although returns will be a slower than I’d expected, they’ll definitely be there. You do understand about leveraging risk?’

bb: ‘Business, you have been a loyal customer although your growth isn’t as high as expected, however, you’ve had sufficient to maintain a momentum whilst  you’ve had some problems (hey, who hasn’t)  but you’re managing them well, therefore  you’re request is perfectly acceptable.’

sb: *smile* ‘Thank You, bb, you won’t regret this’

bb: ‘No you’re perfectly acceptable, but you no longer fit in the box… no can do!… NEXT!’

The uneven impact of the economy strikes; whether independent business or big bank, without a plan or procedure in place, the circumstances are not dissimilar, there is no best way or single fix although it would be reassuring to think the mantra considerations;  all the cost cutting,  resource conserving,  new products/services investing,  exploiting competitor weakness, focusing on trying all, trying one or trying something new,  that small businesses make aren’t overlooked by when big bank writes  that denying any ongoing, re-position or recall facility letter.

By its very nature, it is unusual for smaller businesses to have unlimited resources, however, when well managed, the ability to analyse and respond to a given situation illustrates a flexibility in a way which big business often can’t.  The responses implemented by market changes and the different measured responses by the small independent aren’t usually taken into account amongst the generic financial headlines, or appreciated by any generic lending criteria. Despite the cliché of lenders not understanding  small business mechanics, there are contrary lending facilities beyond big banks when the approach is one of a well managed business coupled with an attitude for no single strategy being guaranteed in the continuing climate of EU Banks shrinking, more credit being held back and businesses big banks becoming more like debt collectors (as deleveraging of their balance sheets continues), the phrase during the financial crisis (Paper 443), might need adjustment.

Big banks will continue to re-assess their clients; re-writing more rigid agreements, with additional or more costs added because the economy has uneven impact. Independent businesses create their own identity, therefore there is no single fix for the commonality of businesses in which no credit means no business.

Image credits: Vectorportal,  Somegeekintn,  Horia Varlan  Article credit: Copyright SUF)

Apologies to any polar bears coming out of hibernation, as you rub your eyes against the bright lights of headline glare, don’t panic you haven’t overslept and the hunting season isn’t for you. No, far more fun…  it’s the bankers’ bonus season, that time of year when the headlines have their sights firmly fixed on the numbers  coming out of the big names in banking.

This year so far, Stephen Hester has been bagged, along with Fred Goodwin (minus the Sir), like clay pigeons from the trap on a clear day, with no headwind, as the 2011 bonus-pot announcements get underway.  Apparently last year (2010 pot) an average of £1.2 million was paid to 323 of RBS’s top staff, with their 2011 pot for investment staff being about a half of it payments last year (£950 million). As bonus-bagging continues, the mix of lack of Euro growth, financial stress, rising funding costs to banks creating renewed squeezes on banks and credit supply will mean the economy will maintain its gloomy popularity for headline grabbing contradictions whilst corroding the elusive silver bullet.

The ECB has provided €489bn  in loans as a three year refinancing operation to eurozone banks, with `retrenchment’ the banking bingo word-of-the-month and bolstering working capital buffers the way to go, even if costs are higher.

Inflation could drop  further as prices lower  with the BoE predicting falls to as low as 1.5% by 2013  ( 2011 inflation report), whilst the BoE Monetary Policy Committee’s minutes (January) showed a split amongst its members, about whether the Bank should expand QE in 2012.

The UK isn’t alone in weak recovery and financial stress; the rate of growth in all of the major advanced economies has been sharply below their respective long-term averages.

Cash preservation, cost control and strengthening balance sheets will be the slow burn to melt the ice of uncertainty, so, for any polar bears coming out of hibernation, there’s no immediate financial climate change.

(Image and Article credit: Copyright SUF)


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