Commenting on a report released yesterday by the National Audit Office, which shows banks have failed to lend a target of £30 billion to small businesses in the UK, Edward Rimmer, UK chief executive at Bibby Financial Services, says:
“The fact that there is a £30 billion discrepancy between the amount of money lent to small business in the UK and the original target set by the Government is disappointing. This situation is made worse by the determination of the banks to provide £7 billion in bonuses to senior staff over the next few weeks, despite their reluctance to lend. This may rub extra salt in the wounds of UK firms, many of which continue to struggle in the current economic climate.
“We know from our own research* that, despite the UK officially being out of recession, almost a quarter of businesses (22 per cent) feel that trading conditions are tough and they are only just surviving. This proves that there is a clear necessity for businesses to be financially supported and by depriving them of £30 billion of rightful funding, the banks have not played their part in boosting both business confidence and performance.
“We all know that access to finance is intrinsic to the survival and growth of our country’s small businesses, which are the engine room of our economy, and the Government set the business lending target for a reason to ensure this would happen. With this in mind, it is not acceptable that financial support has been withheld when it is clearly needed. For example, we have seen a 10 per cent increase in the number of firms using our invoice finance facilities in 2010. Businesses are not only recognising and trusting invoice finance as a more flexible and accessible form of funding, compared to bank overdrafts and loans, but also a more reliable one.
“Looking ahead to next year, it is vital that the Government and Vince Cable take robust action to ensure banks increase lending to UK businesses and allow them to achieve their potential to drive economic revival in this country.”
* Bibby Financial Services Business Factors Index, October 2010
Wednesday, 22 December 2010
Thursday, 16 December 2010
Philip King raises the standing of credit management
Institute of Credit Management (ICM) Chief Executive, Philip King, is to join the working group of the Small Business Economic Forum (SBEF), a Government initiative championed by the Minister for Business and Enterprise, Mark Prisk, MP.
The SBEF’s working group comprises select representatives from the small business, accounting, banking and credit communities. Its main aim is to ensure that small businesses can take concrete benefits to support growth from the Forum’s discussions. The first working group will meet this month.
Philip King was personally invited to join the working group by Mark Prisk, MP, following the Forum’s inaugural meeting in October 2010. At the working group meetings, Government officials, along with attendees, will set the agenda for the next Forum meeting to focus on the most pertinent issues faced by SMEs in the UK.The invitation further highlights the importance the Government sees in the credit management for aiding small business growth and economic recovery.
As Philip says: “The working group will lead new small business initiatives, and by being part of the group we have the opportunity to ensure that credit management has a key role.“It is significant to see the Government engaging with business leaders and industry figures in this manner; as a group we need to ensure it has a positive impact on small businesses.”
The SBEF’s working group comprises select representatives from the small business, accounting, banking and credit communities. Its main aim is to ensure that small businesses can take concrete benefits to support growth from the Forum’s discussions. The first working group will meet this month.
Philip King was personally invited to join the working group by Mark Prisk, MP, following the Forum’s inaugural meeting in October 2010. At the working group meetings, Government officials, along with attendees, will set the agenda for the next Forum meeting to focus on the most pertinent issues faced by SMEs in the UK.The invitation further highlights the importance the Government sees in the credit management for aiding small business growth and economic recovery.
As Philip says: “The working group will lead new small business initiatives, and by being part of the group we have the opportunity to ensure that credit management has a key role.“It is significant to see the Government engaging with business leaders and industry figures in this manner; as a group we need to ensure it has a positive impact on small businesses.”
Monday, 13 December 2010
Lehman/ Nortel High Court judgment
Pensions Regulator response.
Mr Justice Briggs last Friday handed down his judgment in a case brought by the administrators of 20 insolvent companies in the Lehman Brothers and Nortel groups.
The Pensions Regulator was a respondent in the case, together with the trustees of the Nortel and trustees of the Lehman Brothers UK pension schemes. These two schemes account for more than 43,000 members.
Mr Justice Briggs ruled that where a Financial Support Direction (FSD) is issued against a company after insolvency, the cost of complying with that direction is an expense in that insolvency. It therefore must be paid before any distributions to unsecured creditors.
The Pensions Regulator welcomes the judgment. It confirms an FSD is valid if issued after an insolvency event. In particular, it supports the claims of the Nortel and Lehman pension trustees in their respective administration processes.
More generally, this ruling clarifies the effect of an FSD on an insolvent target. However, it will not alter the regulator's approach to determining FSDs in any situation.
Our statutory objectives require us to protect pension scheme members and the Pension Protection Fund.
In pursuit of these objectives, we can issue an FSD to secure reasonable financial support is provided to a pension scheme. We are required by the Pensions Act 2004 to act reasonably in using these powers and to have regard to the interests of those directly affected by them.
Where schemes are left with inadequate financial support, the regulator engages with all who might have a responsibility to support the scheme to ensure, where possible and reasonable, that the interests of scheme members are protected.
Where an FSD is issued, the form and sum of any resulting financial support will be proposed by the company or companies concerned, and approved by the regulator if it is reasonable in all the circumstances.
R3 response.
Last Fridays ruling could have consequences for the UK’s business environment and highlights a conflict between insolvency and pension law. Judge Michael Briggs himself notes this decision could be ‘an impediment to the achievement of the objectives of the rescue culture’.”
“Promoting outstanding pension debts to super-priority status after the insolvency means that returns to unsecured and preferential creditors could be wiped out. Under this scenario business rescue procedures make less sense and creditors have less certainty when lending in the first place. While some pension funds may benefit, other creditors will suffer as will the value generation capacity of UK plc overall.”
John Frances, Technical Director of R3, the insolvency trade body
Mr Justice Briggs last Friday handed down his judgment in a case brought by the administrators of 20 insolvent companies in the Lehman Brothers and Nortel groups.
The Pensions Regulator was a respondent in the case, together with the trustees of the Nortel and trustees of the Lehman Brothers UK pension schemes. These two schemes account for more than 43,000 members.
Mr Justice Briggs ruled that where a Financial Support Direction (FSD) is issued against a company after insolvency, the cost of complying with that direction is an expense in that insolvency. It therefore must be paid before any distributions to unsecured creditors.
The Pensions Regulator welcomes the judgment. It confirms an FSD is valid if issued after an insolvency event. In particular, it supports the claims of the Nortel and Lehman pension trustees in their respective administration processes.
More generally, this ruling clarifies the effect of an FSD on an insolvent target. However, it will not alter the regulator's approach to determining FSDs in any situation.
Our statutory objectives require us to protect pension scheme members and the Pension Protection Fund.
In pursuit of these objectives, we can issue an FSD to secure reasonable financial support is provided to a pension scheme. We are required by the Pensions Act 2004 to act reasonably in using these powers and to have regard to the interests of those directly affected by them.
Where schemes are left with inadequate financial support, the regulator engages with all who might have a responsibility to support the scheme to ensure, where possible and reasonable, that the interests of scheme members are protected.
Where an FSD is issued, the form and sum of any resulting financial support will be proposed by the company or companies concerned, and approved by the regulator if it is reasonable in all the circumstances.
R3 response.
Last Fridays ruling could have consequences for the UK’s business environment and highlights a conflict between insolvency and pension law. Judge Michael Briggs himself notes this decision could be ‘an impediment to the achievement of the objectives of the rescue culture’.”
“Promoting outstanding pension debts to super-priority status after the insolvency means that returns to unsecured and preferential creditors could be wiped out. Under this scenario business rescue procedures make less sense and creditors have less certainty when lending in the first place. While some pension funds may benefit, other creditors will suffer as will the value generation capacity of UK plc overall.”
John Frances, Technical Director of R3, the insolvency trade body
Sunday, 12 December 2010
Retail Insolvencies
Insolvencies across the retail sector decreased by 14% year on year during Q3, suggesting the sector is improving. However, insolvencies across all sectors decreased by 23% year on year during Q3, suggesting that Retail is not bouncing back as quickly as other sectors.
With VAT set to rise to 20% on 4 January 2011, there is growing concern from a variety of commentators that the retail sector is set to suffer a wave of administrations, closures and job losses early in the New Year.
Many retailers have introduced pre-Christmas promotions and discounts earlier than normal in an attempt to drive sales. A leading consumer research group (Nielsen) has disclosed that Christmas puddings were on promotion in September, two months earlier than 2009. In addition, the British Retail Consortium recently revealed that consumer confidence is falling due to forecast job losses in the public sector.
Anticipating that the New Year could be one of the most difficult in living memory for retailers, one of the UK’s leading business recovery firms, RSM Tenon, has launched a free helpline for retailers. The 'Retail Survival Service' aims to help worried retailers weather the storm through Q1 2011. “Larger retailers will have factored the rise in VAT into their forecasts and prepared for it as best they can. The sector has been hit hard over the last few years and businesses recognise that they should start sales earlier. There is a ‘Feast and Famine’ effect. Retailers want to capitalise on the Christmas period as they know that everyone traditionally spends at Christmas time and tightens their belts in January.
With the increase in VAT to hit early next year as well, there will be more tightening of belts than before. Q1 2011 will be a particularly hard time for retailers, hence the reason for our free service. “Retail is a crucial sector in the UK economy and has led the country out of recession in the past while playing a key role in the regeneration of towns and cities. We need to ensure retailers are fit to deal with the next few months when spending is going to contract, and costs remain static or even rise.
With VAT set to rise to 20% on 4 January 2011, there is growing concern from a variety of commentators that the retail sector is set to suffer a wave of administrations, closures and job losses early in the New Year.
Many retailers have introduced pre-Christmas promotions and discounts earlier than normal in an attempt to drive sales. A leading consumer research group (Nielsen) has disclosed that Christmas puddings were on promotion in September, two months earlier than 2009. In addition, the British Retail Consortium recently revealed that consumer confidence is falling due to forecast job losses in the public sector.
Anticipating that the New Year could be one of the most difficult in living memory for retailers, one of the UK’s leading business recovery firms, RSM Tenon, has launched a free helpline for retailers. The 'Retail Survival Service' aims to help worried retailers weather the storm through Q1 2011. “Larger retailers will have factored the rise in VAT into their forecasts and prepared for it as best they can. The sector has been hit hard over the last few years and businesses recognise that they should start sales earlier. There is a ‘Feast and Famine’ effect. Retailers want to capitalise on the Christmas period as they know that everyone traditionally spends at Christmas time and tightens their belts in January.
With the increase in VAT to hit early next year as well, there will be more tightening of belts than before. Q1 2011 will be a particularly hard time for retailers, hence the reason for our free service. “Retail is a crucial sector in the UK economy and has led the country out of recession in the past while playing a key role in the regeneration of towns and cities. We need to ensure retailers are fit to deal with the next few months when spending is going to contract, and costs remain static or even rise.
Monday, 25 October 2010
A voluntary company liquidation (CVL) is more beneficial than a CVA says companyliquidations.co.uk
According to www.companyliquidations.co.uk a company going through a voluntary liquidation (CVL) is the most common practice used in the business marketplace to achieve a business recovery when a company has basically run its course or come to a standstill. A CVL may be the only viable option left when the business has no money or valuable assets to trade and has no feasible trading avenue but has debts to be paid and creditors owed monies.
A business cannot just go into CVL and must seek professional company insolvency advice to understand how company liquidation works and if it is the right solution to their financial problems. The alternative to liquidating your company is a Company Voluntary Arrangement (CVA), this a proposal where the company agrees to repay all the debts over a long term period, however, this is not all it promises to be.
A company that has gone into CVA trades at a credit rating of zero, thus making it virtually impossible to obtain credit terms from suppliers. This makes trading very difficult as a CVA involves long term monthly payments to repay the debt – this burdens the trading and often leads to falling into arrears. If a company (in CVA)falls into arrears for 60 days or fails to make a payment for two months can be forced into liquidation at any time during the regular 5 year CVA. Most of the time, the companies that opt for a CVA rarely run their course and fall back to square one - needing business liquidation help.
Liquidating a company works on so many different levels for a business, the main being the directors are not held liable when going into insolvency and also this process is cheap, easy and fast. Once liquidated assets can be acquired at distressed prices and payment terms can be arranged with the liquidator at an affordable rate.Thus allowing to fall out of debt and begin trading much more easier.
A business cannot just go into CVL and must seek professional company insolvency advice to understand how company liquidation works and if it is the right solution to their financial problems. The alternative to liquidating your company is a Company Voluntary Arrangement (CVA), this a proposal where the company agrees to repay all the debts over a long term period, however, this is not all it promises to be.
A company that has gone into CVA trades at a credit rating of zero, thus making it virtually impossible to obtain credit terms from suppliers. This makes trading very difficult as a CVA involves long term monthly payments to repay the debt – this burdens the trading and often leads to falling into arrears. If a company (in CVA)falls into arrears for 60 days or fails to make a payment for two months can be forced into liquidation at any time during the regular 5 year CVA. Most of the time, the companies that opt for a CVA rarely run their course and fall back to square one - needing business liquidation help.
Liquidating a company works on so many different levels for a business, the main being the directors are not held liable when going into insolvency and also this process is cheap, easy and fast. Once liquidated assets can be acquired at distressed prices and payment terms can be arranged with the liquidator at an affordable rate.Thus allowing to fall out of debt and begin trading much more easier.
Wednesday, 22 September 2010
Small firms still feeling the squeeze on credit
Business lending shrank for the fifth month running, a new report from the Bank of England has revealed.
According to the Bank's latest Trends in Lending report, net business loan repayments in July were £2.5 billion. The figure was an improvement on the £3.2 billion recorded in June, but the Bank said that lending by the UK's major credit providers has stayed moderate in August.
The picture is not uniform. Credit conditions for larger companies were showing signs of easing, but smaller businesses were still struggling to secure finance.
Although many firms have been seeking to pay down debts in the aftermath of the recession, smaller enterprises have fewer funding options open to them than their larger counterparts.
The report said: "Contacts of the Bank's network of agents noted that while credit conditions were easing for larger businesses, they remained tight for smaller firms."
New lending facilities for SMEs have remained unchanged over recent months.Despite the £200 billion of quantitative easing with which the Bank of England has been priming the economy, the broad money supply declined by 0.2 per cent in August compared with the previous month. The annual rate of growth in money was down by 1.8 per cent.
It had been hoped the quantitative easing programme would make more funds available for credit-starved small businesses.
One analyst, Howard Archer of HIS Global Insight, argued that the case was strengthening for a return to quantitative easing. He said that the Trends in Lending survey highlighted concerns that tight credit conditions are still posing a significant obstacle to economic activity, even when subdued demand for credit among businesses was taken into account.
According to the Bank's latest Trends in Lending report, net business loan repayments in July were £2.5 billion. The figure was an improvement on the £3.2 billion recorded in June, but the Bank said that lending by the UK's major credit providers has stayed moderate in August.
The picture is not uniform. Credit conditions for larger companies were showing signs of easing, but smaller businesses were still struggling to secure finance.
Although many firms have been seeking to pay down debts in the aftermath of the recession, smaller enterprises have fewer funding options open to them than their larger counterparts.
The report said: "Contacts of the Bank's network of agents noted that while credit conditions were easing for larger businesses, they remained tight for smaller firms."
New lending facilities for SMEs have remained unchanged over recent months.Despite the £200 billion of quantitative easing with which the Bank of England has been priming the economy, the broad money supply declined by 0.2 per cent in August compared with the previous month. The annual rate of growth in money was down by 1.8 per cent.
It had been hoped the quantitative easing programme would make more funds available for credit-starved small businesses.
One analyst, Howard Archer of HIS Global Insight, argued that the case was strengthening for a return to quantitative easing. He said that the Trends in Lending survey highlighted concerns that tight credit conditions are still posing a significant obstacle to economic activity, even when subdued demand for credit among businesses was taken into account.
Over half of British SME's are not expecting government help over late payment issues
New research from Bacs, the organisation behind Bacs Direct Credit, has revealed that over half of British SMEs (56%) do not anticipate any assistance from the Government in tackling the late payments issue, and that the number of companies feeling the impact of late payments in June 2010 has fallen by a massive 20% in just six months.
Mike Hutchinson, head of marketing at Bacs, believes this is largely due to the individual companies' efforts and says: "It's extremely heartening to see that there are now many companies making great strides to help themselves beat the late payments cycle, by sharpening up their billing and credit control procedures."
However, there are still a massive 769,000 companies effected by late payments and Bacs' research shows that the total amount of money owed to these companies is now nearly a third more (28%) than it was six months ago (£25,000 December 2009 compared with £32,000 in June 2010), with a massive £24.6bn in total now owed to businesses across Britain.
Hutchinson continues: "There is valuable help and advice available, through schemes like the Prompt Payment Code, for companies still suffering from late payments and SMEs will be well served to draw on all available resources to find new routes forward.
"For example, with many SMEs still highly dependent on cheques, a specific piece of advice from Hutchinson is for companies to consider adopting automated payments methods. Bacs' research shows that 79% of SMEs still use cheques to pay bills and, with cheque clearing facilities due to be phased out by 2018, Hutchinson says: "SMEs should consider replacing the use of cheques with automated payment methods sooner rather than later. Automated payments offer many benefits in streamlining processes and helping cash flow, which companies can take advantage of now to help combat late payments.
"For more information about late payments and how to tackle them head on, visit www.paymedirect.co.uk where Bacs has developed a series of hints and tips for encouraging prompt payment.
About the researchBacs conducted independent market research with business to business specialists BDRC Continental. In June 2010, we conducted 477 telephone interviews with FDs, MDs, and owners of GB SMEs. The sample was representative of the GB SME audience and was representatively divided as follows, North = 126 interviews; Midlands = 107; South = 244; Manufacturing sector = 136; Distribution sector = 179; Services sector = 162.About Bacs:Founded in 1968, Bacs, the not-for-profit, membership-based industry body is owned by 15 of the leading banks and building societies in the UK and Europe.
Mike Hutchinson, head of marketing at Bacs, believes this is largely due to the individual companies' efforts and says: "It's extremely heartening to see that there are now many companies making great strides to help themselves beat the late payments cycle, by sharpening up their billing and credit control procedures."
However, there are still a massive 769,000 companies effected by late payments and Bacs' research shows that the total amount of money owed to these companies is now nearly a third more (28%) than it was six months ago (£25,000 December 2009 compared with £32,000 in June 2010), with a massive £24.6bn in total now owed to businesses across Britain.
Hutchinson continues: "There is valuable help and advice available, through schemes like the Prompt Payment Code, for companies still suffering from late payments and SMEs will be well served to draw on all available resources to find new routes forward.
"For example, with many SMEs still highly dependent on cheques, a specific piece of advice from Hutchinson is for companies to consider adopting automated payments methods. Bacs' research shows that 79% of SMEs still use cheques to pay bills and, with cheque clearing facilities due to be phased out by 2018, Hutchinson says: "SMEs should consider replacing the use of cheques with automated payment methods sooner rather than later. Automated payments offer many benefits in streamlining processes and helping cash flow, which companies can take advantage of now to help combat late payments.
"For more information about late payments and how to tackle them head on, visit www.paymedirect.co.uk where Bacs has developed a series of hints and tips for encouraging prompt payment.
About the researchBacs conducted independent market research with business to business specialists BDRC Continental. In June 2010, we conducted 477 telephone interviews with FDs, MDs, and owners of GB SMEs. The sample was representative of the GB SME audience and was representatively divided as follows, North = 126 interviews; Midlands = 107; South = 244; Manufacturing sector = 136; Distribution sector = 179; Services sector = 162.About Bacs:Founded in 1968, Bacs, the not-for-profit, membership-based industry body is owned by 15 of the leading banks and building societies in the UK and Europe.
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