SME Business News

The Institute of Directors (IoD) has said that the introduction of flexible working patterns doesn’t invariably work to the benefit of employers.

In a recent IoD survey, almost one in four respondents (18 per cent) said that flexible working agreements with employees had caused problems for the operation of their businesses.

Commenting on today’s report on flexible working by “Opportunity Now”, Alexander Ehmann Head of Regulatory Affairs at the IoD said:

“It’s true that most flexible working arrangements bring benefits to both employers and employees, and we welcome that. The vast majority of businesses recognise the benefits that flexibility can bring to the workplace and were offering these arrangements long before the introduction of a right to request flexible working. However, we shouldn’t fall into the trap of assuming that all flexible working arrangements, such as flexi-time or remote working, are beneficial to both parties on all occasions, as Opportunity Now have stated.”

“In a recent survey 18 % of IoD members said that they’d agreed to flexible working arrangements for workers which subsequently caused challenges or problems for their businesses. This evidence shows that flexible working isn’t benefiting everyone and supports the IoD view that any more legislation in this area would be a serious mistake. Employers are clearly under too much pressure to accommodate flexible working requests as a result of existing laws already.”

UK  Small businesses are wary about the economic climate, it has been revealed, with less than a third  expecting  things to improve this year.

The annual Voice of Small Business survey, conducted by the Federation of Small Businesses and ICM Research, found just under half (48 per cent) of respondents experienced a drop in sales last year. Thirteen per cent of businesses saw revenue decline by more than 10 per cent, while 14 per cent saw turnover plummet by more than a fifth.

It wasn’t all bad news for small business however, with three in 10 companies managing to grow their top line, and almost half of those posting increases of more than 10 per cent. Sales remained flat for 16 per cent of firms last year.

Around a third of firms are feeling optimistic,  with 28 per cent of firms claiming the business climate will improve this year. A deterioration is expected by 22 per cent, while 46 per cent believe trading conditions will remain stable.

Firms in Wales and Northern Ireland are particularly downbeat. Just 21 per cent of Welsh respondents expect the business climate to improve this year, while 29 per cent of Northern Irish firms expect conditions to deteriorate.

Publishing group Yell (YELL) saw signs of stability in the third quarter as the rate of revenue decline slowed.

The Yellow Pages publisher said confidence is beginning to return to the small business community from which it gets most of its advertising revenue and this will be reflected in its results for the quarter to the end of June.

While its printed directories business continues to struggle, its internet business is putting in a stronger performance with web revenue now accounting for 20% of total revenue compared with 15% from the same period last year.

Chief executive John Condron, said: “While the economic pressures remain, we continue to see early signs that the rate of revenue decline is stabilising and this quarter has again delivered revenue slightly above guidance.

“The fact that our usage and retention rates remain relatively resilient gives us confidence for the future and we continue to invest in our products and sales teams to ensure we are best placed to help our customers grow when the economy recovers.”

Manufacturing production rose for the first time in two years, as overseas demand for UK-made goods increased and stock reductions eased, the CBI comments.

The business group’s latest quarterly Industrial Trends Survey revealed a stronger-than-expected rise in output in the three months to January. But the CBI warned that the outlook for the sector remains uncertain, with domestic demand still weak, and some firms still struggling to access finance.

Of the 461 manufacturers surveyed, 31% said output rose during the three-month period, while 20% said it fell. The resulting balance of +11% is the strongest figure since January 2007 (+19%).
Export orders rose for the first time since January 2008, boosted by the relative weakness of Sterling and improving global demand. 30% of firms said exports grew during the quarter, while 24% reported a fall, giving a balance of +6%. Exports are expected to grow more strongly in the next quarter (+13%), and firms are the most optimistic about export prospects for the coming year (+19%), since July 1995 (+21%).

Firms are continuing to de-stock, but at a slower rate, which also helped lift output. A balance of -11% indicated that stocks of finished goods fell in the quarter, compared to a balance of -29% in the October survey.

Domestic demand, however, was weaker than expected with 18% of manufacturers reporting a rise, and 26% a fall, giving a rounded balance of -9%. That compared with a balance of -16% in October. Total new orders were broadly unchanged (+1%).

Ian McCafferty, the CBI’s Chief Economic Adviser, said: “After nearly two full years of falling output, manufacturers are seeing a return to modest growth, thanks in part to improved overseas demand and much slower stock reductions. It is encouraging that the weaker pound is now providing firms with some respite as global demand improves. Exports are rising for the first time in two years, as UK-made goods are looking more attractive in overseas markets. Manufacturers are also feeling upbeat about export prospects for the year ahead.

“However, the manufacturing sector is not out of the woods. With domestic demand still weak, and credit remaining constrained for some companies, firms expect growth to be more modest in the next quarter. This underlines our view that the UK’s economic recovery will be slow and protracted.”

The availability of finance remains a concern, and is cited by 13% of firms as a factor likely to limit output, and by 12% as likely to limit export orders.

Despite that, sentiment about the overall business situation is continuing to improve, with a net 12% more optimistic than three months ago. The rate of job losses across the sector is slowing. A balance of -13% indicated a drop in staff numbers during the quarter, an improvement on October’s balance of -34%.

Investment intentions for the year ahead are stabilising. Firms are planning on spending more on training and retraining (+11%) and on innovation (+15%). Investment in buildings will be cut back further (-18%) and little change is expected in spending on plant and machinery (+1%).
Domestic prices are expected to rise for the first time in six quarters (a balance of +8%). 66% of firms report that they are working below capacity, compared to 76% in October.

A new deal for entrepreneurs to stimulate social enterprise as a “recession buster” solution for the UK;
A redistribution of all government support from ineffective business support activities to direct credits for angel and family investment in small businesses;
A broad commitment to apprenticeship support across all forms of business to help people be employed rather than subsidized being unemployed;
A demand that the UK government set aside a specific portion of its procurement budget for small business;
The liberalization of the legal structures surrounding social enterprises to assist more start-ups to help solve social issues;
Major investment to catapult the UK out of the slow lane through super high broadband to every citizen in Britain.

Be sure to let us have your views!

We stand at a crossroads. The United Kingdom has the potential to remain a central economic and political power amongst the world’s nations or it can sink slowly beneath the weight of its problems and the impotency of its remedies.

We are a nation that has everything it needs to enter the 21st century on a wave of growth and prosperity. But to do so we must harness the only force for growth, for prosperity and for fairness and social justice that exists: the entrepreneurial culture.

This is not about capital. This is not about the few getting rich at the expense of the many. This is not about the preservation of privilege. If anything it is the key to the opposite: the creation of ladders of social mobility, and increasing of the wealth of the nation so we can afford the services we believe are the rights of our citizens: to be healthy, to be educated, to be safe and to remain free.

But harnessing entrepreneurialism first means understanding it: an entrepreneur takes on the risk of innovating in the expectation of being rewarded for success. Reducing the incentives of being rewarded, increasing the obstacles to create new enterprises, limiting the shape and type of entrepreneurial activity and not investing in the key infrastructure upon which the next wave of innovation will depend, all combine to emasculate our nascent entrepreneurs.

Thus we call for our government to change its priorities.

We must increase economic freedom for new businesses and small businesses and all businesses that take new business risk. We must cut the time it takes to start a new business. We must radically streamline the effort of complying with government regulation and exempt the smallest businesses from many of the regulations entirely.

We must sweep clean the entire government funded industry of business support and leave behind solely an institution whose remit is to expedite and simplify the effort of small business to manage the burden that government places upon it.

We must free up the savings of our families, friends and communities so that they may give, invest or lend their own small capital into the nascent businesses of their children, their friends and their communities with credits and exemptions that radically encourage the activity.

We must stop paying people to be un‐employed and begin to share the cost of them being taught to be employed. Apprenticeship is not solely for the trades; it is for any job in any company. We face a lost generation of students and young graduates with no hope for jobs whilst employers have no means to underwrite the period they need to make those students into productive employees.

We must recognize that the largest customer in the UK is the government itself. The government must adopt a requirement that a specific percentage of all of its procurement will be through small and medium businesses. It must place the responsibility for compliance with industry and at no cost to itself drive revenue to our entrepreneurs and open the doors of government to innovation.

We must broaden the scope for social entrepreneurs by creating new legal frameworks that explicitly encourage a broad range of social businesses from co‐ownership models such as John Lewis to for‐profit businesses that seek to achieve a social bottom line as well as a traditional profit.

Finally, we must recognize the centrality of connectedness in the competition amongst nations. The United Kingdom must wire itself and do so urgently. Just as our roads and trains are a public service and a natural monopoly; so too is true broadband. True broadband is not 1MBof information trickling down to some of our homes. It is 100Mb to every doorstep in this country. It is the key infrastructure that will kindle a wave of creative destruction and increased wealth that will match the industrial revolution. It will reduce the stress on our crowded transport systems, it will re‐vitalize neglected sections of our nation, it will place the key tools in place to amplify and distribute scarce resources in education and health care. And it is achievable now.

Finally, we must understand that we do not understand. People are not empowered to step out on their own, take risk, hope for reward, and move on from failure. The corrosive impact of an overprotective State is not merely the loss of our sense of responsibility to a civil society; it is the even more profound loss of our sense of capacity to change society, to have an impact, to be, in short, an entrepreneur.

Entrepreneurship can be taught and must be learned.

And what it held
stood ready to be loosed
with all the power that being changed can give.
Philip Larkin

A spectre is haunting the United Kingdom – the spectre of Capitalism.

As a nation we fear that nothing has changed; that greedy bankers will continue to be rewarded for their failure, that amoral corporations will continue to put profits in front of people and the environment, and that the State, however bloated and costly, is not only unable to control the beast but must compete with other nations to be its servant at an unbearable cost to itself.

We have banks so large that they dwarf the very governments whose guarantees they rely upon for our trust. We have become hostage creditors to their uncoupled risk taking. And worse, as nations we are reduced to acting like market stall vendors shouting our best price louder than the adjoining shopkeeper hoping they will purchase just one more night. They are not just too big to fail. They are too big to even let leave.

The largest corporations pit our tax systems against each other. Their capital alights like a wind born leaf ready to whisp away on the slightest breeze of taxation. In the failure of a global commons their profits shoulder a fraction of the costs of the infrastructure and shared society whose foundations support them.

The environment has no voice, the consumer has no collective;  thus the largest corporations are neither charged for their cost to the world nor rewarded for building products that endure.

Yet our State continues to grow. It has devoured every pound of taxation and growls for more. Our civil servants earn uncivil wages. When the economy grew, it outgrew the economy. Despite a decade that has seen more than a 40% increase in welfare spending (i), our rates of poverty and joblessness have continued to climb.  One in four UK citizens live in poverty; nearly three million children do (ii).  Over the last ten years our index of production has fallen more than 10%. In the last two years our index of services has fallen over 5% as well (iii). Our national debt is now 60% of our GDP (iv). We are demonstrably poorer as a nation. The system does not work.

In their fear, and amplified by their impotence, our politicians rail against the excesses of the global financial system, the greed of the corporations and the system that drives it: capitalism.

Their fear reflects the real power of capitalism. It is the acknowledged force that respects no nation’s boundaries and no politicians’ calls for fairness.

But the current economic downturn, precipitated by the credit crisis in the financial system is neither proof of the failure of capitalism nor an endorsement of the profligate spendthrift ineffectiveness of our government.

It marks the first recession in a globally connected economy and the speed by which local folly is amplified into a global crisis. It demonstrates the short‐sightedness of permitting investment banks to co‐habit with retail banks thus coupling the low risk savings and loans business that underpin our citizens to the high risk and volatile business of financial inventions and speculation. And it is a vivid demonstration that much of what we call financial services adds little or no economic value to the nation.

Unleashing the wealth creators

But, the wealth of this nation, and of every nation rests on the shoulders of entrepreneurial activity. The innovators who open new markets, create new products, deliver new services and change the processes of business itself; by the very act of creation, destroy less efficient industries, create greater productivity and as a direct result create all new wealth.

The State is not our society.  It is the largest servant of our society and to the degree it intends to deliver greater benefits and services to all of its citizen’s in equal measure the greater its moral obligation to ensure that it harnesses the power of the entrepreneur  to constantly improve the delivery of its services. The size of the State, itself, is not the enemy. Thus focusing on its size will not lead us to a solution. “Societies that try to reap the gain of creative destruction without the pain find themselves enduring the pain but not the gain.” (v)

The tax receipts that flow from the entrepreneurs’ efforts pay for all the services we receive. Yet the services we receive are not beneficiaries of that gale of creative destruction. The State, often operates from the flawed assumption that if it’s the State’s obligation to ensure we are safe, healthy and educated, then only the State can deliver a fair service. That notion of fairness is the fairness of the least: that no one can benefit more than the least the state can deliver. Thus, everyone gets the least, we cannot improve until we can improve everyone and we end up improving no one.

But to the smallest degree that the State aspires to deliver more than it can afford; it has no choice at all: it must recuse itself from the monolithic delivery of all services and create playing fields upon which entrepreneurs can be unleashed. Harness the collective creative self‐interest of our entrepreneurial output for the benefit of meeting our social objectives and we can ensure that they will improve at the fastest possible pace. We will see a flowering of ideas, a manifold unfolding of new approaches and a gale of creative destruction that sweeps the Kafkaesque bureaucracy and sclerosis from the implementation of government.

Beyond the state, the promise for the United Kingdom is to lead the world, not follow. To create the economic freedoms necessary to nurture innovation and entrepreneurialism and to realise that entrepreneurs, like teachers and doctors are key contributors to the healthiest societies. That is the promise of entrepreneurship. That is the opportunity for the United Kingdom.

Agree? Disagree? We would be keen to hear your views regarding this bold statement of intent.

Former Dragons’ Den panellist and founder of School for Startups, Doug Richard has published The Entrepreneurs’ Manifesto in which he calls for a radical overhaul of the way the government supports entrepreneurs.

The Entrepreneurs Manifesto is a public declaration aimed at supporting the UK’s 4.4 million small business owners and entrepreneurs.

The document consists of two sections:

The Entrepreneurs Manifesto
A statement of principles highlighting the challenges that the UK must overcome to truly harness the potential of its entrepreneurs

The Declaration of Rights
A series of practical recommendations for the current and incoming Government to clear the path for an explosion in entrepreneurial activity

During this week, SME Business News will feature both parts of this document, guaranteed to strike a chord with the owner managed business community.

The Surrey snows have forced me to get some serious reading done. This weekend I read a fascinating business book with a fairly uncompromising title that promised much and to an extent at least delivered it: “The Upside of the Downturn: Ten Management Strategies to Prevail in the Recession and Thrive in the Aftermath.”

Its premise is that some businesses - and some people - will emerge from this downturn stronger and more dominant than when it started. Others will weaken and fade. It all depends on critical choices they make right now.

Geoff Colvin, one of America’s most respected business journalists, says even the deepest recession has an upside. The best managers know conventional thinking won’t help them win in tough times. They’re taking smart, practical steps that will not only keep them strong, but will also distance them from the pack for years to come.

The dozens of top-performing leaders Colvin interviewed reject the common view that slashing costs and firing employees are all that matter. They see the recession as a rich opportunity to reinvent their organisations and lay the groundwork for future growth.

Colvin’s ten solidly grounded strategies are designed to increase competitiveness and build  long-term value.

Here are some highlights:

* Reset priorities. Easy to say, harder to do. Pursuing the lofty goals set in good times can be disastrous now.
* Reevaluate people and steal some good ones. Mass layoffs are a tempting way to cut costs, but great companies often find smarter alternatives. And if your competitors are dumb enough to fire their best people, grab them.
* Keep investing in the core. Trim the fat from your budgets but not the muscle. The best companies actually increase some spending in a recession, funding the areas that make them unique and valuable.
* Don’t rush to cut prices. Many companies assume they must - yet the long-term damage often outweighs the short-term boost.

Colvin shows how these strategies work, using examples of major companies that have applied them with inspiring results.

There are obviously many more strategies that are being adopted with real success right now. We’d be really interested to hear more about your success stories as well as any great business books that you’ve read lately that have inspired you or talk to your particular situation.

See how invoice discounting can help your business survive and thrive in 2010.

The UK Economy continues to improve: the service sector PMI figures are out and the news has bolstered demand for the British Pound.

The UK service sector is reported to have ended 2009 on a positive note, with growth of both activity and new business improving since November.

Expectations for the new year remain high and, despite a decline, employment fell at the slowest pace for nearly a year-and-a-half.

Less positive was an acceleration of input price inflation to the highest since October 2008, while output charges continued to be cut as market conditions remained competitive.

After accounting for seasonal factors, the CIPS/Markit Business Activity Index recorded 56.8, up slightly from 56.6 in November. The headline index has been broadly unchanged over the past three months, posting readings consistent with robust growth above the long-term series average. By company size, large companies led the overall expansion, while Business Services remained the best performer on a sector basis.

Underpinning the latest rise in overall service sector output was a sixth successive monthly increase in incoming new business. Growth was the steepest since September 2007 amid reports of a strengthened business climate, the release of previously delayed expenditure and increased marketing.

Latest data showed only a marginal fall in outstanding business at the end of 2009. While there were some reports that workloads remained low compared to pre-recession levels, a number of companies commented that growth of new business had tested capacity. Nonetheless, employment in the service sector continued to be reduced. Payrolls have now been cut for twenty consecutive months, with large companies again shedding jobs at the fastest rate. Company restructuring and the non-replacement of leavers were amongst the factors cited by panellists as leading to job losses in December, although the overall rate of decline was the slowest since August 2008.