SME Business News

It is not just SMEs that have been suffering through government cutbacks. It has recently been widely reported in the press that the top 20 suppliers to the government are to be summoned to a meeting this week to negotiate cuts of billions of pounds to their contracts.  Which will come as no surprise to any of you.

According to Wilkins Kennedy, savings are expected in 4 areas:

1.Construction
2.Technology
3.Professional Services
4.Facilities Management

Connaught, the FTSE 250 social housing maintenance group issued a profit warning last week blaming last month’s budget.  It told investors that revenues for the year will be £80M lower than expected as councils draw up plans to freeze spending.

On the eve before the World Cup kicks off, new figures show that over half of small firms will be letting their staff watch key matches. However, 32 per cent are unaware they need a TV Licence to watch the games online, says the Federation of Small Businesses (FSB).

In an FSB-ICM survey of more than 1,300 members, 51 per cent of small businesses said they will let their staff watch key matches in the World Cup tournament as long as their business could continue as usual.

However, with millions of people wanting to watch key games that kick off during office hours and with every game being streamed live online, it is worrying that a third of respondents are unaware they need a TV Licence to watch online.

The FSB is urging all small businesses to ensure they are fully licensed or risk a penalty of up to £1,000. A TV Licence is required by anyone, be it staff or customers that are watching programmes whether on a TV or computer.

The FSB has also issued guidance for employers on how small firms can avoid employment issues during this high-profile month long tournament. The timings of the England matches lend themselves very well to UK working hours. However, the FSB is concerned that as England progresses, working fans may get over exuberant and staff absence due to hangovers will follow.

Mike Cherry, Policy Chairman, Federation of Small Businesses, said: “The World Cup is kicking off and it is vital that everyone – both staff and employers – get the chance to relax and watch the games without disturbing the running of the business. However, these figures show that a worrying number are not aware they need a TV Licence to watch the matches online, and could risk being fined. So it is imperative that all those small firms that are going to let their staff watch the game are on the ball and ensure they are fully licensed.

“Sorting these issues out beforehand means everyone can sit back and enjoy the World Cup, without the risk of getting fined and making sure jobs still get done in the workplace.”

Ian Fannon, TV Licensing spokesperson, said: “This poll supports our own recent research, which revealed 44 per cent of managers weren’t aware their business needed to be licensed for staff to watch live online.”

“Some managers might assume if they don’t have a TV in the building, they don’t need to worry, but the rise of online TV means many more businesses need to be covered by a TV Licence nowadays. We want everyone to be able to enjoy the World Cup without having to worry about facing a different kind of penalty, and we’d rather businesses think ahead and check if they need a licence than risk a court case and a fine.”

In a letter to the Chancellor of the Exchequer ahead of the emergency Budget, the CBI has urged the Government to increase confidence in the public finances by bringing the deficit rapidly under control in a way that does not undermine the economy’s ability to grow.

The UK’s leading business group argues this should be done by controlling spending rather than increasing taxes. The Government should focus on current spending, with a radical re-engineering of public services to deliver more with less, rather than reducing spending on capital infrastructure.

The CBI suggests that for every pound of tax increases, there should be four pounds of Government expenditure cuts. The business group welcomes the action taken so far by the Government to tackle the deficit and urges it to use the Budget to reinforce the UK’s fiscal credibility by announcing a faster reduction in the structural deficit, based on more rigorous economic assumptions and backed by more detail on spending plans.

John Cridland, CBI Deputy Director-General, said: “This needs to be a bold and ambitious Budget, with a credible pathway for restoring sound public finances and a convincing narrative for growth.

“A radical re-engineering of public services is a must if damaging tax rises are to be avoided. Only an effective cost reduction strategy can safeguard future growth.”

The Government will need to undertake a root-and-branch examination of all spending needs and priorities, similar to that undertaken by Canada in the 1990s, where the administration successfully overcame a large government deficit by going back to first principles and looking at all its spending programmes.

The CBI therefore welcomes the spending review framework announced by the Chancellor.
Some areas of public spending are vital to promoting future economic growth and should be a priority. In particular, the CBI would like to see capital spending on infrastructure return to its previous level of 2.25% of GDP, as soon as conditions allow.

Small and medium-sized enterprises (SMEs) will play a vital role in growing the economy, and the Government’s proposals for continuing with a loan guarantee scheme are welcome. The range of funds that exists for SMEs could be brought together into one fund, cutting administrative costs and creating one national operation.

The CBI believes that tax rises should be kept to an absolute minimum. Moreover, there are certain taxes that would be particularly damaging to economic growth were they to go up:

The business group has major concerns over the Government’s proposed reforms to capital gains tax (CGT). It also wants to see a broad definition of business assets to prevent disincentives to investment or start-ups, and the tax should be structured to minimise the impact on long-term investment.

It is encouraged by the Dyson commission’s support for the R&D tax credit and urges the Government to retain it in its current form. Changes to tax treatment of pensions, planned to come into force from April next year, are unnecessarily complex and expensive to administer, and in their current form would make it harder for UK businesses to attract and retain global talent.

The group strongly supports the coalition Government’s ambition to reform the UK corporate tax system, by simplifying it to make it more certain.

Mr Cridland said: “The UK’s future economic prospects depend on the ability of firms across the country to create new jobs and win orders. Increasing taxes makes this more difficult.

“The prospect of a new 5-year corporation tax framework, allowing business to plan with certainty, will bring some relief. But any changes to capital gains tax must recognise the importance of incentives for wealth creators and the value of business investment.”

Businesses looking to hold on to their staff have been urged to get involved in more development work in order to stop them leaving.

According to a report by GfK NOP, a survey of 4,000 workers has found that 13 per cent plan to leave as soon as possible, while 11 per cent are hoping to leave move on within 12 months.

Mike Petrook, head of public affairs at the Chartered Management Institute, explained how businesses could retain staff.

He said: “The biggest issue for organisations is that they cannot and should not throw money at the matter. It simply is not there to go around at the moment.

“It is also about making sure that the jobs offered are varied enough to keep people interested. So what we see now is not so much job rotation but job shadowing, cross-functional working, and doing projects too. This gives people new opportunities for their talents and thinking in their organisation.”

Meanwhile, a survey by PricewaterhouseCoopers recently found that flexible working was seen as the most valued benefit for employees.

The latest quarterly figures released today by the Asset Based Finance Association (ABFA) show total sales from firms financed by asset based finance have increased, with client sales at £49,371 million, a rise of eight per cent from March 2009.

Whilst there has been an eight percent increase in turnover compared to the Q1 2009 figures (March 2009), there has been a six percent drop in advances, which may indicate that members’ clients are being conservative when it comes to drawing on funds available to them.

Kate Sharp, chief executive of the ABFA, said: “The latest figures are interesting. ABFA members’ clients are representative of businesses of all sizes but particularly of the SME community. This growth in turnover is a positive indication that increased demand is filtering through to all levels of UK industry. However, whilst client sales are encouraging it seems that businesses are treading carefully when it comes to borrowing suggesting an underlying degree of uncertainty surrounding the UK’s economy.”

Though overall advances were down, advances against plant and machinery witnessed a positive growth of nine percent, indicating that with the resurgence of UK manufacturing, more manufacturing firms are turning to asset based finance to fund their business needs.

The ABFA stats also suggest that UK firms are expanding their horizons outside of the UK to find new business opportunities, with export invoice discounting showing a positive rise of 15 per cent.

To find out more how factoring and invoice discounting can transform your business cash flow, contact SME Invoice Finance.

The coalition Government’s proposals to slash the red tape stifling business growth is welcome news for the UK’s 4.8 million small firms, says the Federation of Small Businesses (FSB).

Research by the FSB shows that nearly a third (27%) of small firms that wanted to expand said the proposed increases in regulation is a difficulty in doing so. Of businesses planning to downsize or close, half said that regulatory burdens were very important in that decision. This was the second most important factor behind the retirement of the business owner for firms closing.

The FSB welcomed proposals outlined by the Business Secretary, Dr Vince Cable, to simplify red tape, including:

A “one-in, one-out” to regulation which will control and reduce its burden
The creation of a new Cabinet Star Chamber that will lead the Government’s drive to reduce regulation which is stifling growth, especially of small businesses
An immediate review of all regulation in the pipeline for implementation which has been inherited from the last Government.

The FSB is also keen that Vince Cable sends a strong message to his colleagues in other Government departments urging them to explore all alternatives to regulation before legislating. The FSB believes that given these tough economic times, costly legislation should be a last resort.

Mike Cherry, Policy Chairman, Federation of Small Businesses, said: “Regulation has long been stifling business growth so these plans to put an end to the excessive legislation that choke small businesses is welcome news. It is a real victory that our calls to simplify the regulation system have finally been heard.

“Small firms have repeatedly said that the burden of regulation and the time it takes to comply with is just too much and could prevent them from taking on staff – and stunts economic growth. We now need to see the Government give detailed plans as to how these will take affect so that small firms can get on with growing their business, rather than spending precious time filling in forms to say they will do just that.”

Thousands of small businesses could benefit from the measures outlined in the Coalition Government’s document, Programme for Government, according to the Federation of Private Business (FPB).

The FPBs’ reactions to the agreements are positive, however, they have stated that they will be cautious of any veiled proposals. Head of Policy, Matthew Goodman commented: “I’m sure this document will come as a breath of fresh air to many small business owners. In many ways, it reads like a ‘wish list’ of things the Forum has been demanding for several years.

“The regulatory burden imposed on business frequently emerges as one of the main problems facing SMEs, so the agreement to introduce a ‘one in, one out’ rule, together with sunset clauses to kill off outdated legislation, will hopefully go some way to tackling this huge issue.”

In spite of this, Mr Goodman went on to say that the real test is for the new Government to turn their intentions into “practical changes” to the business arena, without adding to the already burdensome bureaucracy and administration costs, especially at a time when a number of small businesses around the UK are still struggling.

“And while the coalition’s promises to simplify and reduce some of the taxes affecting small businesses are of course to be welcomed, business owners will also be anxious to see that the June 22 Budget does not contain any nasty surprises.”

The new coalition government recently announced that Ed Vaizey was to be the new broadband minister, and the Federation of Small Businesses is now already calling on Vaizey to ensure that businesses have access to basic broadband speeds.

It was announced recently that the new broadband minister in the UK was to be Ed Vaizey, and the announcement came after calls from a number of industry groups to get a broadband minister in place as soon as possible so that broadband plans could be put into action.

The Federation of Small Businesses has now called upon the new broadband minister to ensure that all small businesses are given access to basic broadband speeds. The FSB wants Vaizey to take charge and oversee improvements and rollout of better Internet services for small businesses.

There are concerns that many small businesses in the UK, and in particular those that are situated in rural areas, are suffering as a result of inadequate access to broadband services, and lack of quality broadband services is hindering these businesses when it comes to developing their services in an online environment.

As a result of this the FSB wants Vaizey to ensure that basic broadband speeds are made available to small businesses, so that they can benefit from adequate internet access and can aid the growth of their businesses through creating an effective online presence.

The FSB said that ninety four percent of small businesses are not happy with their Internet Providers because the speeds that are delivered are much slower than those that are advertised. The FSB also said: “The UK was lagging, and as a result the nation’s 4.8 million small businesses could not develop their businesses online, which was vital to grow the UK’s economy.”

Contractors working as sole traders or limited companies in a number of UK industries could be among those finding it more difficult to enter Time to Pay agreements with HM Revenue & Customs (HMRC).

New figures have revealed that HMRC rejected 11.2 per cent of all VAT Time to Pay requests in the first quarter of this year.

This more than doubled the 5.3 per cent of requests that were rejected in the same period in 2009.

The figures have been brought to light following a Freedom of Information request by IT finance provider Syscap.

According to the firm, many enterprises are unable to pay their VAT bills as they are awaiting payment of invoices form customers.

Philip White, Syscap chief executive, said: “[Enterprises] are still finding it incredibly hard to borrow money from their bank to pay HMRC VAT so news that the HMRC refusal rate has shot up is worrying.

“Whilst HMRC say there is no change in policy over granting credit for VAT payments it does seem they are enforcing existing policy in a way that has increased the number of refusals quite dramatically.”

Global information services company Experian reveal UK business insolvencies down 15 per cent

The latest Insolvency Index from Experian®, the global information services company, has revealed a year-on-year fall in business insolvencies during April in the UK.

The total number of insolvencies fell by 15.1 per cent during April compared to the same month last year - from 2,274 in April 2009 to 1, 818 in April 2010. As a result, this brought the year-on-year insolvency rate down from 0.11 per cent to 0.10 per cent in April.

The overall financial strength score[1] of UK businesses also improved, from 80.02 in April 2009 to 80.76 in April this year.

Mid sized businesses suffered the most in April. Companies with 26-50, 51-100 and 101-500 employees experienced the highest rate of insolvencies in April 2010 at 0.22, 0.26 and 0.24 per cent respectively.

Rolf Hickmann, Managing Director of pH, an Experian company, said: “Our analysis shows that it continues to be vital for businesses to understand the circumstances of those they are doing business with and the risks they could expose their company to.”

“It is easier for the smallest businesses, with just one or two employees, to make adjustments to their operations and pull in the reins when times are challenging. For the largest business, there is the flexibility that comes with economies of scale, so insolvency rates among these extremes of business type are also low. Mid-sized businesses do not typically have the luxury of either of these benefits and can face the most pressure.”

Other key highlights include:

The North East region saw the highest rate of insolvencies for the third consecutive month and was joined in April by Yorkshire and the West Midlands, all with a rate of 0.13 per cent

The East Midlands was the region to see the highest improvement, from an insolvency rate of 0.11 per cent in April 2010 compared to 0.15 per cent in April 2009.

Scotland remained the region with the lowest rate of insolvency, although did see a slight increase on last year’s figure up to 0.07 per cent from 0.05 per cent in April 2009

The Greater London region continued to be the region where businesses had the lowest financial strength score compared to other regions. However, it was also, along with Yorkshire, one of the regions that saw the biggest year-on-year improvement from 78.45 in April 2009 to 79.59 in April 2010.

Although they are among the companies with the highest insolvency rate, companies with 11-25 employees saw the greatest improvement year-on-year in the insolvency rate (from 0.32 per cent in April 2009 to 0.22 per cent).

The smallest businesses (with 1 to 2 employees) saw the most improvement in their financial strength scores - from 80.33 in April 2009 to 81.95 in April 2010.

The financial strength of businesses in the IT industry rose from 81.46 in April 2009 to 83.25 - the biggest improvement compared to other sectors.

Businesses in the oil industry held the highest financial strength score during April - 85.61.