finance
monthly
Personal Finance. Money. Investing.
Contribute
Newsletter
Corporate

The term ‘financial literacy’ refers to taking the time to understand the world of finances a little more, and thinking about how you can save money through budgeting. There are a range of additional benefits that this can provide, including additional independence and being able to work towards your long-term goals. 

These are some of the benefits that come from improving your financial understanding and literacy, and why you should acknowledge your current savings habits to work towards a more secure future. Check this out for more details about financial advice and improving your credit, as well as more information on personal loans

Save For Retirement

So many people end up using their savings before they get the chance to retire, or reach retirement age. This can be due to a number of things, but one of the main reasons is poor financial planning and habits. Make sure that you investigate your current monthly expenses to see what you can cut back on. 

Ensure that you are putting away a small amount each month if possible so that you have a higher amount saved for your retirement. Getting on top of your financial situation and improving your financial literacy is essential for you to increase your retirement savings. 

Regardless of your age, you must have enough money in the right place that you can fall back on when needed. This includes medication, surgeries, and other things that will make your retirement a little more pricey. Ensure that you have prioritised saving for your retirement if you are closer to retirement age

Avoid Debt 

Another significant reason why you should improve your financial literacy is so that you can get a better understanding of your current income and allow for essential debt repayments. If you currently have a loan that needs to be repaid, or if you have a history of debt, then it could be worth changing your financial habits in order to avoid debt. 

Try to change your priorities and consider implementing a stricter budget so that you do not fall into similar habits that are potentially damaging to your account and credit rating. Creating better savings habits can allow you to repay your debt, or make space in your monthly budget for debt repayments. 

This can prevent additional damage caused by debt collectors, credit agencies, and a harmful impact on your credit score overall that will impact your financial future. 

More Confidence And Independence

Something that will come to anyone who works on the budget and financial literacy is an increased sense of independence and confidence. This is because you will be more aware of your current spending habits, and have the opportunity to reshape your budget and monthly outgoings. 

It could be worth taking a different approach to your finances so that you feel as if you have more control over your spending and have found the best deal with utilities and other regular bills. This can allow you to feel more confident and even treat yourself to something nice every so often. 

This can be an important part of somebody’s journey to financial literacy if you have a lower average income and find yourself regularly asking for help. Making sure that you know all the facts and how a range of things work within the financial world can allow you to be wiser with your money and save a small amount each month. 

Knowing that you can support yourself if you need it can make you feel more independent and assured that you do not need to rely on anybody else in an urgent situation. 

Financial Security

Part of the confidence that comes from improving your financial literacy stems from financial security. This can allow you to make bolder decisions and have a lot more clarity with your purchases in the future. Ensuring that you have a small amount of money saved over time can provide you with additional security. 

If you are interested in saving for a large purchase, have a baby on the way, or if you find yourself unemployed temporarily, a savings account or investment is a great thing to lean on when it is needed.

Avoid asking loved ones for money as this can have a toll on your relationship with them over time, so it is worth putting a little money away when you have it that you can fall back on when it is needed. 

Credit Improvement For The Future

Finally, it is worth making sure that you work on your finances so that you can improve your credit score. This is a three-digit number that banks and credit unions use to assess how likely you are to repay them over time. Whether you want a loan, or financing options for larger purchases including house mortgages, vehicle financing, or a vacation paid in instalments, your credit score can determine how flexible the corresponding institutions will be. 

Make sure that you are creating better habits for the future so that your credit score will be higher. This can allow you more flexibility with the amount borrowed, repayment periods, and even achieve lower interest rates. 

In some cases, this can be the difference between a smaller home and your dream location or building. Try to take better care of your finances now, so that you have additional security for the future. Higher credit scores can open all kinds of doors for you, so it is definitely worth maintaining it if possible. 

Summary

There are so many benefits that come from working on your finances and getting a better understanding of your financial literacy. Ensure that you figure out your main areas of weakness and that you are budgeting for regular bills and utilities that are necessary. Saving for the future can be done after this, but it could be worth seeking custom financial advice in more detail. Check out the link above for more information. 

However, while it is a significant factor, Mark Halstead, partner at business intelligence and financial risk firm Red Flag Alert, says Brexit can also distract from more fundamental problems with a business, such as unrealistic profit guidance given to markets, setting inflated expectations, poor management performance, unsustainable debts reducing ability to invest, or an inability to adapt to changing market conditions.

Financial Distress Has Increased

Of course, Brexit does have an impact on many businesses and is often a contributor to those in trouble.

Importers, for example, are suffering from the falling pound (at least those that haven’t been managing currency exposure) and the lack of certainty over a trade deal makes investment justification challenging.

Our own figures show that since the 2016 referendum, there has been a 40% increase in the number of UK companies in significant financial stress. And the number of those in ‘critical’ financial stress has increased 8% year-on-year. Businesses in the real estate and property, construction, retail and travel sectors have been the most severely affected.

Consumer Spending Remains Steady

However, if we look more closely at different sectors, we see that the impact of Brexit is more complex than it might first appear.

Take retail, for example. The sector has been experiencing a digital revolution that has seen the high street face stiff competition from the internet. At the same time, business rates and rents have increased, and consumer habits have changed.

Brexit has played its part by knocking consumer confidence, but some retailers are doing very well in this environment.

Clothing retailer Primark has no online sales presence at all, and yet it reported a 4% increase in sales earlier this year, while its mid-market competitor Next saw its full-price sales increase 4.3%

Both of these brands have strong value propositions: Primark is known for its heavy discounts on fashion, while Next had a reputation for its home delivery service long before online retail took off.

It’s also worth noting that consumer spending has actually increased during 2019. Although it may have peaked, it remains to be seen if the previous growth is set to continue.

Brexit can even present some opportunities. Low-interest rates have resulted in poor returns for investors, and so lending to businesses is now a viable alternative – helping businesses access capital for propositions that may have been unattractive to investors pre-referendum.

Builder blames Brexit

FTSE 250 housebuilder Crest Nicholson issued a recent statement outlining a decreased profit projection, and Brexit was the headline factor: “During the second half of FY2019, the Company has experienced a volatile sales environment in some of its regional businesses, driven largely by ongoing customer uncertainty relating to Brexit and the economic outlook in the UK.”

Two additional factors cited were a reduction in the value of some London property stock and a large cost associated with remedial works regarding combustible materials.

While Brexit uncertainty does affect housebuilders, it may be a stretch to blame it for huge reductions in profit. Perhaps Crest Nicholson were a little over-ambitious with original house evaluations, and Brexit has nothing to do with the £17m remedial works required to bring properties in line with government guidance.

While Brexit uncertainty does affect housebuilders, it may be a stretch to blame it for huge reductions in profit.

One could also argue that low-interest rates and weak sterling (both driven in part by Brexit) are helpful to housebuilders.

Beach the Brexit-blame

Another company blaming Brexit for not meeting performance expectations is travel retailer On the Beach: “This weakening of Sterling (driven by Brexit) leads to a significant increase in On the Beach prices versus full risk competitors; as a result, the Group anticipates delivering a full-year performance below the Board's expectations.”

Another interpretation might be that the company’s currency hedging strategy, or lack of it, wasn’t robust enough to maintain margins during uncertain times.

Lunar Caravans: Low Consumer Confidence or Overtrading?

Lunar Caravans is another business that has blamed poor performance on Brexit.

Until recently, the caravan, motorhome and campervan manufacturer had been profitable. In fact, in 2017 it reached a peak turnover of £50.6m from the production of around 3,400 units.

However, jump forward just two years, and the company was calling in the administrators, blaming a 20% drop in sales across the leisure vehicle industry caused by reduced consumer confidence due to Brexit.

[ymal]

But once again, Brexit was only part of the story.

In 2016, the company’s profits were £1.6m; however, this dropped to £725k in 2017 when Lunar’s holding company had to buy back shares from three retiring shareholders.

Then, the company began to see a steady increase in its costs as the pound began to slip against the Euro.

With turnover increasing but profitability declining, the company was beginning to overtrade and struggling to manage its growth.

This reduced the value of the company by £1m and left it with fewer reserves to weather difficult times. And these difficult times soon came.

The company had invested heavily in new products, but several design issues in the new caravans saw a flood of warranty claims coming in from thousands of angry customers.

This further eroded profits, damaged the brand and added to the financial risk associated with the business.

With poor sales and spiralling costs, huge debts accrued, and the company was unable to pay its creditors – by which time the writing was on the wall.

Brexit Alone is Not Toxic

The impacts of Brexit are undoubtedly severe; however, they shouldn’t always be terminal, and Brexit alone doesn’t automatically equate to a toxic business environment.

In many cases, it represents a short financial shock that lays bare a company’s underlying long-term weaknesses and sends it spiralling.

But those businesses which are financially healthy and have competent management who can react to changes in the market stand a much better chance of being able to weather Brexit and maybe even achieve some growth.

The Financial Institutions Sentiment Survey, now in its fourth year, canvassed the views of more than 100 senior decision makers at a broad range of organisations – from global banks and insurers to intermediaries, investors and asset managers – to explore the key themes shaping their sector.

The report found that more than half of firms (58%) are expecting growth in the UK economy to slow down in the next 12 months – twice as many as held that view in 2018 (29%). Two-thirds of them (67%) expect domestic growth in the coming year to be weaker than G7 peers.

These views were broadly mirrored in respondents’ expectations for the UK financial services sector with 55% forecasting that growth would deteriorate during the year ahead, up from 27% in 2018.

Similarly, most senior executives (54%) said they have become less optimistic about the future of their industry in the past 12 months, up from 40% in 2018.

Meanwhile, two-fifths of firms (40%) expect their own revenues to increase – albeit down from 64% last year – with only 17% seeing income falling next year.

More than half of firms feel they are prepared for the UK’s departure from the EU, with 59% stating they are ready for a ‘no deal’ Brexit with little or no dependency on a transition period and no further extension.

The remainder of firms surveyed are dependent to some extent on a transition period to complete their contingency planning, with almost a third (29%) saying that they have a limited dependency and 12% saying that they have a significant dependency.

Despite the focus these preparations require, the sector continues to invest in the UK, with a third (31%) expecting investment to increase during the year ahead (compared to 24% in 2018). Only 10% of respondents forecast a reduction in investment in their UK business over the next 12 months.

Top risks identified

The three most significant risks cited by survey respondents remained unchanged on last year, with the UK’s departure from the EU top (58%), followed by economic uncertainty (36%), and new regulation (31%).

Significantly, the risk posed by cybercrime (29%) has leapt from eighth place to fourth since 2018.

Last year 46% of respondents said one of their firm’s top three technology investment strategies for 2018 was to improve cybersecurity, behind improving customer satisfaction (49%) and reducing operating costs (48%). In 2019, cybersecurity moves to top of the tech agenda and with greater prominence – 70% are now prioritising it as an area for investment.

Robina Barker Bennett, Managing Director, Head of Financial Institutions, Lloyds Bank Commercial Banking, said: “The past year has presented many challenges for businesses. Against a backdrop of on-going global economic turbulence, it is unsurprising that sentiment among financial institutions towards the sector and the wider economy is lower than in previous years.

“That said, the responses to this survey show the sector’s resilience during difficult times and it is especially encouraging to see that firms plan to continue investing in the UK.

“In 2019, firms are arguably more dependent than ever on technology. With this rapid advancement, the risks from cybercrime are increasing, placing extra pressure on financial institutions to change the way they operate.”

Investors are rapidly losing confidence in the government’s ability to secure a good Brexit deal, according to new data from Assetz Capital’s Q3 Investor Barometer.

The peer-to-peer business lender carries out its Investor Barometer every quarter, a survey of its 29,000-strong investor community.

The Investor Barometer has tracked Brexit sentiment since the start of 2018, and as the UK’s withdrawal gets closer, confidence of a positive outcome to the negotiations has dropped. In Q3, only 10% were ‘confident’ or ‘very confident’ of a good deal. This is down from 20% in Q2 and 21% in Q1.

Conversely, the number of ‘not confident’ or ‘not at all confident’ has continued to rise. The figure hit 90% in Q3, up from 80% in Q2 and 79% in Q1.

The results come following Chancellor of the Exchequer Phillip Hammond warned that a no-deal Brexit would lead to ‘large fiscal consequences’.

Stuart Law, CEO at Assetz Capital said: “Whatever optimism our investors had around the Brexit negotiations is slipping away. The view from the Assetz Capital community is that there’s significant economic pain on the horizon.

“Post-withdrawal, it will be more important than ever that the whole alternative finance industry works hard to deliver for both investors and borrowers. It’s when the economy struggles that growth capital becomes even more scarce. Peer-to-peer lenders must stand up and support the country through this Brexit uncertainty.”

(Source: Assetz Capital)

Financial terminology is continually thrown around as we navigate through the different stages of our lives. The need to entirely acknowledge and comprehend what some financial terms mean becomes most apparent when making difficult financial decisions such as how best to climb onto the property ladder and selecting the best saving account or investment product that could provide the greatest return in the future.

With words and phrases in areas such as banking, savings, investments, pensions and mortgages more than likely to feature heavily in an individual’s handling of their personal finances – the expectation would be for them to have a firm grasp of common and recognisable financial jargon. Unfortunately, this does not seem to be the case, as 31% of Brits have shockingly admitted to signing a financial contract without knowing some or all the terminology according to research by Norton Finance.

Interested in financial competency, Reboot Online Digital Marketing Agency analysed findings from YouGov, who surveyed 1,916 British adults to see how confident they were with the meaning of a range of financial words and phrases.

Reboot Online found that ‘savings account’ is the financial term that most Brits are confident about at 92%. Thereafter, 78% claim to be assured by what a ‘cash ISA’ is. In third position, 74% of Brits feel confident enough to know what a ‘building society’ represents and can differentiate it from a normal bank.

Interestingly, despite regularly featuring in the small print of advertising mediums for potentially significant purchases like cars, only 64% of Brits are entirely confident about what a ‘fixed or variable annual percentage rate (APR)’ truly is. Information for immediate release Reboot Online Digital Marketing Agency.

Focusing specifically on the different types of mortgages and the terms related to it - Brits seem most confident knowing what a ‘fixed mortgage’ (72%), ‘mortgage deposit’ (63%) and ‘tracker mortgage’ (49%) is. Contrastingly, Brits are apprehensive about how a ‘shared equity mortgage (58%)’ and ‘offset mortgage’ (57%) respectively work.

On the other end of the scale, the British public were least confident about a ‘spread betting account’, with an overwhelming 67% unsure about its proper connotation. Closely by, 65% are shaky about what ‘corporate bonds’ are. 64% of Brits were equally unclear by a ‘tracker fund’ and ‘self-invested-personal-pension’.

Shai Aharony, Managing Director of Reboot Online commented: “Jargon specifically related to certain sectors and subject matters can be a mind field. Individuals can therefore often get lost in translation when trying to decipher them. Despite this, considering the fact that numerous financial terms have a substantial impact on minor as well as major saving and spending intentions, Brits should be more accustomed to them. This research certainly shows that Brits currently lack the knowledge and confidence to correctly understand a handful of financial terms in a range of important areas such as mortgages, pensions and savings. Going forward, there should be a real drive to educate Brits from an early age on the different aspects of the financial world that will more than likely affect their personal and business matters in adulthood.”

(Source: Reboot Online)

Finance Monthly speaks to Kristinn Gils Sigtryggsson, the Founder of Bankers Confidence ehf, an Icelandic company that offers small and medium-sized banks a comprehensive backup and added value support services to enhance their reputation and confidence.

 

Tell us about the inspiration behind Bankers Confidence – is it what you hoped it would be?

On 8 October 2008, my family was due to fly back from a holiday in Crete. On the way to the airport, we were told that there’s the possibility of our aircraft not landing, as the Icelandic banking system had collapsed and there could be problems connected to paying for the flight. Eventually, the plane landed and brought us back home, but soon after this and after I had fully understood what really happened, I kept asking myself what could be done to prevent this from happening again? What could be done to build trust and confidence in the global banking system again?

Bankers Confidence is now in the process of building its recourses team and funding to target full-service operations within the next 12 to 18 months.

 

What would you say was the primary cause behind the 2008 collapse in the Icelandic banking system crisis? Is there anything, in your opinion, that could have been done differently to prevent it?

The primary cause can be traced to the collapse of the ‘too big to fail banks’ in the United States.  Some had to file for Chapter 11 but others were kept alive by pumping a lot of public money into them. This immediately hit all Icelandic banks

Yes, something could have been done to avoid this. The construction of the Icelandic banks balance sheets was wrong in a number of major aspects. They had been lending out long-term mortgage loans to support massive investments in the country and they had been financing this by short-term loans from foreign banks. When Lehman Brothers went bankrupt, not only did the American banking system freeze, but all confidence and trust within the Global banking system was lost. Suddenly, no short-term funding was available anywhere.

Even though it can be argued that the beginning of the Icelandic banks crisis was imported, in my opinion, this would have happened sooner or later anyway - all of our banks had been too greedy, trying to grow too fast and consequently, they had been taking unacceptable risks, involving themselves in business deals that carried tremendous risk.

 

What lessons should auditors take from how the crisis was handled? Are there any that you now keep in mind in your own work?

Auditors’ work will always have to be based on their professional judgement. This judgement has to be based on a comprehensive knowledge and understanding of the environment the client is operating within. Too many of my colleagues concentrate on following the auditing standards, which is good but not enough. The standards are just a manual to be used as a guide, when questions arise on how to handle certain issues. A tunnel vision is dangerous for auditors; a wider horizon and understanding of the business is vital.

 

In what ways does Bankers Confidence provide safeguarding against the unforeseeable problems that could arise in the future?

Bankers Confidence’s terms of business agreements with small and medium-sized banks will allow them to use what we call the BC Stamp in their PR materials and inform customers and other stakeholders that they are under our independent scrutiny and protection. This could also mean access to backup funds in case of sudden short-term liquidity requirements and access to high-security data backup. For its own security and to be able to safely offer these services, BC will take over the relevant banks’ internal audit risk reporting function, which will be performed on a daily, live assessment basis.

The members of the Board of Directors of Bankers Confidence are highly skilled professionals that have been carefully selected to ensure a balanced mix of extensive senior management experiences. They have all held very senior positions in both large and small banks and responsibility for risk assessment and management. They have held CEO positions in smaller banks, high-level appointments in the European Commission, within the banking sector and CEO roles in insurance.

Our mission is to become visible within the Global banking sector as the people who introduced a new approach to build trust and confidence in the banking sector. This trust and confidence is still missing, even though it’s been nearly ten years since the 2008 crisis.

 

What are the next steps in Bankers Confidence’s future development?

We are now in the process of selecting two to three banks to participate in our pilot project. This work will take four to six months and during that period, we should be able to finalise the funding and become fully operational.

 

Website: http://bankersconfidence.net/

 

The high street is reeling after a winter of ill health. Toys R Us, Maplin, House of Fraser, Claire’s: it seems that even stalwarts of the retail landscape aren’t immune to rising rents, the burgeoning ecommerce market and wavering consumer confidence. Below Finance Monthly gains special insight from Andrew Watts, Founding Partner, KHWS, The Brand Commerce Agency, on the impact behavioural science can have on high street performance.

Many other household names appear on the brink of crashing. The question must now be, is the high-street blight another blip or could it this time be terminal?

Nowhere are the symptoms more obvious than casual dining chains like Prezzo, Carluccio’s and Jamie’s Italian. These eateries and others like them have enjoyed the benefits of the booming experience economy in recent years, but not anymore.

Their current troubles are based in low consumer confidence which started with the financial crash almost a decade ago. As real-term income has dropped, and the cost of raw materials increased, consumers have become even more selective about how they spend their disposable income. Retail therapy is no longer proving the consumer tonic that it once was, and even the experience economy is under pressure. A nice experience is no longer enough; spending must result in a clear benefit and value for money.

The homogenised nature of casual dining is a sound example. The majority of chains are backed by private equity, so scale and profit are a key part of their basic business strategy. As a consequence, each brand offers similar mediocre food and a mirror-image dining experience. It’s become harder to charm consumers into splashing out and coming back. Add rising prices to the mix, and people can be forgiven for dining out less.

What’s unfolding in casual dining is symptomatic of a wider malaise on the high street, but this trauma needn’t be fatal. In casual dining, we can see the possible remedies that can be used to salve other areas of retail - a natural downsizing of the market coupled with stronger brand differentiation.

Understanding consumer behaviour is of fundamental importance to succeeding in this landscape. Establishing how and why spending decisions are made will empower brands to tailor their marketing messages accordingly. Behavioural science-led marketing techniques are now enabling brands to do just this, something that has not previously been possible.

Working in partnership with Durham University Business School, we examined the hardwired short-cuts – known as heuristics – that everyone uses to make decisions. We then identified and reframed the nine most relevant to purchase decisions; we refer to them as Sales Triggers.

For casual dining brands, there are two Sales Triggers that are particularly relevant and could prove the cure for the current problems ailing them: Brand Budgeting and Less Means More. This means using marketing messaging to demonstrate real value in a crowded marketplace (Brand Budgeting) and also offering something different or exclusive that enhances the experience when dining (Less Means More).

Despite the seemingly dismal outlook on the high street, some retailers are bucking the trend. Grocery discounters like Aldi and Lidl are triumphing because of their successful use of the Brand Budgeting and Less Means More Sales Triggers. There are some success stories in fashion retail, too. FatFace and Ted Baker have done well in the past quarter, posting robust Christmas sales. This is down to two things: a good product range and a strong reputation. This demonstrates their use of two Sales Trigger. FatFace uses Choice Reduction to simplify information and choice, so people don’t suffer from overload and default to their current behaviour. Ted Baker utilises the obvious truth, communicating well-held positive views of the brand’s heritage, to provide people with information that they are unconsciously seeking to confirm their beliefs.

Flourishing retailers are those who invest in understanding the key Sales Triggers that inform the purchasing behaviour of their customer base, and tailor their service output, products, tech and shopping environment accordingly. High-street brands seeking to replicate and sustain such successes can then use these insights to inform their marketing strategy. This differs from sector to sector, but can be clarified by a behavioural science-led approach which can inform marketing and ultimately present an offering and point of difference that will boost retailer longevity.

There’s no quick fix, but with the right sort of changes, the current retail retrenchment doesn’t need to be a terminal issue for the high street. Gaining a deeper understanding through behavioural science of how shoppers could help cure the pressures on the high street.

Optimism is high among SMEs across both Europe and the US, but is said optimism enough to warrant actual business expansion?

With investment in tech, especially AI, can SMEs afford to expand into new markets and regions? With tax cuts in the US, the new budget, incentives in the UK and confidence in markets all together, is optimism on the rise? Is this a year of your business expansion? What are your thoughts on the current climate, risks and opportunities?

In this week’s Your Thoughts Finance Monthly has heard from a number of top experts and businesses on their opinions and plans for expansion in 2018.

Rick Smith, Managing Director, Forbes Burton:

These days, with so many alternative funding streams available to entrepreneurs and established companies alike, it is easier than ever to get funding. However, this comes with an immediate danger and risk. How companies use this money is often the reason they run into trouble.

The tired adage of not putting all one’s eggs into one basket comes to mind, but it remains true. Diversifying, rather than concentrating on singular vision, is essential.

One thing we always advise companies to do is to think about having physical assets. Being labour-intensive and hiring equipment in the construction industry for example will only serve your growth so far. The lack of bricks and mortar or equipment assets can hit companies hard if things start to go wrong.

With so much uncertainty about, including Brexit, companies need to be mindful in order to be able to recover if things deviate.

Consider expansion of business premises or the purchase of a large, well priced piece of equipment. Ring-fencing that kind of value is wise and can be leveraged more easily. The danger in not looking for this kind of self-preservation is having to borrow more when you fall into a hole. By then it could well be too late. Growth is fantastic, but only when properly managed.”

Lewis Miller, Chief Financial Officer, Frank Recruitment Group:

When it comes to expanding your business in 2018, it isn’t a question of can you can afford to, it’s a question of can you afford not to?

Currently, the availability of cheap debt is at an all-time high; technology advancements are making it easier to invest in new capabilities and new markets, and trading internationally is becoming easier.

For these same reasons, competition is growing and getting tougher. If you are confident in your products and your capabilities, there is no time like the present to bite the bullet and invest in your expansion. If you don’t, it could be a decision you come to regret.

We are already seeing interest rates starting to rise and with strong wage rate growth being reported, this appears to be a trend set to continue. This will eventually place pressure on the economy. It’s impossible to predict the extent of which but I certainly wouldn’t rule out a recession over the next few years.

Expanding now, whilst the market dynamics are supportive will not only open up new opportunities, but the diversification will help protect your business in the event of downturn.

Having access to different markets can also give you a competitive edge with your customers as well as help attract new customers who are looking for a partner who can serve them across a wider array of offerings or geographies.

If you are looking at expanding this year into new markets, whether it be geographically or product, I would offer this one piece of advice – don’t assume that the secret sauce that has made you successful in your current market is the exact same secret sauce to enable you to succeed in new markets. You need to do your homework thoroughly across all key areas, such as; your value proposition; cultural differences in how people buy in the target market; laws and regulations; employing staff; and so on.

In SME’s, often we rely on our existing staff to drive the expansion agenda. Sometimes hiring or partnering with someone that has been there and done it in the market you are looking at, whilst costly, can be the difference in you getting it right the first time and really accelerating your growth.

Adam Schallamach, SME Growth Consultant, Business Doctors:

For a small or medium sized business, the timing of any decision to invest or expand is crucial to ensuring its continued success and, typically, owners will look at both internal and external factors before coming to any conclusions.

The external environment is confusing at the moment. For every article you find stating that business confidence is on the up, you can also find an article talking about how difficult conditions are. But, if you look through the noise, there are certain key themes at the macro level.

Despite it being 18 months since the referendum and nearly 12 months since Article 50 was triggered, we are no clearer about what the future relationship between the UK and Europe will look like. Obviously, if you are a business that relies on European interaction, this uncertainty could be crippling. But, even if you are not, the broader impacts of Brexit on the UK economy and its competitiveness, which could be positive or negative, will have an impact.

Interest rates are another key issue. As a result of inflationary pressures, the Bank of England is giving strong signals that there will be further interest rate hikes this year. These will impact the cost of borrowing and may raise pressures on finances going forward. However, interest rate rises can also have a positive impact on exchange rates altering costs for import/export businesses and supply chains.

As a consequence of Brexit, the Government is looking at how it realigns business related policies to refocus the economy. A major part of this is the Industrial Strategy which is intended to set out the broad vision going forward. Allied to this are the funding schemes/tax credits which are available and will continue to be available to assist business investment/expansion but it is clear that Government will increasingly use this tools to focus on particular areas rather than general business support.

However, whether the broader economic environment is up, down or sideways, businesses still succeed and prosper. And although there will always be exceptions, I would argue that for most small and medium businesses, the key is having a clear direction and strategy.

If a business owner knows what they want to get out of their business and has a clear alignment between that and their business objectives, that will drive what they need to do and when they need to do it. Worrying about external factors which are out of their control and even experts cannot agree on, is frankly a waste of time. So my advice is, if you do nothing else, take the time to revisit and refresh your business plan if you have one, or invest in pulling one together.

Mike Hoyle, Finance Director, Sellick Partnership:

We recognised early on that our financial year to February 2018 was going to be a big year for growth - not just for Sellick Partnership but for our clients and the wider economy.

Our temporary contractor numbers have grown steadily and the number of permanent placement has increased significantly on the year before. This reflects employers’ confidence in the market, indicating that they can afford to keep their new hires long-term.

Demand for recruitment services has increased across all sectors - including finance - and as a result, this year we are focusing on organically growing our professional services offering. We will strengthen our teams by recruiting more specialist consultants to make sure we reach our ambitious financial and operational targets for the next financial year - including surpassing £2m turnover for permanent placements.

These signs are all positive and optimism is certainly on the rise, but there still remains some uncertainty for business owners and employees alike. Although all things Brexit are definitely picking up pace, the remaining uncertainty creates risk, as businesses may struggle to properly plan for the future. With that in mind, it’s imperative that Theresa May pushes on with developments if we want a shot at further economic growth post-Brexit.

Mark O'Connell, CEO, OCO Global:

Market volatility in global equity markets in recent weeks might make you think 2018 has gotten off to a shaky start. But looking beyond this at the wider global economy, 2018 is shaping up to be a promising year for SMEs and could be the year for expansion. Last year, only just over one in ten UK SMEs exported, with businesses missing out on significant opportunities in markets outside of the UK.

2017 saw the return of a booming Europe. Key markets such as Germany, France, Italy and Spain are growing at the fastest pace in a decade and have not yet been fully explored. The German market in particular is a key prize – friendly, accessible and well-disposed to quality and strong service support. The weakness of Sterling also makes UK exporters more competitive than ever right now.

Uncertainty surrounding Brexit arrangements is also prompting many to look further afield for opportunities for growth. In the last year we have seen a significant increase in companies exploring North America. New tax friendly policies in the US have boosted small-business optimism, government-related cost pressures continue to ease and consumer spending remains strong. The US presents a supportive business climate for small firms and a wealth of opportunities.

The benefits of exporting are manifold; diversifying an export portfolio can increase both sales and business stability. A wider base of customers and distributors results in a more resilient business that is able to weather downturns in one or more markets, or offset quieter seasonal periods in one part of the world. Additionally, exporting exposes a business to new ideas and supports innovation. And one thing which UK SMEs are regularly chided for is ‘lack of ambition’: the fact is that more internationally diverse businesses achieve higher exit valuations, so don’t just fly the flag for the country- fly it for yourself.

Adrian O’Connor, Founding Director, Global Accounting Network:

There is no doubt that organisations of every size are increasingly taking a global approach to future expansion plans. It may sound like a cliché, but rapid technological advancements mean that geographic borders are not the barrier they once were - the world is getting smaller. Meanwhile, future uncertainty caused by myriad external factors, not least Brexit, is encouraging smart business leaders to explore opportunities outside of the UK. It’s no wonder that a growing number of organisations are looking to capitalise on favourable market conditions elsewhere, or simply hedge their bets against unpredictable local economies.

Recent client demand, and subsequent recruitment activity, reflects this growing thirst for international growth. The organisations we work with are increasingly seeking senior finance professionals who have experience within a global operation, are familiar with specific international tax structures or who have a solid background in analysing risk associated with global expansion strategies. Unsurprisingly, we have also witnessed job roles, and associated remits, shift in recent years to fit within business structures which are conducive to international operations.

While due diligence associated with overseas expansion expands far beyond the remit of finance teams alone, FP&A specialists who can provide detailed analysis of the strengths and opportunities of target markets - and management accountants who can advise on compensation packages based on local standards and customs - are highly sought after.

This is a strategy we have applied to our own growth plans and Global Accounting Network is expanding into the US this year. The decision was based on a similar market with a shared language and a business-friendly tax regime. International expansion is no longer a pipe-dream for the majority of business: it’s a logical next step for companies which have their ear to the ground and are looking to take their business to the next level.

Dany Rastelli, Global Marketing and Communications Manager, Elements Global Services:

2018 is the year for expansion. 2017 saw stronger growth than many had predicted and I think businesses are starting to look at their expansion timelines with greater optimism. Although companies will continue to proceed with caution in light of current geo-political events, they will no doubt look at international expansion with a view to offsetting negative growth in one market by starting to operate successfully in another.

With regards to Elements Global Services, we are certainly optimistic about what this year will hold for the company. As a global organisation we know our strengths, and are ready to put them to good use to achieve our short, medium and long term goals – no matter how ambitious they might seem. One example of our expansion plans this year, is our ambition to double our head count in the next twelve months across all offices.

It is clear that investing in tech, and more specifically AI, will be essential to a small business’ survival later down the line. In my opinion, this is a short-term (albeit costly) investment for a long-term gain that will give small businesses the competitive advantage. Companies are investing in their futures and it is widely acknowledged within the industry that automation and digitalisation will be the dominant route to market going forward. This influx of tech adoption now should see lower overheads further down the line, allowing for companies to become more profitable across a multitude of markets.

With the latest tax cuts in the US, incentives in the UK and a general confidence in the markets, I think a mood of cautious optimism has pervaded the financial markets in the last 18 months and the global economy has witnessed a positive trend developing. As a result, companies have started to look at expansion with more confidence than before. Although it is indisputable that the current economic climate is volatile, I personally believe that in every risk lies an opportunity. In 2017 the global economy far surpassed expectation and I predict that 2018 will continue this trend and allow businesses to expand and triumph in the face of both global and local adversities.

Chris McClellan, CEO, RAM Tracking:

Despite the ongoing uncertainty around Brexit, and the value of sterling, UK SMEs are still operating in a dynamic and exciting business environment where expansion is a viable option. A recent survey by American Express found that 41% of UK SMEs cite their leveraging of the particular advantages they enjoy as an SME – such as adaptability, innovation and strong customer relationships – as one of their top three strategies for fuelling revenue growth in 2018. And this optimism doesn’t cease when crossing the pond with the recent US National Federation of Independent Business survey reporting one in five SMEs looking to both hire and expand during 2018.

Back in the UK, the American Express survey also states that the majority of those surveyed cite economic uncertainty the most significant threat they face – which has switched from political uncertainty within the same poll just a year earlier. While concerns are ever-present though, this is matched with increased optimism about the opportunities that are out there to trade and form strategic alliances, both in the UK and overseas.

Indeed, developing a specific overseas strategy is a clear advantage for SMEs particularly as it provides a safety net/ pool of new customers and suppliers to fall back upon, as the UK’s departure from the EU draws ever nearer and the weaker pound becomes more attractive for overseas buyers. According to KPMG, almost half of UK exports were destined for the EU in 2017, which demonstrates the dire need to start looking at forging wider global relationships now as a safeguard.

Naturally, global expansion requires a number of obligations around tax and culture to consider but the typical make up of a successful small business – which incorporates focus, strong working/ customer relationships and consistency – helps provide the ‘front’ required to successfully move beyond our national barriers. Financing is of course, an ever-present issue – and barrier – for some, but again, by utilising the agility and innovative nature of an offering and in-house team, investment can become much easier to source. For those not quite at the stage where they can do this, perhaps 2018 is better used looking at the business and how they can make it ‘overseas expansion ready’ in order to make 2019 or 20 the year when they truly elevate.

Indicating business efficiencies is a key element of driving success within existing efforts but this also helps in demonstrating the potential for an SME to move to the next level where expansion (in the UK or indeed, overseas, is concerned). This comes down to measures like ensuring that supplier relationships are properly managed in terms of spend and consolidating requirements down to the fewest suppliers possible. However, internal measures that drill down the day-to-day costs are always needed, an example of such measures is the use of vehicle tracking devices for employees out on the road, as these are very effective and also demonstrate that employee safety and well-being is proactively being monitored.

While nothing in life that is worth getting comes easily, it does seem that the current business landscape is 'expansion-ready' where SMEs are concerned – indeed, the expected uncertainty caused by the current Brexit negotiations actually represents an opportunity for SMEs to forge new relationships that are not as dependent on exiting the EU in terms of tariffs and taxation. So, in conclusion, go forth and conquer!

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

Dun & Bradstreet and the Small BusinessResearch Centre have revealed a community of small and medium enterprises (SMEs) who are confident that the UK is a great place to start a small business (72%), but face a plethora of challenges in a rapidly changing political, regulatory and economic landscape. The study found that UK SMEs see late payments, uncertainty around Brexit and a fluctuating pound as potentially detrimental to growth, with 54% confident about future success.

Although keeping ahead of the competition and attracting new customers remains a key priority, SMEs are concerned about the impact of Brexit: almost one in three respondents (32%) said it has affected their confidence negatively. A third (35%) of those surveyed have cancelled or postponed expansion plans as a direct result of the Brexit vote, while 34% admit that they have rewritten their business plan in response to the ongoing economic and political uncertainty.

In this time of heightened uncertainty, over a quarter (26%) of SMEs also highlighted timely payments as the most critical factor for financial success. Respondents indicated that at any one time, they are owed an average of £63,881 in late payments, with 11% saying they are owed between £100,000 and £250,000. The consequences of late payments include cash flow difficulties (35%), delayed payments to suppliers (29%) and reduced profit performance (24%). Some respondents have even had to dip into their personal savings to cover the shortfall. And the problem is growing - more than half (51%) of SMEs say late payments are more of a problem than three years ago, with 58% going as far as to say this issue is putting their business at risk of failure.

“Late payment of debts is a perennial challenge for SMEs” explains Professor Robert Blackburn from Kingston University’s Small Business Research Centre, “This seems to worsen during difficult economic times. Although many SMEs are able to tighten their belts during an economic slowdown, late payment adds further pressure on cash flow.”

While SMEs face many challenges in the current environment, the study revealed a positive outlook amongst the small businesses surveyed. Even with the backdrop of unprecedented turbulence, most SMEs still have a clear business strategy prepared (70%). And they believe their business has a bright future in the UK, with three quarters (75%) saying they are confident they can achieve financial growth in the next five years.

“It was reassuring that the majority of respondents still think Britain is a great place to start a small business, and most believe they’ll enjoy success in the coming years.” says Edward Thorne, UK Managing Director of Dun & Bradstreet. “There’s no doubt there will be bumps along the road, but this is positive news for the overall health of the UK business environment.”

(Source: D&B)

With the upcoming introduction of IFRS 17, the new insurance contracts standard, the Financial Stability Board (FSB) is calling for implementation as soon as possible. Under IFRS 17, insurance obligations will be accounted for using current values, instead of historical cost. Martin Sarjeant, Global Risk Solutions Expert, FIS, below provides Finance Monthly with a thorough account of why firms should welcome the change.

With concerns over costs and a perceived lack of benefits among some insurers, there’s a prevailing mood of doom and gloom about IFRS 17. But rather than striking a deathly blow to the balance sheet, I believe that the new accounting standard for insurance contracts spells good news for insurers and stakeholders.

From this radical “glass half full” viewpoint, I’ve identified seven big benefits that IFRS 17 will bring to the insurance industry:

  1. Liabilities valued at market value
    By bringing the valuation of insurance contracts in line with both the assets that back them and valuations made in other industries, IFRS 17 will initiate better product design and greater transparency. As IASB chairman Hans Hoogervorst explains: “Proper accounting shines light on risks that might otherwise go unnoticed – both by companies themselves and by investors.” So, although the standard may appear initially to weaken some insurers’ balance sheets, it will actually encourage better pricing of insurance contracts and strengthen the balance sheet over time.
  2. Truer reflection of profits
    In some jurisdictions, insurers have designed products to maximize early profits. For example, if an insurer sells a 10-year insurance contract, with premiums paid for one year, it generates massive profits in the first year and then small losses afterwards. IFRS 17, by contrast, measures profit in line with the services performed and spreads it over the contract’s life in a series of smaller cash flows – giving more insight into how profit emerges. The standard also excludes deposit coverage from revenue calculations, which will especially affect the accounting of thinly veiled savings contracts – and, again, help better reflect reality.
  3. Nearly global consistency 
    A consistent and high-quality accounting standard for all insurance contracts across most jurisdictions has to be a good thing, right? Particularly for multinational insurers, it will reduce the long-term costs of compliance and make it easier to compare business units and aggregate results and financial statements. What’s not to like?
  4. Collaboration between actuaries and accountants
    Both actuaries and accountants look after the interests of stakeholders and help manage insurers’ finances and risks. But in many organizations, these are still siloed functions with little interaction or understanding of each other’s activities. IFRS 17 will drive them to work together and establish mutual respect and cooperation, which would mean good news for stakeholders and improve the way the company is managed in the future.
  5. Better governance of actuarial systems
    For more than a decade, many insurers have been raising their governance game and reaping tremendous benefits such as lower operational risks and reduced ongoing costs. Others, however, continue to use actuarial systems without the control and automation that IFRS 17 demands. Improving governance standards will not only help achieve compliance but also reduce costs, minimize manual errors and make it easier to access risk insight, all leading to better management of the business.
  6. Greater protection for policyholders
    IFRS 17 will help strengthen insurance company balance sheets (see benefit 1) and offer more protection to policyholders as a result.
  7. Investor confidence
    All the above improvements to the accounting standard give investors proper insight into insurance companies, allowing them to compare one firm with another more consistently. This can only improve investors’ confidence in and understanding of insurers – surely another reason to be cheerful.

However you look at IFRS 17, nothing will stop it from coming into force in more than 100 countries in 2021. So, why not ditch the despair, seize the opportunity for change, embrace the benefits – and see the many positive sides of compliance?

The first poll of business leaders since Thursday’s General Election reveals a dramatic drop in business confidence and huge concern over political uncertainty, and its impact on the UK economy. Company directors see no clear way to quickly resolve the political situation, feeling that a further election this year would have a negative impact on the UK economy.

The nearly 700 members of the Institute of Directors who took the survey are looking for any political certainty that can be found and are keen to see quick agreement with the European Union on transitional arrangements surrounding the UK’s withdrawal, and clarity on the status of EU workers in the United Kingdom.

The overall priority for the new Government, according to IoD members who have taken the survey since noon on Friday, must be reaching a new trade deal with the European Union. On the domestic front, work to deliver a higher skilled workforce and better quality infrastructure is considered vitally important.

A summary of the key findings and the full results of the survey can be found below.

Stephen Martin, Director General of the Institute of Directors, said: “It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could – if not addressed immediately – be disastrous for the UK economy. The needs of business and discussion of the economy were largely absent from the campaign, but this crash in confidence shows how urgently that must change in the new Government.

“It was disheartening that the only reference the Prime Minister made to prosperity in her Downing Street statement was to emphasise the need to share it, rather than create it in the first place. With global headwinds and political uncertainty at the front of business leaders’ minds, it would be wise for this administration to re-emphasise its commitment to a pro-business environment here at home.

“Business leaders will be acutely aware that Parliaments without majorities are more prone to politicking and point-scoring than most. If we do indeed see a minority Government, both sides of the aisle must swallow their pride and work on a cross-party basis on the most important issues. The last thing business leaders need is a Parliament in paralysis, and the consequences for British businesses and for the UK as an investment destination would be severe.

“Saying this, there is also little appetite for a further election this year, and indeed business leaders are keener to see the new Government get to work in Brussels and on the domestic front. Ensuring negotiations start well, and delivering higher quality skills and infrastructure across the country, must be the priority.”

Markus Kuger, Senior Economist at Dun & Bradstreet said: “After the surprising election result, political and economic uncertainty in the UK has risen considerably. The election outcome looks set to further complicate the process of negotiating the UK’s departure from the EU, as the government only has a narrow majority in parliament – and even this looks vulnerable in the context of Conservative MPs’ widely differing views on post-Brexit UK-EU relations. Given the backdrop of an already slowing economy (the UK posted the lowest real GDP growth of all 28 EU economies in Q1 2017), it is not surprising that businesses are beginning to express a lack of confidence. We believe it’s highly unlikely that the first round of Brexit talks between the British government and the EU (scheduled for 19/20 June) will deliver more clarity or significant results. This means that companies will have to wait even longer to assess the impact of these negotiations on their business.

“Our analysis indicates that uncertainty will remain high in the next 18 months, regardless of what happens in the wake of the election, and we are maintaining our risk rating of DB2d and our ‘deteriorating’ risk outlook for the UK economy. We predict that, in the long run, the election result could make a ‘hard’ Brexit - which we believe would be harmful for the British economy - impossible. The best advice for businesses is to monitor the progress of negotiations, and use the latest data and analytics to assess risk and identify potential opportunities. Once a government is firmly in place and negotiations progress, organisations may have a clearer picture of the business partnerships between the UK and the rest of the world. Until then, a careful and measured approach to managing relationships with suppliers, customers, prospects and partners will be key to navigating through these uncertain times.”

“If there’s one thing that’s certain in business, it’s uncertainty” – Stephen Covey, US author. You’ve probably heard this a few times in your life. Here Ed Thorne, UKI Managing Director at Dun and Bradstreet, talks Finance Monthly through the current situation in the UK, the uncertainty that looms, and the confidence that is being pushed throughout.

We are without doubt a nation sitting in a world in flux. Business confidence is shaky, as recent geopolitical and economic issues have created an uncertain business landscape. For the UK, the vote to leave the European Union has created a volatile UK market; with the pound’s value dropping, inflation is at its highest point since September 2013, and reports that the cost of some imports could rise by eight per cent after the UK finally leaves the EU. But where does this leave businesses?

A recent survey by the London Chamber of Commerce and Industry found that business confidence is actually growing despite increasing cost pressures (including raw materials and oil prices) and the devaluation of the sterling still lingering. It’s also been reported that business confidence among the UK private sector is now at its strongest level since mid-2015, thanks to a strong economic backdrop and improving client demand.

There are businesses that are thriving in the UK despite the uncertainty; in the past few months, the tourism and manufacturing industries are experiencing an all-time high. The Office of National Statistics revealed that tourism to the UK has increased by 13% from November to January year-on-year. The reduced cost of visiting the UK for American and Eurozone tourists, appears to have caused tourism to skyrocket. The same applies for British manufacturing; CIPS’ latest figures from February reported solid growth of output and new orders. These factors suggest that many UK businesses are actually doing well at the moment, despite Brexit.

It might not all be plain sailing, though. UK businesses need to keep one eye on the global currency; as the pound fell precipitously after the Brexit vote and the dollar could very well strengthen. If this does happen, it could affect the fortune of both net importers and exporters – so definitely something to watch closely!

And it’s important to remember that the UK hasn’t fully left the EU yet, and much is yet to be worked through before the June 2018 deadline. Failure to negotiate a good trade deal, or indeed any deal, with the EU could have a significant impact on business confidence. Our Dun & Bradstreet economists have advocated a calm and cautious approach for businesses, recommending continued monitoring of developments rather than responding too quickly. The impact of Brexit on migration, interest rates, house prices and even food prices, could have considerable effects on business confidence in both the short and long term.

Business confidence in the UK is not solely centred on national companies. For decades, the EU has simplified trade regulations to allow labour, capital, goods and services to move freely across borders. Companies across the world that rely on the UK as a base for business in Europe can no longer take these benefits for granted when Brexit is set in motion. This could certainly impact the growth potential for UK businesses and stall opportunity for those companies looking to expand. Global companies operating in the UK and Europe also face greater compliance and regulatory challenges, as uncertainty plays an increasing role in the market.

Stephen Covey’s words about business uncertainty ring louder right now than any time in recent memory. Although risk and uncertainty is an accepted part of our increasingly complex global environment, it doesn’t make it any easier to deal with for the modern business. Against a backdrop of uncertainty, companies doing business with or in the UK can use data and analytics to stay abreast of market trends, and effectively manage relationships with customers, suppliers and partners to minimise risk.  Business confidence in the UK is likely to continue on a rocky road for the foreseeable future and companies need the right tools and information to help them stay ahead and navigate to success.

About Finance Monthly

Universal Media logo
Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
© 2024 Finance Monthly - All Rights Reserved.
News Illustration

Get our free monthly FM email

Subscribe to Finance Monthly and Get the Latest Finance News, Opinion and Insight Direct to you every month.
chevron-right-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram