New report from national law firm Mills & Reeve highlights the defiant ambition of the mid-market despite serious challenges, and demands for sustainable growth finance.

Mid-market businesses remain ambitious and confident in their growth prospects despite an unstable economic landscape, the impact of Brexit and an unsupportive funding environment, according to new research from national law firm Mills & Reeve.

The study, ‘Defying Gravity’ - based on the opinions of 500 leaders of medium-sized businesses in the UK – reveals that 83% of mid-market businesses plan to increase turnover in this financial year (2017/2018) by an average of 22%, and two thirds of leaders aiming to grow (62%) are willing to bet their house on meeting this target. This is not unrealistic, with the new research also revealing that two thirds (66%) of medium-sized businesses grew turnover last year, at an impressive average of 20%.

However, mid-market businesses face serious challenges to growth. Three fifths (59%) of mid-market business leaders do not believe that the economy is strong and stable. Two thirds (64%) of mid-market boards are concerned that there is now a real risk of recession, and that economic uncertainty will disproportionately affect the mid-market (66%).

With single market access “critical” for three fifths (60%) of mid-market businesses, Brexit looms large on leaders’ list of concerns. Three in five (61%) mid-market leaders are concerned that the UK failing to reach an agreement with the EU would cause “significant damage” to their business, and 60% are concerned that regions outside London will be disproportionately affected by Brexit. More than half (55%) of leaders are concerned that implementation of Brexit is a serious threat to their ability to recruit both specialist and low-cost talent.

The external funding needed to supercharge growth is also found to be lacking: almost three in five mid-market leaders (58%) say that their company can’t achieve its growth potential without better long-term finance options. More than half (56%) of business leaders stated that mid-market finance is not “fit for purpose”, with two thirds (63%) believing that the UK funding environment is great for start-ups, but not for mid-market firms.

Claire Clarke, managing partner at Mills & Reeve, comments: “Despite very real challenges, it is encouraging to see mid-market leaders remaining defiantly ambitious about growth, determined to beat market conditions and to hold their position as the driving force of the British economy.

“But these businesses are being hindered in their efforts to realise their ambitions. Accessing growth finance suited to mid-market needs is a significant challenge, and the unstable economic and political landscape is causing some businesses to refrain from making the investment necessary to grow.”

The findings are released today ahead of a series of reports from Mills & Reeve championing the mid-market and exploring the current challenges faced by business leaders.

The research goes on to reveal a perceived lack of support from Government, with two thirds (65%) of medium-sized business leaders frustrated that the Government “keeps presenting obstacles to mid-market growth”. Three-quarters (74%) cite a lack of targeted policy support, with 61% concerned that Brexit will distract Government from supporting regional development and infrastructure.

Jayne Hussey, head of mid-market at Mills & Reeve, adds: “The mid-market is the unsung powerhouse of the UK economy, and we are hopeful that medium-sized businesses can continue to overcome the barriers to growth formed by uncertainty. The events of the recent past may have rocked the nation’s confidence, but the resilience, strength and ambition of mid-market business leaders appears to remain intact.”

(Source: Mills & Reeve)

Lord Alan Sugar is best known for his long tenure as host of the BBC’s hugely successful show The Apprentice.

His qualifications to sit across from hopeful candidates in the boardroom have been built up through years of diverse business experience from heading up an early computing giant (Amstrad) to more recently acquiring a lucrative property empire.

A self-made man with an innate sense of corporate strategy, Sugar rose from humble beginnings in a council flat to being appointed the UK’s Enterprise Tsar through tenacity, savvy and a tell-it-like-it-is attitude.

However, his rise from obscurity to celebrity wasn’t without its setbacks and stumbles. Here is the story of one of Britain’s most influential businessmen.

(Source: ABC FINANCE LTD)

According to a report co-authored by Yandong Jia, a researcher at the Research Bureau of the People's Bank of China, alongside Jun Nie, a senior economist at the Kansas City Fed, “analysis indicates that the momentum of Chinese growth is likely to slow in the near term."

As the world’s second largest economy, China’s GDP has seen a 6.9 YoY increase, according to China’s National Bureau of Statistics (NBS). However, the above report suggests further growth to be considered bleak. "An analysis of its underlying forces suggests this momentum may not be sustainable," it reads. "In addition, strength in policy-related variables has been waning, creating additional downside risks to near-term growth."

Finance Monthly, this week spoke to several expert sources on China’s economy and prospected continued growth. Here are Your Thoughts.

Josh Seager, Investment Analyst, EQ Investors:

Every so often, investor concern about a Chinese hard landing rises. There have been numbers of catalysts for this over the past three years, from Chinese equity market sell offs to expectation of capital outflow induced currency depreciation. Most have passed without issue and are now barely remembered

The biggest cause of concern, however, has been debt. This has led many commentators to predict a large credit crisis. We believe that such concerns are overemphasised and stem from a key misunderstanding: the Chinese economy is ultimately guided by the Communist party not market dynamics. Credit crises generally happen because heavily indebted borrowers lose access to financing. In China’s case, the communist party control both the lenders (the banks) and the problem borrowers (the heavily indebted State-Owned Enterprises (SOES). Consequently, they are in a perfect position to manage the riskier debts and avoid defaults.

The real risk to China is much less exciting. Without ‘creative destruction’ where unprofitable companies are allowed to default, resources become misallocated. This means that unprofitable and unproductive companies, many of whom should be bankrupt, hoover up capital, employees and materials that could be better used by more productive firms.

This is happening in China, SOEs are hoarding resources in spite of the fact that they have get 1/3 (capital economics) of the return on them that private companies do. The route out is through supply-side reform but is difficult. It requires bankruptcy, bank recapitalisation and would probably lead to higher unemployment and increased uncertainty.

The Chinese government is financially strong and can afford to do this now. However, reform will get more difficult and expensive as the stock of debt builds. If President Xi chooses to pursue reforms we are likely to see short term pain for long term stability. If not, we will see a continuation of the status quo for the next few years but future GDP will be lower as a result.

Jonathan Watson, Chief Market Analyst, Foreign Currency Direct:

The Chinese economy has been wobbling with concerns over the pace of economic growth, which peaked at nearly 15% in 2007 but has been languishing around 6.9% lately.

Both business and consumer debt is high, and there are wider concerns that the largely export driven growth the economy has seen in the last few decades is coming to a halt.

Previously voiced concerns over the legitimacy of Chinese economic data raises questions about the extent of the trouble the economy could be in. Overlooking those fears, what appears clear is that the Chinese economy is still improving. With the global economy predicted to grow by 3.6% this year and 3.7% next year, according to the IMF, China should have little to worry about.

As a net exporter, the global economy will continue to have an effect on China’s economic growth. Any readjustments could cause turbulence but I see the trajectory as positive. Rather than hitting a wall as many have been predicting for years, I expect the Chinese economy will be building over or through one…

Erik Lueth, Global Emerging Market Economist, LGIM:

The Chinese economy is indeed likely to slow from here, but it is unlikely to hit a wall. Growth has been above the official target of 6.5% so far this year, powered by exports and a buoyant property sector. But, both of these drivers are fading.

In response to runaway house inflation in prime cities, the government tightened prudential measures over the past year or so. This has led to weaker housing demand and prices with the latter now falling in tier-1 cities. Similarly, exports seem to have peaked with PMIs in advanced economies looking stretched and the Chinese currency no longer falling in real terms. In our base case the economy would slow from around 7% this year to 6.5% in 2018 and 6.2% in 2019.

We are concerned about high debt levels, but the Chinese economy hitting a wall is a mere tail event in our forecast. To begin with, a financial crisis doesn’t look likely (as I have argued here on our investment blog, Macro Matters). China’s debts to foreigners are negligible and the capital account remains tightly managed. Key debtors and creditors are state-owned—state-owned enterprises and banks, respectively—greatly reducing roll-over risks. And, shadow banking while risky is still too small to overwhelm the state banks.

Second, China still has ample fiscal space. If it were to increase its fiscal deficit – estimated at around 12.5% of GDP – by 2 percentage points over each of the next 5 years, government debt would rise from around 70% of GDP today to 105% of GDP in 2021. This is not negligible, but certainly manageable given high savings rates and potential growth.

If something has the potential to drive China against the wall, it would be the deflation of a property bubble. As always spotting a bubble is challenging, but on balance we discount it. According to BIS data real house prices have been flat since the global financial crisis on a nationwide basis. Moves in prime cities have been anything but sideways, but at 90% over 3 years, increases remain well below the 300% witnessed in Tokyo before its bubble burst in 1990.

Dr Ying Zhang, RSM Rotterdam School of Management, Erasmus University:

China’s economic growth from the factor-driven to an efficiency-driven in the past 3 decades has not only brought China to be the world manufacturing center in the past, but also leveraged China as one of the important “spinal joints” of the world-body for the future. The reason of its importance is consistent with the global phenomena and world economy integration, as well as the interdependence between China and the rest of the world.

China’s supply-driven and quantity-based catch-up model is very effective, particularly to bring China to the category of middle-income countries; however, once stepping into such a territory, the historical evidence already shows that the chance to be trapped in there is be very high, if without proper in-time transformation.

Due to the high-interdependence, China’s reduced economic growth rate, though not pulling China’s economy moving down, has pulled exponential impact on some countries in terms of their employment rate and economic performance. Such symptom calls for worries and blaming to China, with two different messages: one, China hits the wall; second, China is transforming and preparing for the innovation-driven economic growth model.

China’s current transformation, in terms of being inclusive and quality-based and dramatic rising evidence in domestic consumption and prosperous service sector, implies that China will not be falling into the first proposition. It is also supported by the vision and the joint effort of Chinese citizens, global participants, and Chinese government to build China as an inclusive society and sustainable economy for the sake of world integration and global sustainability. In principle, this direction is presented as a paradox where China’s transformation is empowered by massive entrepreneurship and innovation in the current technology-driven and digitalization era ,while presented with a reduced GDP growth rate. The underlying matter is our perception and the angle to view it.

China’s economy does not hit the wall. Instead, it is on drive with much more power. With corrected understanding on the relationship between what China is working on and what the statistics simply presented, there would be more space for the world to grow together, for the world economy to be more stabilizing, sustainable and integrative.

Franklin Allen, Executive Director, Brevan Howard Centre for Financial Analysis:

Academics and journalists often predict that the Chinese economy’s growth will “hit a wall” and slow down dramatically. So far this has not happened. The Chinese economy has slowed down from about 10% annual real GDP growth several years ago to the current 6.5-7.0%. My own view is that this kind of growth rate is likely to continue for the next few years at least. The Chinese government still has a large degree of control over many aspects of the economy and if growth appears to be missing this target, they can ensure enough extra activity is undertaken that it hits it. There is a significant amount of debt in the Chinese economy but much of this is local government debt. The problem is that the funding of local governments is not well structured currently. They do not have taxing powers and do not receive large block grants from the central government. At some point the Chinese government will need to solve this problem. However, in the short run debt figures in China should be interpreted in a different way than equivalent numbers in Europe or the US.

In the long run, I think the Chinese economy has the capability to grow more quickly than current rates. The problem is that the financial system does not provide productive small and medium sized enterprises with the financing they need. They are the growth engines the economy requires and has used in the past during the fast growth period. If you look at the interest rates these firms are prepared to pay in the shadow banking sector, it seems likely they can grow quickly if they could obtain finance through the formal financial system. At the moment this is geared up to provide large state-owned enterprises with finance but they do not require very much. They do not have many prospects for growth. Hopefully, reforms to the financial system that have long been discussed and that will allow flows to the firms that need then will be implemented before too long.

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

Sustained economic growth and the fall in the Sterling exchange rate have put record pressure on British businesses to increase the amount of money tied up in working capital, leaving them at risk if growth were to weaken in the months ahead, according to the latest report from Lloyds Bank Commercial Banking.

Firms across Britain now have around £535bn tied up in excess working capital – up seven per cent from £498bn since the last report was released in May – meaning that firms could struggle to free up cash either to grow or to weather turbulent financial conditions.

The sustained growth seen in the past 12 months – particularly in manufacturing and in the services sector – has increased the amount of cash tied up in the day-to-day running of businesses, with the impacts from the fall in Sterling, forward purchasing of inventory and a rise in input costs, being fully realised.

At the same time, one in four businesses said their customers had taken longer to pay during the past 12 months, increasing the value of firms’ outstanding invoices.  This comes as businesses are continuing to rapidly build up inventory, leading to more cash being locked up in stock, which is then unable to be used for growth.

With as many as one in three firms saying they are concerned by economic uncertainty or a fall in sales during the next 12 months, these factors could spell trouble for British businesses if economic conditions declined.

Adrian Walker, managing director, head of Global Transaction Banking at Lloyds Bank, said: “Increasing pressure for British businesses to hold more working capital has to date largely been driven by economic growth fuelled by the fall in Sterling. But, if there were any economic obstacles on the horizon this could be a double-edged sword.

“By locking up cash in this way, it stops investment in other more productive areas of the business, whether that be investing in new people, creating new products or targeting new markets.

“With as many as one in three businesses telling us that their greatest concerns for the next 12 months are economic uncertainty or a fall in sales, this reliance on future growth prospects is concerning.”

The findings come from Lloyds Bank’s second Working Capital Index, a six-monthly report that uses Lloyds Bank Regional Purchasing Managers’ Index (PMI) data to calculate the pressure British businesses are under to either increase or decrease working capital.

Working capital is the amount of money that a company ties up in the day-to-day costs of doing business. Growing businesses tend to use more working capital, while pressure falls when firms realise they are facing challenges.

The current Index reading of 108.0 is an increase of almost four points, from 104.1 at the end of 2016, and is just below the highest point seen since the research started in 2000.

The Index highlights that with the UK’s domestic outlook looking weaker, businesses are increasingly going to need to rely on exports for future growth.

While the current relative weakness of Sterling makes conditions for international trade benign, the practicalities of exporting mean that it often places even greater stress on working capital through shipping times and slower payments.

Mr Walker added: “Whether businesses expect to grow through exporting, or they anticipate challenges due to weakening domestic demand, UK firms could benefit from the operational efficiency and cash flow boost that comes from working capital improvements.

“In the past, previous highs in this Index have coincided with improving financial conditions. The fact that the Index is currently climbing while financial conditions remain relatively low means businesses are taking on more and more risk.

“Our experience is that businesses that undertake a programme of working capital improvements can typically release around three to five per cent of turnover in additional cash, allowing them much more freedom to invest in growth, trade internationally, expand their product set or to give themselves a buffer to see them through more troubling times.

“But doing so successfully isn’t easy. It requires change across a number of business functions, and so the time to undertake that work should be done ahead of embarking on further growth, a new exports programme, or before any possible future storm hits.”

Manufacturing under pressure

The manufacturing sector has been a source of hope and opportunity for the British economy in recent months as the fall in Sterling made British manufactured goods more competitive overseas.

But the sector’s growth, together with rising import costs and pre-purchasing of materials in expectation of inflation, has pushed the sector’s working capital index to 126.1, which could be hampering growth amongst manufacturing businesses.

This compares with readings of just 105.0 and 104.8 in the services and construction sectors respectively.

Regional variations

The pressure to increase working capital grew in every region apart from the East of England, where the Index fell from 112.0 to 107.8. Although, the East of England still saw high pressure on businesses to hold more working capital.

Scotland, where a reading of 99.5 indicated pressure to reduce working capital six months ago, saw the biggest increase, with the Index reading rising more than five points to 105.2.

Wales remained the region with the highest pressure to increase working capital with the Index climbing from 113.7 in April to 114.3 now.

(Source: Working Capital)

In 2017, Aldi announced they were planning on becoming a major competitor in the US grocery store market, investing a mind-blowing $3.4 billion into current and future American endeavors. If you don't have an Aldi near you now, one might be popping up soon. So, what can you expect? Here's the fascinating history behind this up-and-coming US chain…

A recent report form PwC concludes that UK investment in InsurTech in the second quarter of 2017 surpassed that of the previous three quarters, increasing to $290 million (£218m) in the first half of 2017, compared to $9.7 million (£7.3m) the year before.

Global investment in InsurTech by global insurance firms, reinsurance firms and venture capital companies surged 247% to $985 million.

Mark Boulton, Insurance Sector Lead at Fujitsu UK & Ireland has this to say to Finance Monthly:

“This year has been phenomenal for the insurtech industry in the UK, and these latest figures reflect it. Increasingly, we see the market gaining momentum, and the amalgam of data made available is reshaping the industry in an unparalleled fashion. Investors are coming to much better understand the values that lie within a connected world, from more dynamic customer relationships to personalisation and need for tailor-made solutions.

“Fujitsu’s recent research looking into the UK’s digital landscape showed that nearly 40% of people want the UK to make faster digital progress. As such, insurers need to keep up with the rapidly changing dynamics and unlock the power of technologies.

“Although many insurance companies have digital on their radar, it is important for this industry to take advantage of digital innovation by not only creating savvy online apps and improving the digital elements on the consumer-facing side, but by also implementing digital throughout the business. This will help insurers not only save more, but also become more integrated and process efficient. The amount of deals and investment in the past year are a vote of confidence and now is time UK claims its role as a global insurtech hub.”

While many younger drivers have been using so-called black box car insurance, telematics has yet to become mainstream. The FT's Oliver Ralph test drives a telematics system to see how it affects his driving, and whether it could be the future of car insurance.

Sopra Banking Software uncover why it is that men still dominate senior positions in Tech and why men are out-earning women, even in equal positions.

The UK gender pay gap won’t close until 2069 unless measures are taken to combat it now. That’s another 53 years that women will continue to pay a higher price for being female.

A study by McKinsey Global Institute found that in an ideal scenario, where female roles are identical to those of men, “as much as $28 trillion, or 26%, could be added to the global annual GDP by 2025.”

Gender Disparity in the Workplace

Laura Parsons, Senior Manager at Deloitte, shares these findings: Last year, girls outperformed boys in every science, technology, engineering and mathematics subject, and even though innumerable top-paid jobs demand capabilities in STEM subjects - 70% of women in the UK with a STEM qualification aren’t working in compatible fields.

What is it that pushes women out of these industries, and how do we secure them from entry level to senior positions, and offer support in pursuit of entrepreneurial ventures?

Unsurprisingly, McKinsey Global Institute found that 38% of women in the technology field feel that gender discrimination staggers growth and chances for progressing their career in the future. 60% of these women attribute not wanting to be a top executive to excessive stress and pressure. Of all the fields researched, these figures were among the highest.

Melissa North, head of human resources at Sopra Banking, shares: “Businesses are not taking adequate measures to ensure women feel they have the reassurance to pursue a work-life balance, including starting a family - and therefore women don’t succeed long term. Feeling like they must compromise having a family to have a career is one of the leading reasons women don’t stick around to get moved into leadership roles.”

Pip Wilson, entrepreneur, investor, and co-founder of amicableapps, adds: “Ultimately, the thing that will completely level the playing field is an even split between men and women in childcare.”

As a parent, Pip Wilson shared the domestic workload with her husband to be able to focus on the success of her business ventures. This often meant her husband would stay home while she worked, and vice versa.

Something as simple as employers providing or supporting childcare initiatives for employees could prove to be one of the most important incentives for females in the workplace.

Tech: A Growing Sector for Women

Entrepreneurs and business women, such as Melinda Gates, wife of businessman and philanthropist Bill, see the value of using tech to their advantage: “To me, the tech industry is one of the best places to work right now. If I was working again, I would work in biological science or tech or a combination of both. Every company needs technology, and yet we’re graduating fewer women technologists. That is not good for society. We have to change it”.

Women should view this as the best time to enter the tech market: more people are graduating from tertiary levels than ever before, and women are outperforming men in STEM subjects.

As businesses become aware of what this lack of gender representation means for their overall success, the more women will become empowered to hold positions they didn’t before.

It’s tough to identify whether the gender bias is due to subconscious views during the recruitment process, or from the ongoing cycle that sees women receiving lower pay and fewer promotions, thus resulting in women keeping themselves placed below men through these continuous actions. The social constructs for gender roles will take time to be broken down.

There is good news for women, however. Studies show that those who ask for the same salary as men, in the same role, tend to get offers in line with what they are asking.

What Should the Workplace Look Like?

Take gaming for example: Women make up only 22% of game developers, yet represent 50% of the people who play video games.

As a business woman and consumer, Pip Wilson believes that people inside your company need to reflect the people you’re trying to serve.

Businesses need to recognise the responsibility they have to women and gender equality in the workplace, but also the possible benefits that come with hiring from a larger pool of talent, that includes women:

- Increased labour supply
- Higher incomes
- Productivity gains
- Reduced poverty in developing countries
- A unique angle and approach to problems, due to a different atmosphere cultivated by women

Once a culture of diversity has been adopted and is naturally functioning, there will be a good discrimination in place – one that filters and keeps only the best for the job, regardless of gender.

How Companies Can Address the Gender Disparity:

• Provide practical career insights to educators and policymakers
• Create more support for women returning to work
• Share detailed information on the gender pay gap with employees and the public

Melissa North, Head of HR at Sopra Banking Software adds that networking is important, “Having a belief and not doubting yourself is important as a woman climbing the business ladder as well as making yourself visible to other women in the industry and talking about your struggles. Not chasing your dreams of going into a new field because of commitments attached to gender shouldn’t hold you back.”

Tips for Women in Tech:

Talk to others: Fight the temptation to ‘do it yourself’, and get help and advice from wherever you can

Find mentors and those who have been in your shoes before: male or female

Use tech to your advantage: A study done by Accenture details how mobile tech has made it easier than ever to balance work and home life. Exploit the connectedness, making use of mobile apps and cloud services. A successful business no longer requires a 9-to-5 in an office

Have confidence and trusting your abilities: Many women tend to believe they fall short in the skills needed to thrive in business. A lack of confidence means avoiding intimidating tasks or new disciplines, more so than some men, who are more likely to try

At a time when the tech industry and business overall is dominated by males, women should take this opportunity to get a head start in whatever they want to achieve, using the various tools available in a changing world. Businesses should recognise this as an opportunity to empower women, and to attract the best new talent, regardless of gender – as it’s crucial to growth.

(Source: Sopra Banking)

Technology is often remarked as evolutionary ammo, and the statement stands just the same for the growth of businesses. Finance Monthly below hears from Frédéric Dupont-Aldiolan, VP Professional Services at Sidetrade on the latest and upcoming innovations that have hit 2017 hard.

Artificial intelligence, robotics, machine learning and the Internet of Things: 2016 stood out as a year marked by technological development and significant advances in several fields, not least that of connected, driverless cars. Against this backdrop, a clear trend is appearing: the growing influence of robotic technology in daily life.

In 2017, we have seen more promising innovations, here is my review of the top five things we are seeing:

5. IoT, the Internet of Things

Star of the Consumer Electronic Show (CES), which took place in Las Vegas in January, and Viva Technology, which took place in Paris, the Internet of Things was thrust into the spotlight in 2016 and continues to bring increasingly intelligent connectivity to our daily lives. Smart devices, equipped with bar codes, RFID chips, beacons or sensors, are taking the lead and enabling companies to gain greater visibility over their transactions, staff and assets.

In 2016, information and technology research and advisory company Gartner estimated that there were 6.4 billion connected devices globally, an increase of 30% on 2015. By 2020, this figure is likely to have grown to 20.8 billion.

4. The explosion of Big Data

Network multiplication brings with it a proliferation of data generation, whose analysis, use and governance have become a burning issue. According to estimates by IDC, an international provider of market intelligence for information technology, by 2020, every connected person will generate 1.7MB of new data per second.

The concept of ‘perishable data’ has lost validity. In 2017, companies now have the capability to use data before it becomes obsolete. Devices connected via the Internet of Things will rapidly speed up data decoding and processing for actionable insight.

3. The ramp up of artificial intelligence and automatisation

Artificial intelligence has been one of the main talking points in technology over the last year. Encompassing areas such as machine learning, robotic intelligence, neural networks and cognitive computing, it’s now in daily use in numerous forms including facial and voice recognition, endowing velocity, variety and volume.

This year, artificial intelligence has taken on an increasing number of repetitive and automatable tasks, beginning with wider use of ‘chatbots’ with the capacity to give coherent, easily formulated responses. IDC pinpoints robotics driven by artificial intelligence as one of the six innovation accelerators destined to play a major role in the digitalisation of society and the opening up of new income streams. Indeed, Amazon and DHL are already making use of warehouse handling robots.

2. Location technology, the Holy Grail of customer satisfaction

Location technology has taken great strides over the last year or so, to the marked benefit of customer satisfaction in the hotel, health and manufacturing sectors. Customers can now receive geo-targeted offers on their smartphones, for example for promotions or reductions, depending on their physical location.

In 2017, RFID chips enable yet more accurate tracking of customers and enhancement of their buying experiences.

1. Virtual reality makes way for augmented reality

One of the biggest innovations recently has been virtual reality, and with it came much media coverage too. From Facebook to Sony, Google to Microsoft, big brands grasped this new technology to offer an outstanding user experience, through the merging of virtual and real imagery.

In 2017, these virtual devices have acquired an awareness of their environment and give users a real sense of immersion of the digital environment from within their own homes. The potential of augmented reality for business will be harnessed too in the coming months. Some companies, among them BMQ and Boeing, are already employing it to increase their retention and productivity rates, or to provide training to their workforces across worldwide subsidiaries.

Over the next few months, as we gear up for another round of product launches, we should expect to see advancements in these key areas of technological innovation. Within business, this technology should help to improve customer service by streamlining production and processes, saving time and money, as well as providing new and exciting ways to reach and engage with customers, helping to retain existing clients as well as bring in many new ones.

Today, the 5^th July 2017, marks the ten year anniversary of the last time there was an interest rate rise in the UK.

On this date in 2007, the Monetary Policy Committee voted to increase rates to 5.75%, just as the wheels were about to come off the global economy. A decade on from the last interest rise, the Bank of England is once again mulling a rate hike, though the current level of consumer debt leaves the central bank facing a tightrope walk on interest rate policy.

• 8 million Britons haven’t seen an interest rate rise in their adult life
• £1,000 cash in the bank is now worth £878 after accounting for inflation
• This compares to £1,323 from £1,000 invested in the stock market
• Money in non-interest bearing accounts has risen almost eightfold to £179 billion
• UK consumer borrowing is higher than on the eve of the financial crisis… and rising
• The Bank of England bind
• Charts and tables

Laith Khalaf, Senior Analyst, Hargreaves Lansdown: “It’s been a decade since the last interest rate rise, so it’s little wonder that borrowers have got used to the idea of cheap money. Indeed around 8 million Britons haven’t witnessed an interest rate rise from the Bank of England in their adult lives.

Low interest rates undoubtedly helped to prop up the economy in the wake of the financial crisis, by lowering the cost of debt for UK consumers and companies. However the burden of loose monetary policy has very much fallen on those with cash in the bank, who have seen the interest they receive wither away to virtually nothing.

Meanwhile the UK consumer has even more borrowing now than ten years ago, thanks to weak wage growth and the addictive nature of low interest rates. Rising house prices and the increased cost of a university education mean that the current generation of young adults are particularly accustomed to eye-watering amounts of debt.

There has been a sharp rise in consumer borrowing over the last year, and current conditions of weak wage growth coupled with rising inflation are likely to exacerbate the use of credit to fund living expenses. Indeed the savings ratio has now fallen to a record low, highlighting the squeeze currently facing UK consumers.

The fragile debt dynamics of the UK economy put the Bank of England in a bind, because while a rate hike would help to curb consumer borrowing, it will also make the existing debt mountain less affordable. The central bank therefore faces a tightrope walk between keeping borrowing levels in check, without putting too big a dent in consumer activity, which would have a damaging effect on the UK economy.

The Monetary Policy Committee has turned more hawkish recently, and expectations of a rate rise have built up considerably in recent weeks. However the large amount of consumer debt means that even when the Bank of England does finally decide to wean the UK off low interest rates, it will be a very slow and steady process.”

The cost for cash savers

Those with cash in the bank have now seen a decade of falling returns. £1,000 stashed in a typical instant access account in July 2007 would now be worth £1,107. However after factoring in inflation, which has risen 26% over the period, the real value would today be £878. By comparison the same £1,000 investment in the UK stock market in July 2007 would now be worth £1,666, or £1,323 after adjusting for inflation. (Returns calculated with interest and dividends re-invested).

This is a pretty astonishing result, seeing as this investment would have been made just as the UK stock market was about to fall by almost 50% as a result of the financial crisis. These figures highlight the healing power of time on stock market returns, even if you happen to be unlucky enough to invest just as conditions take a turn for the worse. The figures also demonstrate the toll taken on cash in the bank by such an extended period of low interest rates.

Indeed, over the last ten years the amount of money held in non-interest bearing accounts has risen almost eightfold, from £23 billion in 2007 to £179 billion today. At the same time the average rate on the typical instant access account has fallen from 3.3% to 0.4%, and the average rate on non-instant access accounts (including cash ISAs) has fallen from 5% to 0.9%.

(Sources: Bank of England, Thomson Reuters Lipper, Moneyfacts)

The benefit for borrowers

While cash savers have undoubtedly felt the pinch from lower interest rates, there have been benefits for borrowers which have helped support the economy. The typical mortgage rate has fallen from 5.8% in July 2007 to 2.6% today, helping to support household incomes and the housing market in the wake of the financial crisis. Unsecured consumer borrowing rates have fallen too. The result is much lower levels of consumer loan defaults. UK lenders have written off £2.5 billion of bad consumer loans over the last year, this compares to £6.8 billion in 2007.

Borrowing costs have also fallen for UK companies. The typical borrowing cost for a large company with a good credit rating has fallen from 6.4% in July 2007 to 2.8% now. This has allowed companies to gain access to funds cheaply, thereby supporting them in making investments and profits, and providing employment.

Low interest rates have therefore helped the economy by reducing the burden on UK consumers and companies. However it seems consumers are now increasingly taking advantage of low interest rates to load up on debt, which is causing concern at the Bank of England. Only last week the ONS published data which showed that the UK savings ratio has fallen to a record level of 1.7%, which suggests the consumer squeeze is beginning to hit home.

(Sources: Bank of England, Markit iBoxx)

Consumer credit warning signs

The Bank of England recently warned that consumer credit and mortgage lending were a key risk to financial stability in the UK. This is because there has been a rapid increase in consumer credit of late, which rose 10% over the last year. As a result the central bank is bringing forward an assessment of the banking sector’s exposure to potential losses stemming from stressed conditions in the consumer credit market.

In absolute terms, levels of UK consumer debt are actually higher now than they were on the eve of the financial crisis, a point in history when it is widely recognised that the UK was living beyond its means. Consumer borrowing (including credit cards, overdrafts and loans) now stands at £199 billion, compared with £191 billion in July 2007, and a highest ever level of £209 billion recorded in September 2008. Mortgage borrowing now stands at £1.3 trillion, up from £1.1 trillion in July 2007.

The good news is household income has also risen over this period, which along with low interest rates make this debt more affordable. In 2007, the household debt to disposable income ratio peaked at 159.7%. This fell back in the years following the financial crisis as consumers tightened their belts and banks became more reluctant to lend. However it has recently started to head in the wrong direction again, rising from 139.9% in 2015 to 142.6% in 2016.

The Brexit-induced currency crunch facing consumers at the moment can be expected to put further upward pressure on this ratio. With wage growth weak and inflation rising, consumers are more likely to rely on debt, while their disposable household income is likely to come under pressure. Indeed in its latest forecasts the Office for Budget Responsibility predicts this ratio will hit 153% in 2022.

(Sources: Bank of England, ONS, Office for Budget Responsibility)

The Bank of England bind

This all underlines the very difficult situation the Bank of England finds itself in. Raising rates will help to wean investors off borrowing, however it will also make the large existing stock of debt more expensive, which will eat into monthly budgets, putting downward pressure on spending and weighing on economic growth.

This is perhaps why the bank has so far chosen to use more specialised tools to deal with the sharp rise in consumer credit, such as tightening up mortgage lending rules and increasing bank capital requirements to deal with any downturn in credit conditions, rather than wielding the sledgehammer of an interest rate rise.

However, more members of the monetary policy committee appear to be in favour of a rate rise, which may mean we could soon be in for the first hike since 2007.  Markets are now pricing in a 55% chance of a rate rise by the end of the year. However the fragile debt dynamics of the UK economy mean that even when the Bank does decide to raise rates, it’s going to tread very carefully indeed.

It’s also worth pointing out that this wouldn’t be the first time that expectations of a rate hike have risen only to be subsequently quashed. At the beginning of 2011, two years after rates had been cut to the emergency level of 0.5%, the market was expecting interest rates to be at 3% by 2014.

Charts and tables

The data behind these charts is available on request.

Here’s a summary of interest rate data:

The stock market fell sharply in 2007 and 2008, but has since staged a significant recovery, while cash has been left in the doldrums:

Consumer credit fell in the wake of the financial crisis, but has started to pick up again and is approaching a record level; weak wage growth and rising inflation are likely to stoke the borrowing binge further:

Low interest rates have helpd the economy in a number of ways, not least by making mortgage payments more affordable, which has helped to underpin the housing market:

Sources: Bank of England, Thomson Reuters Lipper, Nationwide, ONS

(Source: Hargreaves Lansdown)

Led by growth in Asia Pacific, the global insurance industry has been experiencing moderate growth in recent years. However, a slowdown in the industry is likely, though growth is going to remain steady.

While the life insurance sector remained the most profitable in 2015, the non-life insurance sector was not far behind, according to Global Insurance Industry - Forecast, Opportunities & Trends 2015-2020, a report recently released by Taiyou Research. The industry remains fragmented, thus increasing the level of rivalry within the market. Large, international companies have more or less entered most countries now and have either driven many smaller players out of business or have formed partnerships with them.

Online insurance is also a rapidly growing business, competing successfully with existing players. Apart from insurance market players, many financial service providers and banks are also entering into the global insurance business, thus creating even more competition for existing players.

Stringent regulations govern the insurance industry and it remains to be seen how this scenario plays out in the coming years.

(Source: Taiyou Research)

GTR spoke to insurers and brokers at the annual conference of the Association of Trade Finance in the Americas (ATFA) on how the insurance market has evolved in the US since the financial crisis.