FINANCE

Carillion collapse shines light on late payment epidemic

The Times’ James Hurley looks at how the collapse of Carillion has exposed Britain’s “late payment epidemic” and the government’s efforts at resolving it. Industry bodies say Carillion was a member of initiatives designed to tackle late payment, including the prompt payment code and a “supply chain finance” initiative, giving it a veneer of respectability, when in fact the company remained a “notorious” late payer. FSB chairman Mike Cherry says the late payment code “does not work when it is most needed” but Philip King, CEO of the CICM, which runs the code, insisted the code was not the problem. “We need businesses to be more willing to challenge the behaviour of buyers both directly and through the prompt payment code, so that the change in culture we all know is needed can be achieved,” he said. Meanwhile, insurers have said they will pay more than £30m to businesses owed money by Carillion. Sums ranging from &pou nd;5,000 to several million pounds are being paid to firms which had insurance policies against bad debts. However, the majority of the collapsed construction firm’s suppliers risk getting little or nothing back, as only a minority had cover.

The Times Daily Express The Times

Small firms hold key to contracts

Entrepreneur Chris Poll has called on the government to work directly with small businesses to commission public services, rather than relying on a small number of giant companies who then engage subcontractors. He proposes setting up a purchase order finance scheme that provides low cost capital to small businesses, which would lessen the chances of suppliers becoming insolvent through cash flow shortages. Meanwhile, Reed Recruitment chairman James Reed has said the government should stop handing contracts to firms which take too long to pay suppliers.

The Sunday Telegraph The Mail on Sunday

New relationship needed between banks and SMEs

Richard Davies, the commercial banking director at TSB, writes in the Telegraph on how SMEs have been let down by banks, suffering from high charges and poor service. He says the “confidence of small business owners in their ability to raise finance to grow their business is low” and with relationships between SMEs and banks having deteriorated, they are forced to turn to family and friends for financial support, leaving “a huge funding gap which is stunting the growth of these firms.” Mr Davies concludes that radical change is required. Banks need to start offering more bespoke solutions to SMEs and offer solutions to help them grow. Open Banking will help drive change, he adds, as will the launch of the Capability and Innovation Fund and the Incentive Switching Scheme.

The Daily Telegraph

Overcoming fears of private equity

James Hurley writes in the Times on business owners’ traditional suspicion of private equity, noting that British companies tend to be less frequent users of equity finance than their continental counterparts. Some analysts believe that this is preventing growth, with promising companies failing to take advantage of external capital and expertise that could enable expansion.

The Times

OUTLOOK

Insolvencies on the rise

New figures show that 17,243 companies entered insolvency last year, a rise of 4.2% on the year before and the highest since 2013. The worst-affected sectors were administration and support services, as well as construction. R3 said businesses were facing tighter profit margins, with individuals reluctant to pay higher prices. “Businesses have faced additional headwinds in 2017 with business rate changes, an increase in the National Living Wage, and the final stages of the pensions auto-enrolment roll-out,” said Duncan Swift, deputy vice president of R3. In the wake of the figures, the FSB has urged the Government to tackle late payment by large firms and open up public contracts to SMEs. The FSB’s Mike Cherry said: “The proportion of small firms reporting a rise in operating costs is at a five-year high.”

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May blamed for fall in start-up numbers

The government has been accused of failing to look after the interests of small business, after new data revealed a 13.7% decline in the number of start-ups formed in Britain last year. The figures from the Centre for Entrepreneurs think tank show just over 589,000 new ventures were created in 2017. It is the first time business formations have dropped since 2010, according to the ONS, and follows complaints from founders of an unfavourable atmosphere for starting businesses since Theresa May became prime minister. The Centre of Entrepreneurs research shows Birmingham topped the league of local authorities outside London for creating new companies for a fifth consecutive year. There were 12,108 businesses set up in Birmingham last year, with London the home to 187,250 new start-ups. Birmingham was followed by Manchester (8,295), Glasgow City (6,189), and Leicester (5,942).

The Sunday Times The Sunday Times

Small businesses’ social media posts reveal optimism for 2018

The Daily Telegraph ’s Business Tracker has analysed the Twitter posts of 25,000 British firms and businesspeople between January 1 ^st and January 22 ^nd – finding that 20% of the 8,000 tweets shared between those dates contained a positive sentiment. Fourteen per cent of all tweets were negative, while 66% were deemed to be neutral. Just over a quarter posted job vacancies, while 26% praised the country’s start-up-friendly environment and referenced the free courses that are available to businesses on subjects such as taxation, and the General Data Protection Regulation which comes into force on May 25 ^th .

The Daily Telegraph

FUNDING

Relief fund offers ‘false hope’

Analysis by Gerald Eve shows that more than £70m of the £175m allocated to councils to support small firms struggling under the weight of business rate rises for the year to March 2018 has yet to be passed on to firms. Mike Cherry, chairman of the FSB, said research suggests one in five business owners facing increased rates are planning to sell, hand on or close their business. “The Chancellor’s £300m hardship fund offered a small glimmer of hope. For many, it’s proved to be false hope,” he said.

The Daily Telegraph

START-UPS

SME Alliance advi s es caution over action groups

The SME Alliance has urged business owners to be cautious when signing up to organisations set up to sue banks on behalf of small firms. SME Alliance director Nikki Turner said proper scrutiny of action groups “would be good” and urged people to do due diligence. Separately, victims of the HBOS Reading frauds have called on police to investigate an alleged cover-up of the crimes, a year after six bankers and advisers were convicted over their abuse of banking clients. Meanwhile, as anger grows over banks’ treatment of business customers, FCA chief executive Andrew Bailey has said he is prepared to back a new independent Tribunal to resolve disputes.

The Mail on Sunday

TAX

MPs call for urgent rate reform

The Treasury Select Committee has called for an urgent review of business rates, with a report to the Chancellor saying the levy is causing “damage” to high street retailers who are placed at a disadvantage compared to online and out-of-town stores. The committee has called for ministers to “urgently investigate” the option of reducing the five year gap between rate reviews. The Treasury said it recognises “the vital contributions” that high street businesses make to the economy, adding that it had reduced future business rates by £2.3bn by changing the way rises will be set. However, business rates specialist Altus Group warned that many retailers have faced “very large increases” in bills which “could spiral further in April”.

The Mail on Sunday

Self-employed hampered by tax hurdles

HMRC has been accused of placing “hurdle after hurdle” in the way of the self-employed as the self-assessment deadline looms. The FSB has called for HMRC to exercise flexibility around Thursday’s deadline, warning that it has been unusually difficult to file returns this year. This is partly due to the fact that people are no longer able to spread tax payments by paying their bill on a personal credit card, while the option to pay self-assessment bills at post offices has also been removed. Experts have warned that reducing the number of ways in which bills can be paid will mean more people are likely to be hit by fines for missing the deadline.

The Times

Automatic tax return fines ‘invalid’

A judge has warned that automatically fining people for filing their tax returns late may not be legal, paving the way for a wave of appeals which could cost HMRC millions of pounds in lost revenue. The judgement at a first tribunal hearing of a late tax return fine in October said such penalties were only valid if issued by humans. HMRC has decided not to appeal against the decision.

The Daily Telegraph The Sun

Start-ups need tax break

The Telegraph’s Matthew Lynn says the government should extend the tax breaks available to company founders as a way of supporting the UK’s entrepreneurs. He adds that punishing business rates and rising NI charges have made it harder for small businesses. He proposes cutting the entrepreneurs rate of CGT to zero in a bid to make Britain “the world’s most start-up friendly tax regime.”

The Daily Telegraph

REGULATION

New rules to tackle financial crime

Geraldine Lawlor, head of financial crime at Barclays, has revealed that a new set of rules to combat such crime has been formulated in recent weeks with a view to implementing them in the next 12 to 24 months. Ms Lawlor explained that the changes will involve banks trying to spot patterns in their data and placing greater priority on threats such as terrorism. Banks still will go through all transactions and report suspicious ones, but there will be less emphasis on individual transaction reporting because it throws up so many “false positives,” Ms Lawlor said.

The Times

EU warns member states over data protection reforms

The European Commission fears small businesses are unprepared for new General Data Protection Regulation (GDPR) and has urged governments to support businesses in understanding how to handle personal data. Meanwhile, a leading American data scientist has warned businesses are “sleepwalking to massive penalties” by not being ready for GDPR when it comes into force at the end of May. Research by Jeff Jonas, known as the “wizard of big data”, found that 60% of companies did not have structures in place to deal with GDPR.

Financial Times The Sunday Times

EMPLOYMENT

UK government is urged to rethink apprenticeships

The UK government is coming under pressure to implement a “radical rethink” of apprenticeships, amid renewed concern that the levy introduced to fund an expansion of the training programme is not working. There was a near 27% fall, to 114,400, in the number taking up trainee posts in the last quarter of 2017 compared to the year before. The levy requires all employers with annual wage costs exceeding £3m to invest 0.5% of employee costs into an apprenticeship fund topped up by the government. It is thought that the overhaul of many programmes may have contributed to the fall. Seamus Nevin, head of policy research at the Institute of Directors, said: “Clearly the new system has failed to take off.” Lib Dem leader Vince Cable commented: “The concept is great, the theory’s fine, but the implementation has been just awful.” But skills minister Anne Milton said it was right that employers were “taking their time to plan ahead, with two years to spend their levy funds.”

Financial Times Financial Times The Guardian The Times The Daily Telegraph

Apprenticeships to plug skills gap

A Lloyds Banking Group survey shows that more than half of housebuilding firms are launching apprenticeship schemes to address the industry’s shortage of skilled workers. Brian Berry, chief executive of the Federation of Master Builders, has called for “a cultural shift” to encourage vocational training and make the industry more appealing to women and ethnic minorities.

The Times

MANUFACTURING

Export demand lifts manufacturing

Factory growth picked up over the past quarter to meet higher demand for exports, leaving manufacturers more bullish about the year ahead, according to the CBI quarterly industrial trends survey. Firms intend to spend more on buildings, plant and machinery, but skills shortages could limit output. The sector, which represents about 10% of economic output, took on workers at the fastest rate since July 2014.

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ECONOMY

UK government borrowing narrows after EU credit

Public sector borrowing, excluding state-owned banks, fell to £2.6bn last month, a £2.5bn fall from December 2016 following a £1.2bn rebate from the EU due to a reduction in the bloc’s budget and changes to contributions. The ONS said public borrowing for the financial year to date now totalled £50bn, down nearly 12% from the same period a year earlier, and also noted the collapse of Carillion could affect public finances.

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