‘Caveat Emptor’ Is peer to peer lending too risky for peers?

Peer to peer lending (P2P) enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman.

As such, the lack of trust in middlemen has seen the emergence of peer to peer lending platforms as an attractive proposition for retail investors in a climate of low interest rates because they can offer better rates thanks to the lower overheads associated with online businesses. The lower overheads are also related to not having to pay a middleman!

The platforms are generally a website or app that facilitates this alternate method of financing, where the first emerged in 2005 and was brought under FCA (Financial Conduct Authority) regulation in 2014.

However, the FCA has been criticised as being too “light touch” in its oversight following the collapse in May this year of UK property finance peer to peer firm Lendy with £160m in outstanding loans of which it has been calculated more than £90m are in...

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Recession, imminent or not is it time to ban the word?

brexit economy Oct 10, 2019

Recession is a word that has immense power, striking apprehension into the hearts of businesses, politicians and consumers alike.

Talk of a recession can also precipitate the very economic conditions that are so feared and it is worrying that the word is currently appearing regularly in the daily news media.

But is recession a useful concept especially in the context of increasing pressure to move to sustainable, rather than perpetual, economic growth, in order to combat climate change and global warming?

Should we keep growing?

The generally-accepted definition of a recession is, according to the Business Dictionary: a contraction in the GDP for six months (two consecutive quarters) or longer. It goes on to say: “Marked by high unemployment, stagnant wages, and fall in retail sales, a recession generally does not last longer than one year and is much milder than a depression. Although [they] are considered a normal part of a capitalist economy, there is no unanimity of...

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Sector update: have there been improvements in care home viability?

It hardly seems any time since I last assessed the viability of the UK’s care home sector, but in the light of recent developments with one of the UK’s largest providers it’s time for an update.

The last blog in December 2018 focused on the implications of the collapse of Southern Cross in 2011. This time it has been prompted by reports this month that Four Seasons, Britain’s second-largest private care home provider with around 320 sites and 22,000 staff, has confirmed it has failed to pay rent on time. It is being seen as a negotiating tactic in order to cut bills, but is this really the case?

Its latest troubles began in 2017 when its owner Terra Firma was unable to pay interest on its debts, most of which are owned by private equity firm H/2 Capital Partners who took control and have overseen the group since then.

The business, which has more than £700 million in debts, appointed Alvarez & Marsal as administrators...

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High Court CVA clarification for landlords

cva retail Oct 03, 2019

Recently in the High Court landlords challenged the validity of the CVA (Company Voluntary Arrangement) that was approved for the High Street Debenhams retail chain.

The store chain had announced that its restructuring plan based on the closure of 50 stores and rent reductions for up to 100 others.

Major shareholder Mike Ashley, owner of Sports Direct, had sought to challenge the CVA after the board of Debenhams rejected his offer to buy the chain for £200 million. His shareholding was wiped out when the company went private as part of the rescue and restructuring deal, which was approved by 80% of its landlords.

Although Ashley withdrew his own challenge to the CVA, he continued by backing a legal challenge from Combined Property Control Group (CPC) as landlords who owned several properties.

According to CMS Law the five grounds of the CPC challenge were:

Items 1, 2, 4 and 5 were rejected by the High Court, although item 3 was upheld, meaning that the landlord...

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The state of manufacturing in the UK and globally

brexit economy sme smes Oct 01, 2019

This month’s Key Indicator looks at the state of manufacturing in the UK and globally and by all indications, it is struggling everywhere.

While the proportion of manufacturing as a part of individual national economies varies all economies depend on trade with each other and in an interconnected world a slowdown in one place can have a significant impact on others.

China is currently the No 1 in the world in terms of manufacturing output valued at $2,010 billion representing 27% of national output. USA is second ($1,867, 12%); Japan third  ($1,063, 19%); followed by Germany ($700, 23%); South Korea ($372, 29%); India ($298, 16%); France ($274, 11%) and Italy ($264, 16%).  The UK trails these countries in ninth place with $244 billion manufacturing output representing 10% of national output.

Poland meanwhile has the highest percentage of its workforce employed in manufacturing, followed by Germany, Italy, Turkey, and South Korea.

In the UK, manufacturing makes up 11%...

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Winding-Up Petition: I want to pay but my company doesn’t have sufficient funds

winding-up petition Sep 29, 2019

If you've received a Winding-Up Petition and you want to pay but your company doesn’t have sufficient funds here are the possible outcomes:

Deferred Payments

While the Court will normally adjourn a Petition Hearing to allow for time to make the payment, too many directors run out of time if they need to collect in outstanding debts, sell assets or raise funds.

There are fundamentally only two options for deferring payments when a company doesn’t have sufficient funds:

  • Petitioning Creditor Payment Plan; or
  • Company Voluntary Arrangement

Petitioning Creditor Payment Plan

This involves reaching agreement over payment terms that provide sufficient reassurance for the Petitioning Creditor to support a dismissal of the Winding Up Petition. Such an agreement will not bind other creditors who might want to take over the Petition but if it is agreed before advertising the Petition it can be achieved.

However, HMRC does not agree such plans so this option is not available if they...

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Can SMEs afford to wait any longer for a business rates review?

Retailers have been calling for months for a business rates review as the decimation of the UK’s High Street continues.

In early August more than 50 leading retailers wrote to the Chancellor urging him to change tax rules to boost the UK High Street and the business law firm RPC has reported that there has been a 65% increase in the number of businesses challenging their rates bill in the last quarter, with 4,000 challenges made in the first quarter of 2019, up from 2,430 challenges in Q4 2018.

RPC explains that the increase in challenges shows broadening dissatisfaction with business rates. Jeremy Drew, Co-Head of Retail at RPC, explains that the property tax is so complex that each new ratings review sees thousands of challenges lodged by businesses.

The retailers’ call was reinforced later in the month by the CBI (Confederation of British Industry), whose chief economist Rain Newton Smith said reform would be an enormous help to companies facing...

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What is AIM and is it beneficial to SMEs to apply for AIM listing?

small business sme smes Sep 24, 2019

It is coming up to 25 years since AIM (Alternative Investments Market), the London Stock Exchange’s junior stock market, was launched and it now lists around 3,600 businesses.

According to the accounting firm BDO, “AIM is the most successful growth market of its type in the world” and in the last five years AIM-listed businesses “have created an additional 76% jobs, now employing almost 390,000 people”.

The London Stock Exchange website explains that AIM is targeted at smaller, and growing, businesses and offers them “the benefits of a world-class public market within a regulatory environment designed specifically to meet their needs”.

It is a multilateral trading facility, operated and regulated by the London Stock Exchange under FCA rules.

Candidates for AIM listing do not have to have a trading track record, but they must abide by the rules. There are very clear guidelines on how to apply for AIM listing on the Stock...

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Late payments situation getting worse for some SMEs

According to the ICAEW (Independent Chartered Accountants of England and Wales) late payments to SMEs are a bigger problem than they were a year ago.

Of the nine SME industries analysed, it said, six had reported that the problem of late payments was worsening.

The FSB (Federation of Small Businesses) too, has said that while there have been some improvements thanks to the efforts of the Small Business Commissioner Paul Uppal, late payments remain a major problem and research by Lloyds Bank Commercial released at the end of last month found that last year almost two thirds (62%) of SMEs that were being paid late “failed to chase up for fear of harming customer relationships” also cited time constraints as a significant factor.

The cost to small businesses has been considerable, according to research published by Hitachi Capital earlier this month. It estimates late payments have cost SMEs £51.5bn in the last year.

Its survey of 1000 businesses found...

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The cost to SMEs of IT failures

The pressure to do everything online is inexorable but what is the cost to businesses of IT failures?

Perhaps one of the most frequent and difficult issues facing SMEs is the seemingly frequent meltdowns of both banking systems and government websites.

This is without considering the issues of cyber-attacks on companies where the FSB has recently calculated UK small firms are subject to nearly 10,000 cyber-attacks a day, with over a million small firms hit by phishing, malware attacks and payment scams.

Obviously it is in businesses’ own interests to have robust IT systems in place including cyber security, but the frustrations of IT failures are a different issue and often not of their own making since the counter parties also need to have adequate IT systems and security at their end.

Since 2018 the FCA (Financial Conduct Authority) has required banks to publish information about the number of major operational and security incidents they have experienced.

...

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