Are Internet unicorns another bubble destined to burst?

Reminiscent of the hubris leading up to the 2000 dot com crash, the start of this year there has seen a queue of internet unicorns lining up to launch on the stock market via Initial Public Offerings (IPOs).

A unicorn business is defined as a private, venture capital-backed firm worth over $1bn. Among those that have either launched IPOs or considering them are Lyft (launched in March), Uber (launched in early May), Pinterest, AirBnB and possibly We Work and Slack.

So far, the results have been distinctly underwhelming with Lyft’s shares valued at $72 each on debut, giving the seven year-old company and rival to Uber a market value of slightly more than $24bn.

Uber set its launch value at $90 billion (£70 billion) and listed share prices at $45 each. However, within hours on its first day of trading Uber’s share value had dropped by 7.6% down to $41.51.

Neither of the two ride-hailing businesses has so far ever made a profit.

Last year, despite boasting revenues of...

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Business opportunities for SMEs in the growing demand for sustainability and cutting waste

The neoliberal economic model based on perpetual growth has come under increasing attack from environmental campaigners particularly since the week-long Extinction Rebellion activity in April this year.

With almost-daily horror stories about climate change, global warming and the amount of plastic waste littering the planet, not to mention a significant decrease in biodiversity, it is clear that action needs to happen a lot more urgently than has previously been admitted.

Changing the developed world’s economic model from perpetual to sustainable growth is no doubt going to be a major challenge, particularly in the face of a rise in populist political parties putting national self-interest first and also of some leaders, such as US President Donald Trump who despite the evidence still questions the truth of climate change.

Nobel prize-winning economist Joseph Stiglitz makes a distinction between good capitalism, which he calls “wealth creation”, and bad...

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Price and environmental pressures in the cargo shipping sector – stormy waters ahead?

In early April a national newspaper published a report on the captain and crew of a cargo ship who had been stranded in the Persian Gulf off the UAE for 18 months without pay or food.

The cargo ship, said the report: “became a floating prison from which he and his 10-man crew could not escape without losing their claim to thousands of dollars in unpaid wages.” The ship’s owners had got into financial difficulties but would not sell the ship because they “would not get a good price”.

This is becoming an all too frequent story and in 2018 alone according to the IMO (International Maritime Organisation) an estimated 791 sailors on 44 ships had been abandoned in this way as a slump in orders led to overcapacity in cargo shipping and took its toll on owners.

Over the last couple of years, a global economic downturn has been gathering pace exacerbated by Trade Wars between the USA and China leading to lower demand on trade routes between...

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Two examples that justify agility when pursuing a retail turnaround

This blog contrasts the fortunes of Majestic Wines with those of Debenhams as arguably examples that show how retail business can survive a rapidly changing environment.

There have been efforts by many struggling High Street retailers to improve their businesses by using an insolvency mechanism called the CVA (Company Voluntary Arrangement).

The most recent of these is Debenhams, which, having secured £200 million in new loans in March and followed with a pre-pack administration sale in early April, effectively wiping out its shareholders including the vociferous Mike Ashley who also owns Sports Direct and BHS.

It was acquired by new owners, a consortium of banks and hedge funds, who almost immediately launched a major store closure programme ultimately to involve 50 stores, in conjunction with a CVA aimed at persuading landlords to reduce the rent for remaining stores by up to 50%.

Debenhams’ sales had dropped by 7.4% in the previous six months but it has been...

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Is there still a direct link between rising Brent crude oil prices and inflation?

economy inflation May 07, 2019

The Bank of England (BoE) governor, Mark Carney, has recently warned of growing inflationary pressures and potential interest rate rises sooner than was previously expected.

At the moment the UK’s inflation rate is at 1.9%, unchanged from the previous month and well below the ceiling of 2% after which the BoE would have to take action.

However, although the core basket of prices that influence the inflation rate is not seen as the problem, the rising cost per barrel of crude oil may be behind Carney’s latest warning.

The current price of Brent crude oil as of April 29, 2019 is $71.22 per barrel, although the monthly average so far this year has been calculated as $64.98. (Figures courtesy of https://www.macrotrends.net )

The idea of a direct correlation between oil price rises and inflation was cemented in the 1970s when the UK economy was hit by an oil embargo by the 1973 by Arab oil producers in response to Western...

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Why the current model of free market capitalism is failing SMEs

In the late 1970s the then UK Prime Minister Margaret Thatcher and US President Ronald Reagan both espoused the idea of minimal state regulation and of allowing free market capitalism to reign relatively unchecked in line with the theories of the Nobel prize-winning US economist Milton Friedman and The Chicago School, as it was called.

The assumption was that the weakest businesses should be allowed to fail and only the strongest would survive, which would benefit businesses, consumers and result in strong economies. It also assumed that the private sector would provide everything from energy to transport infrastructure to education at a lower cost than if they were state-funded.

Since then we have seen the 2008 global financial crisis, the introduction of a programme of austerity in the UK, central banks reducing and keeping interest rates artificially low, productivity in decline and a widening of the income inequality gap with increasing wealth...

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Does the Government understand UK SMEs’ problems?

cash flow hmrc sme smes Apr 25, 2019

A recent fiery opinion piece in the London Evening Standard by Rohan Silva accused the Government of failing to help and therefore destroying UK SMEs.

While most of his ire was directed at the Chancellor, Philip Hammond, due to the 2017 increase in business rates, Silva also alleges: “Poorly implemented plans to make tax digital are costing companies thousands of pounds to become compliant. Big increases in the amount firms have to pay towards pension contributions are making it more expensive to employ people.”

According to the Federation of Small Business (FSB), the business rate increase means the average small company in London now has to find £33,000 a year simply to cover its rates bill. That’s on top of paying rent, NI contributions, corporation tax and running costs. Significant increases in the minimum wage haven’t helped many SMEs either although unlike the other burdens it has benefited employees.

It has become increasingly and...

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UK economy macroeconomic update at the end of March 2019

Amidst the tedious ongoing, protracted and now further extended Brexit process, predicting where next for the UK economy is akin to crystal ball gazing.

So, a macroeconomic update on the UK economy can only be a short term snapshot, from which it may be possible to tease some potential signs for the future although the impact on UK of some global trends make some predictions more certain.

The state of the UK economy after the first quarter of 2019

As ever, we have seen a mixture of positive and negative economic data but it should also be remembered that Brexit is a distraction since the UK economy is heavily dependent on the EU and global economies which have been slowing markedly.

In defiance of most economists, unemployment continues to decline and is at its lowest level for 45 years, and employees are finally seeing modest, albeit recent, above inflation wages growth after many years of minimal wage increases. This has no doubt contributed to the higher levels of income tax...

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Failing to recognise the equal value of women to the economy is short-sighted

sme success women Apr 18, 2019

It is dispiriting in the 21st Century that investors and businesses are still not recognising the equal value of women and their contribution to achieving success.

Two recent reports have – yet again – highlighted this discrepancy.

Not only did many businesses fail to meet the Government’s recent deadline for reporting on their gender pay gap but, according to BBC research, fewer than half of the UK’s biggest employers have succeeded in narrowing their gender pay gap. In fact, in 45% of firms the discrepancy had increased.

The Fawcett Society, which campaigns for gender equality, described the figures as “disappointing, but not surprising”.

More alarmingly, various reports have revealed that women entrepreneurs face an uphill struggle in getting investment finance.

Government analysis has found that less than 1% of venture capital investment in the UK goes to female-led start-ups. Its research was carried out by the British Business Bank,...

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What kinds of jobs will be taken over by automation?

In late March, the ONS (Office for National Statistics) published its latest findings on the effects of automation on the jobs market.

It found that some 1.5 million jobs were at high risk from automation, but, tellingly, 70% of these roles were currently held by women. The next most at risk groups were part timers and young people.

The ONS calculates that around 710,000 jobs in the City may be taken over by automated technology, with around 39% of jobs in the accounting, legal and financial services sectors most likely to be automated and that 34% of roles in tax advice could be affected..

Waiters and waitresses, shelf fillers and elementary sales occupations, are most likely to go, all roles defined as low-skilled or routine. Increasing numbers of factory workers are also at risk of being replaced by machines.

Least endangered are medical practitioners, higher education teaching professionals, and senior professionals in education although many of their support functions such...

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