Should SMEs consider appointing non-executive directors (NEDs)?

small business smes Oct 16, 2018

It is hard for SME directors to step back and look at the bigger picture when they are so immersed in day-to-day operations. Could they benefit from having experienced and objective non-executive directors (NEDs)?

Research carried out by law firm TLT, University of the West of England and the Association of Chartered Certified Accountants this summer suggested that SMEs did not understand how to recruit or engage with NEDs. The conclusion was that smaller firms with NEDs were not benefiting as much as they could.

What does a non-executive director do?

The NED is an independent director, who sits on a business’ board of directors but does not form part of the executive management team.

NEDs’ primary responsibility is to attend board meetings and crucially to turn up prepared having read the board pack and researched the key matters that require decisions. They should also monitor reports and carry out their own review so they can ask pertinent questions with view to...

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An update on the business rates and appeals fiasco

In August it was announced that HMRC had sent in approximately 25 staff to the Valuation Office to fix the business rates appeal portal, which had been repeatedly cited by businesses as being impossible to use.

As the only mechanism now available for appealing non-domestic rate revaluation, the portal has been cited as the chief reason for an almost 90% reduction in appeals since the 2017 revaluation and just before this blog was due to be posted an article in The Times reported that a Government survey has revealed that almost nine out of ten businesses in the first stages of making an appeal using the portal were dissatisfied or very dissatisfied with the new system.

In the meantime, the numbers of business failures, particularly in the retail sector has continued to climb; many attributing the rise in rates as a factor.

Altus Group, a ratings adviser, reported in August that bailiffs had visited 81,000 businesses because of business rates arrears – an average of 222...

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Skills shortages and recruitment problems for SMEs amid ongoing Brexit uncertainty

I try to avoid the dreaded “B” word in my blogs but on this occasion, I can’t avoid it as the chorus of business voices highlighting skills shortages and recruitment problems grows larger and louder.

It is no good for Government to assert that it will all be fine once negotiations on the UK’s leaving the EU are concluded when the situation is no clearer now than it was when all this started almost two years ago.

Somehow, businesses need to carry on in the interim as well as planning for the future.  Some things just cannot wait and high on the list is where and how they are going to source the people they need at all skill levels, whether or not they trade abroad.

Some facts about skills shortages and recruitment problems

Firstly, the most recent complete set of immigration figures, published by the ONS (Office for National Statistics) showed that, in 2017, more EU citizens, 139,000, left the UK than came here to work, 101,000. This was the lowest level...

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Predatory investors behaving like unscrupulous bankers

Ten years after the lending culture that resulted in the 2008 Great Depression it seems that the behaviour of some investors is no less predatory and unscrupulous than those of bankers 10 years ago.

Recently FanDuel, a fantasy sports site, was sold by its Private Equity investors to Paddy Power Betfair for $465 million. So far so good. However, despite the sale price the ordinary shareholders got absolutely nothing.

The background to the investment is that the business was regarded a Unicorn company (a privately-held start-up valued at more than $1 billion) with it having more than 6 million daily customers in America.

Two Private Equity investors, KKK and Shamrock Capital, provided funds, based on a valuation of at least $1 billion. However, I am sure that the actual investment was based on a mix of debt and equity with a tight agreement that included a drag-along provision that was binding on all shareholders and allowed them to force...

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Key Indicator – energy and fuel costs

While the biggest overheads for industrial and manufacturing businesses are generally staff, equipment and premises costs, energy and fuel costs also have a significant impact on profitability.

Indeed, for those in the transport industry, the cost of fuel can make the difference between profit and loss and is often difficult to pass on to customers.

UK businesses are particularly vulnerable to rising energy and fuel costs for several reasons.

Electricity and gas

Approximately 50% of the UK’s electricity is produced from fossil fuels, mainly natural gas and coal, most of which are imported.

21% comes from nuclear reactors however the UK’s nuclear power stations will close gradually over the next decade, with all but one expected to stop running by 2025.

24.5% of electricity currently comes from renewable sources, mainly wind farms.

As backup the UK imports electricity but it also exports some.

Gas, on the other hand is mostly imported.

Energy companies buy...

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I welcome new insolvency proposals – albeit with a few observations

insolvency Sep 03, 2018

The Government has at last published its proposals for changes to the insolvency regime after launching a consultation in March 2016.

The new insolvency proposals have been described as akin to the USA’s Chapter 11 system and have been broadly welcomed for the extra support they should provide to help businesses in financial difficulties to restore their fortunes rather than collapsing with often-catastrophic consequences for employees, suppliers and creditors.

Not only that but they also incorporate other Government initiative, to tighten up on scrutiny of directors and on corporate governance.

The new insolvency proposals – main elements

The insolvency proposals include the introduction of a moratorium, initially 28 days from filing papers with the courts. This is intended to allow viable companies more time to restructure or seek new investment to rescue their business free from creditor action. This would be supervised, most likely by an insolvency practitioner (IP)....

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HMRC aggression and heavy handed use of powers

hmrc Aug 27, 2018

There is no doubt that the Government is putting pressure on HMRC (HM Revenue and Customs) to improve its tax collection rates.

Recently, it launched a consultation, very quietly it should be noted, into a proposal to increase HMRC information-gathering powers while removing some of the protections for those on the receiving end.

Justified as a measure to bring HMRC’s powers into line with those in other countries, the proposal would allow HMRC to demand tax payers’ bank account and other financial information without first having to get the permission of the Tax Tribunal.

Under one of a number of options in the consultation document, Amending HMRC’s Civil Information Powers, the information orders requesting this sensitive financial information could be demanded not only from banks but also from building societies, accountants, lawyers and estate agents.

Furthermore, these institutions could be banned from informing their clients that they have been ordered...

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Why do so many CVAs fail?

cash flow cva insolvency smes Aug 22, 2018

My blog earlier in the year (17 May) asked whether the use of CVAs was “a triumph of hope over reality” as they had been increasing noticeably in the High Street retail sector, which has suffered an escalating rate of insolvencies.

A CVA (Company Voluntary Arrangement) is generally used to help a company in financial difficulties by restructuring its balance sheet and reorganising its operations to survive and trade its way out of insolvency. A key aspect of the financial restructuring is reaching agreement with creditors for payment of a lump sum or regular payments over a defined period which is typically three to five years where the payments may be less than the amount owed.

Instigated by the directors, approval of a CVA requires 75% of unsecured creditors where the payment terms are binding on any dissenting creditors providing they are less than 25%. Generally, the earlier a business enters a CVA the better, although they can be used as a means of dealing with a...

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Could proposed new rules on foreign investment in UK damage SME prospects?

The Government recently proposed expanding its powers to review and intervene on foreign investment in UK businesses.

Under the proposals, which are subject to consultation, the Government’s remit would cover all UK businesses including SMEs, where previously it could only review proposed deals where there were national security implications. It would include powers to block takeover deals across all sectors of the economy.

The UK’s plans are reportedly in line with efforts in the United States, Germany, France and Australia and relate to concerns that China and other rivals are gaining access to key technologies.

How does foreign investment affect the UK economy?

The UK’s current account is a measure of the economy’s health.

It is calculated by adding up the goods and services of our exports and the income earned by the UK from overseas investments and subtracting those goods and services we import, income paid overseas for investments in the UK and the...

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Travel and Tourism: a key UK economic sector, but potentially volatile

economy Aug 15, 2018

As with any consumer-dependent sector of the economy, travel and tourism is susceptible to changing trends in consumer behaviour, to their disposable income and inflation, and of course to the weather.

The travel and tourism industry involves many businesses, from the small, independent SMEs running camping and caravan sites, holiday cottages, B & Bs and independent hotels in traditional seaside resorts, to adventure sites, amusement parks and beachside cafes, as well as the small independent travel agencies offering bespoke holidays and mainstream travel agencies offering packages.

Attitudes to holidays and disposable income

There has been a trend among UK consumers to opt for the “staycation”, holidaying at home rather than going abroad for a couple of weeks.

There have also been signs that the larger travel companies offering packages overseas have been struggling this year, with both Thomas Cook and Tui reporting declining bookings.

This has been more noticeable...

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