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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Chaos and Confusion or Order and Clarity? Where are SMEs now with Brexit Planning?

Brexit planning will continue to dominate the thinking and expenditure of the UK’s SMEs as Parliament is suspended for five weeks and the Government’s plans for leaving the EU on October 31 seem to be in tatters.

Parliament has forced the Prime Minister and cabinet to release its documents, called Operation Yellowhammer, on planning for a No Deal Brexit and has also blocked the possibility of the latter. Both are now, in theory, legal requirements as Acts of Parliament.  However, disagreement prevails.

It is questionable whether the government will obey the law, especially if they can find a way out. Furthermore, there is now no Parliament, or Parliamentary Committees, sitting to scrutinise the Government although the press and Courts are fully engaged.

Notwithstanding the political gymnastics, businesses are deluged with upbeat exhortations and alleged offers of help of which the following is a selection from the last six weeks or so.

Liz Truss, the then...

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Ongoing carnage in consumer services sector as consumers reduce spending in restaurants and bars

brexit economy retail Sep 10, 2019

As I outlined in my June sector blog, it is not only well-known shops in the consumer services sector that have been struggling.

The restaurant sector has also seen a plethora of big name closures, including Gourmet Burger Kitchen, Carluccios, Prezzo/Chimichanga, Byron, Cafe Rouge, Jamie Oliver’s restaurant group and most recently the Restaurant Group which has announced that it plans to close up to 100 of its Frankie & Benny’s and Chiquito branches.

A recent CBI poll has revealed that the whole of the consumer services sector, which includes hotels, bars, restaurants and leisure firms, has suffered its fourth consecutive fall in business activity with both profits and confidence plummeting.

Rain Newton-Smith, chief economist of the CBI, said: “The idea of a no-deal Brexit is clearly weighing down the economy and is affecting businesses both big and small.”

But, of course, there is much more to all this than Brexit uncertainty weighing on businesses and...

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I have just received a Winding up Petition, what do I do?

Uncategorized Sep 09, 2019

A Winding up Petition is essentially an application filed in an Insolvency Court for a Company to be Wound Up, which means placed in Compulsory Liquidation. While many Petitions are applied for by creditors out of frustration due to being ignored or a failure to agree payment terms, a Winding Up Petition involves a formal Court driven process and should not be ignored.

Early action by directors is essential if they want to save their company and avoid personal liability.

It should be pointed out that directors continuing to trade a company when it has no prospects of survival can be held personally liable for liabilities created after the point when they ought to have realised there was no prospect of survival.

While most guides to Winding Up Petitions are aimed at creditors who are owed money and deal with the criteria for submitting a Petition, I've produced this guide which is aimed at helping directors save their business with this section aimed at helping survive a Petition.

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The change to HMRC preferential creditor status v emphasising insolvent business restructure

The Government’s proposal to restore HMRC preferential creditor status when a business becomes insolvent is, in my view, at odds with its desire to shift the balance in the insolvency regime towards helping more businesses to survive.

In September 2018 I welcomed the Government’s newly-published proposed changes to the insolvency regime, whereby there would be a moratorium, initially 28 days, from filing papers with the courts to give still viable businesses more time to restructure or seek new investment to rescue their business free from creditor action. Consultation on this and other changes to the insolvency regime was begun in 2016.

This year, in the April 2019 budget statement, the then Chancellor Philip Hammond included a proposal to restore HMRC preferential creditor status, something that had been removed as part of the Enterprise Act in 2002. The new preferential status will apply to VAT, PAYE income tax, employee...

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