Survey shows drop in UK business confidence

Business confidence in the UK has fallen as the country faces an uncertain economic outlook and a slowdown in demand.

A new survey by Lloyds Bank shows that confidence among small and medium sized businesses is at a four-year low. The Business in Britain report, published by the bank on Monday, questioned over 1,500 UK companies to understand the overall balance of opinion on a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

The reportís confidence index – an average of respondentsí expected sales, orders and profits over the next six months – declined to 12%, down from 38% in January 2016.

Confidence fell in every sector, but the decrease was biggest in services including retail and wholesale, hospitality and leisure, and business and other services.

According to Lloyds Bank, the most commonly identified threat cited by companies for the next six months was economic uncertainty (27%), followed by weaker UK demand at 18%.

Tim Hinton, managing director for Mid Markets and SME Banking at Lloyds Banking Group, said: ‘Business confidence has taken a hit since our last report in January, but this should be viewed in the context of the recent economic and political shocks.

‘The EU referendum vote has introduced a level of uncertainty for companies as the UK decides on the best model for its future relationship with the EU, and this is likely to continue for the foreseeable future. Whilst sentiment has fallen to a four-year low, it remains well above the lows reached during the global financial crisis of 2008/9.’

A closer look at the survey results shows that the net balance of exporters anticipating an increase in total exports across the globe fell by 15 percentage points to 20%. There was also a 14-point drop to -1% in the net balance of companies expecting an increase in headcount over the next six months, and the net balance planning to raise their capital expenditure also declined, falling from 14% to zero.

Lloyds reported an increase in spare capacity among survey respondents: the percentage of businesses indicating that they are operating at full capacity fell back slightly to 49% from an all-time high of 52% in the last survey, and the proportion citing difficulties in recruiting skilled workers fell to a two-year low of 38%.

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, commented: ‘All of the key metrics in the Business in Britain survey, including the outlook for demand, employment and investment, have weakened since January’s report. This indicates that economic growth is likely to slow in the next six months, following a relatively robust performance in the first half of the year.

‘Even though inflation is expected to pick up as a result of the weaker pound, this may be offset by the survey findings of a fall in capacity pressures within firms and a fall in recruitment difficulties.’

Public liability insurance: Business essential or nanny state gone mad?

Many business owners make the mistake of not properly understanding public liability insurance before launching their small business. This leaves them at risk of paying exorbitant fees for damages in future.

Public liability insurance is suitable for both small businesses and bigger corporations. The concept appears confusing on the surface but with proper research into available policies, it is easier to see how the range of options available can protect your business from disaster. It must not be confused with employers’ liability insurance.

Is Public Liability Insurance compulsory?

Public liability insurance is not compulsory by law. However, is essential if your business will be interacting with the general public in its day to day operations. Do customers visit your office or work premises? Do you send deliveries to your customers? Are you operating a home based business with meetings holding in your home? Public liability insurance is essential for your business.

What does public liability insurance cover?

Public liability insurance covers a wide range of scenarios. Generally however, you can expect cover if anyone is injured by your business or when third party property is damaged during the course of your business. The damage doesn’t always have to be massive. Even a minor scratch could set your small business back by tens of thousands of pounds as long as the affected party agrees it is enough to seek redress in court. Public liability insurance will not only provide you cover for against the fines but will also take care of your legal fees.

To get an effective public liability insurance policy, you need to provide a comprehensive description of your business processes to the insurer. This goes beyond documentation purposes as it will help the company determine the policy best suited to your business. The two main policy types, such as this one offer cover for up to £1 million and up to £5 million respectively. Businesses in the public sector are most likely going to be offered the latter by insurers.

It is important to avoid assumption that there is no need for public liability insurance because you run a small business and it is not a legal requirement. Simple scenarios such as liquid spill over a visitor’s computer or a poorly lit doorway leading to a visitor’s fall and injury could leave you in danger of paying thousands in fines without public liability insurance.

UK businesses face cash flow difficulties because of late payers

Cash flow problems experienced by UK businesses are primarily caused by late payments, Lloyds Bank revealed on Wednesday.

The British retail bank’s twice-yearly Business in Britain report is conducted by Lloyds Bank Commercial Banking, which canvasses the opinions of 1,500 UK companies that are primarily small and medium-sized businesses. The survey is now in its 23rd year.

Lloyds latest Business in Britain report shows that one in five businesses are experiencing cashflow problems and the situation is expected to worsen in the next six months.

Despite overall business confidence remaining strong at 43%, Lloyds found that nearly one in three businesses, or 31%, expect more customers to require deferred payment terms over the next six months, increased from 27% six months ago.

Although many businesses are said to be considering investing in growth, 18% admit to having cash flow problems, with 59% of those businesses citing late payers as being the main reason.

Only 7% respondents to the Lloyds Business in Britain survey are expecting cashflow difficulties to decline during the second half of 2015.

Donald Kerr, managing director at Lloyds Bank Global Transaction Banking, a provider of alternative sources of financing for customers including asset based lending and trade finance, commented: “While the number of businesses suffering cashflow problems has fallen from a peak of 35% in 2013, it remains stubbornly high.

“Cashflow is the lifeblood of any business but for too many businesses, late payments continue to be a significant problem. Where businesses do expect cashflow to be an issue, they need to take action to manage issues like late payment so that it doesn’t hamper their opportunities to grow.

Kerr added that: “Specialist types of lending such as invoice finance can alleviate these pressures by allowing businesses to borrow against the value of their invoices helping them to avoid payment delays and improve cashflow.

“Thorough credit checks on customers and setting out clear payment terms at the outset of any relationship will also help.”

According to Lloyds, cashflow problems are more likely to be experienced by businesses in Gloucestershire and Oxfordshire (23%) while businesses in the South West of England are least likely (8%).

The report also found that 37% of businesses said a fall in demand for products and services also resulted in cashflow difficulties, while 31% said customer default resulted in cashflow problems.

Lloyds added that 1500 firms responded to its latest Business in Britain report in April 2015. The data was collated by research consultancy BDRC Continental, which found 65% of the responses came from businesses with an annual turnover below £10m; 10% of responses were from businesses with an annual turnover between £10m and under £15m; and 25% of the responses came from businesses with an annual turnover of over £15m.

How to innovate to keep your business growing

Once you’ve got your small business established in the market, your thoughts are likely to turn to future expansion. One of the keys to successful growth is innovation, as evidenced by the dominance of the likes of Facebook, Amazon and Apple in the online/technology sectors.

Here are some tips on how to go about innovating within your own business.

Start small

There are many ways in which to innovate, but none of them are guaranteed to work. That’s why it’s best to begin by innovating in little steps, especially if you’re a small firm with tight margins to keep to.

One of the most common ways to do this is by tinkering with existing products and/or services. You can experiment with new features by launching revised versions of your current offerings and gauging the response among your clientele to see how successful they are, for example.

This approach can be much cheaper and less risky than simply launching a brand new product or service, which will require significantly more investment and effort to turn into a profitable venture.

Set specific goals

Simply aiming to think of a good idea at some point in the future is unlikely to yield much in the way of results. That’s why it can be useful to set a few goals when looking for ways to innovate within your small business.

For example, you could lay down a deadline – “I need to devise a mock-up of a new product by the end of next month” – or an end point to your thinking, e.g. a particular cost saving in a specific process, a target market for a new service, etc.

Collaborate

Brainstorming with other people is often a great way to come up with new ideas. Whether you set up a one-off session or make this a regular occurrence, meeting with your colleagues to discuss avenues for growth could generate concepts you might never have thought of on your own as the business owner.

Don’t let things like remote working and busy schedules put you off the idea; technology such as teleconferencing services for small businesses can help bring people from different parts of the company together to ensure a variety of viewpoints and ideas are put forward.

Take a risk

It’s important to remember that innovation requires a certain degree of risk-taking. The online giants mentioned at the start of this article didn’t get anywhere without breaking boundaries and really surprising people. While this doesn’t necessarily mean you need to take a huge gamble on a whole new market, it should provide food for thought when considering whether a particular risk is worth taking.

Of course, it’s easier to take a risk if you know what it will cost if you fail, so doing your research beforehand will certainly help. But this still isn’t guaranteed to lead to success, so it’ll still be on you as the leader of the business to make the right decision.

Plan in detail

Coming up with a great new idea to try is only part of the innovation process. Turning your concept into reality requires a lot more hard work and patience. One thing that can help is drawing up a detailed plan for the process, showing who is responsible for what and setting deadlines for each stage.

This will make it more likely that you’ll stay on track with your proposal, rather than veer off course whenever another seemingly fantastic idea comes into being.

UK Business Secretary unveils plans to cut employment law red tape

Proposals to limit compensation for unfair dismissal and to encourage settlement agreements to end employment relationships have been put forward by the UK government today.

Business Secretary Vince Cable has announced a range of reforms designed to simplify and speed up the process of ending the employment relationship when it breaks down. According to the Department for Business, Innovation and Skills the proposals, which are subject to consultation, are intended to benefit both employers and employees.

Controversial “fire at will” proposals have been abandoned but the law will be changed to ensure that businesses can pay off under-performing employees through a settlement agreement, without fear of future claims. This sort of arrangement between the employer and employee is intended to help resolve disputes and end an employment relationship in a fair and consensual way.

In cases that end up going to an employment tribunal, workers face a reduction in how much compensation they will be able to claim. The consultation proposes to limit payouts to a maximum of 12 months’ salary.

Vince Cable said that the UK already has very flexible labour markets, as evidenced by the fact that more than one million new private sector jobs have been created in the last two years, despite the lack of economic growth. However, he added that the state can do more to help small companies by reducing the burden of employment tribunals and moving to less confrontational dispute resolutions through settlement agreements.

Labour unions are unhappy about the announcement, fearing that it takes away employment rights of ordinary workers. Chris Keates, general secretary of teachers’ union the NASUWT, claimed that the reforms would allow employers to “exploit, bully and discriminate against their workforce”.

Shadow business secretary Chuka Umunna said that the government was “attacking the rights of every employee in this country” and added that ministers “should be making it easier to hire, not easier to fire people”.

A different view was taken by business organisation the British Chambers of Commerce (BCC), whose director of policy, Dr Adam Marshall, said that an unnecessarily antagonistic dismissal process and the possibility of facing malicious tribunal claims has a detrimental effect on employment. The proposals would boost business confidence when firms can see the changes in action, he added.

UK businesses favour more free trade but less integration in Europe

British businesses value free trade with other countries across Europe but are unsure about the value of deeper integration in the European Union, according to a new survey from the British Chambers of Commerce (BCC).

Ahead of a meeting of EU leaders, the business group questioned more than 7,500 companies, asking firms of all sizes about what type of trading relationship with other European nations would most benefit their business in the long term.

A significant proportion of businesspeople are unsure or unaware of whether links to the rest of Europe benefit them. More than half (55%) of all respondents are uncertain about which trading relationship with Europe would be best for their business, including a third of exporters and two thirds of non-exporters.?

Of those who expressed an opinion on the matter, 51% of exporters believe that Europe should be a free trade area while less than a third (31%) support the concept of an economic union. A free trade area would allow the free movement of goods and services but would not have the EU’s social and economic integration, so firms would be less burdened by European regulation and legislation.

Commenting on the survey’s findings, John Longworth, BCC director general, said that businesses want to see more free trade but less integration across Europe. Noting that some companies said that they found it as easy to increase their trade with some non-EU countries as it was to increase their trade with other EU countries, he called on ministers to push hard to remove barriers to free trade among European countries, to make the single market work better.

Despite their scepticism about the EU’s ever closer union, British businesses still support UK membership: just 4.4% of all respondents favoured leaving the European Union altogether and agreeing bilateral trade agreements with individual European countries.

Perhaps unsurprisingly, given the ongoing crisis in the eurozone, only 3.9% of respondents expressed support for UK entry into a monetary union.

The New IR35 Business Test: How Will Contractors Be Affected?

The IR35 Forum has revealed that a new business test as well as six risk scenarios will be published in April by HM Revenue & Customs. The improvements have been proposed to make the way IR35 is administered clearer; and from next month contractors and freelancers will be placed into either the low, medium, or high IR35 risk profile.

The advice will be issued to help self-employed workers regarding compliance risk. The aim of the Business Test will be to help contractors understand their position and they can use the evidence after taking the test if they are selected in an IR35 investigation.

The tests are not status tests because the legislation hasn’t been changed since it was introduced in 2000 but the proposals have attracted numerous disagreements due to the fact that industry experts claim that all freelancers cannot be categorised into a one-size fits all method.

The Forum was established by the Government to improve the administration of IR35 and to assist HMRC in identifying specific areas for development. Processes created include the new business entity tests and scenarios as well as a helpline and guidance.

Genuine contractors and consultants will not be affected by the latest changes, but aim to make IR35 easier to understand. And if they do become subject for investigation, their cases should be settled quickly with the help of the test results.

The scenarios which will be disclosed to “reduce the room for interpretation” of whether or not a contractor is in or outside the legislation. It is hoped that the scenarios will clarify the regulation and the IR35 Forum has revealed that it will develop a code of practice to educate contractors and contracting service firms.

The risk setups which will be published by HMRC in April will consist of two with a contractor inside IR35; two with a contractor outside it; a contractor who has started outside IR35 but moved inside; and the grey area of disagreement between HMRC and the Forum.

This article was written by the IR35 specialists at Nixon Williams. For more advice, visit the site today at www.nixonwilliams.com.

Why Goal Setting Can Ruin Your Life and Your Health

We live in a world where acquisition and achievement have become all important.

A whole movement, which studied the psychology of success over the past 40 years, has taught us that the only way to “success,” is to set clearly defined goals.

But the truth is – not only is the outcome not guaranteed, but the very process could be ruining our lives.

That’s according to Sarah Alexander, an expert in intuition and the author of “Spiritual Intelligence; The Eight Pillars of 21st Century Business Success”.

“There is no doubt that the human mind is hugely powerful and if you consistently focus your mind on a chosen result, there is a possibility that you will achieve a certain outcome. For a few, this approach has brought material success and financial gain, but for most it has led to disappointment, frustration and misery as intended goal after goal has not materialised.” says Sarah.

So why is this? Why is goal setting able to ruin your life?

1) Goals are most often set in the hope that life will be better with the attainment of a certain goal. They are set in the hope that with this achievement or acquisition, there will be greater happiness and fulfilment.

Yet the realisation soon comes that even with their chosen acquisition or achievement, they are no happier or fulfilled.

From here the solution seems to be to set another, bigger goal. In time, goal setting creates an almost never ending cycle of desire all in the search for a seemingly elusive thing.

2) Another problem with using goals to try to make us feel better inside is that we often create for ourselves things that are not really right for us as an individual and that are not really in alignment with who we inherently are as a person.

The “success” can actually become a burden on us rather than a pleasure, and impose some considerable strain on us on many levels.

3) In addition to this, many people set goals that are a result of what they think they should want or should have. They set goals based on what their peers have or what their peers are doing, or based on what they are being “encouraged” to do by others. It takes quite a lot of singularity of mind not to get caught up in this subtle peer pressure, or indeed the family pressure, that says you should have a certain thing by a certain age or be a certain way.

4) What often happens when we are intent on creating a specific outcome is we miss that very thing that really is for us to have, that really would make us happy. With the strength of our focus we fail to see the opportunity that is right in front of us because it is not what we have chosen to look for.

5) Furthermore, our logical, rational approach to our goals leaves no room for intuition, inspiration and creativity. This approach, based purely on what appears to be the logical steps to take to achieve something, can lead us to be very driven, very manipulative and often very unaware of the effect we are having on those around us.

With this self focused approach, at no time do we stop and ask what are the consequences for our families, our marriages or relationships, our friendships and also the consequences for our health of all this pushing to “make life happen”?

“For many people that I have worked with as a coach, they have lost much that they hold dear as a result of this desire to be successful – as defined by their goal setting and the material world. They have lost marriages, relationships with their children and friendships all in the name of goal achievement and success.” explains Sarah.

6) However, the biggest problem with goal setting is what happens to the many people who, despite doing all the right things, do not achieve their goals. The disappointment and disillusionment this causes is hugely detrimental. It leads us to be very self denigrating, self critical and self undermining.

It makes us see ourselves and our life through a very negative lens that effectively states “life is not fair.”

This endless comparison erodes our levels of self appreciation so that we often feel a failure. Stress and depression are moving towards epidemic proportions these days and, for many, goal setting and the failure to achieve is at the root of this.

So what is the solution to all of this? Should we just to give up on our goals and give up all hope?

Within all of us is a sense of inner wisdom that can be used to guide us in every aspect of our life. It can guide us to achieve all that is for us to achieve; it can inspire us with new ideas and options that we had perhaps not considered and it can be used to guide us in the creation of our dreams.

What gets in our way of following this natural course of events is our desire to control our life and what happens within it.

“My advice is to stop setting goals and stop striving to achieve those goals and let your instincts guide you in the right direction. You will feel happier, less stressed, and certainly more fulfilled.” concludes Sarah.

The five barriers to business growth

According to UK Government statistics less than 20% of all companies achieve sustainable growth. Why is the number so low? What stops the majority of companies achieving growth?

Roderic Michelson is a company growth expert from Aralex Consulting. In his experience, working with both large corporates and smaller SME’s, there are five key barriers to growth. By ignoring these key areas you can be sure you will be in the 80% that fail to grow;

1. Unclear Value Proposition.
Is your product solving a real customer problem – technical or operational? Or is it just a nice to have? To achieve growth it must be clear what problem you are solving. Having determined exactly where you are bringing value to your customers, then it may be necessary to fine tune the features or the price. However without a clear understanding of why your customers would want your product or service, tweaking is irrelevant.

“These sound very basic, but in my experience this area is the main reason a company fails to grow, and by tackling it you can make a huge difference in a very short time-frame.” says Roderic.

2. Owner and management team capabilities.
People start companies for different reasons. However, all entrepreneurs share common psychological traits: a desire for independence and getting things done, persistence, fortitude and optimism. These are great assets but there’s another side of the coin: inability to delegate, competitiveness and unwillingness to listen, also come with the package.

Beyond a certain size the family atmosphere of a start-up company needs to give way to team leaders, stronger delegation and clear processes.

When a company hits the milestone sizes of 6, 20 and 50-70 people, it is up to the entrepreneur to decide whether they want to grow further or stay in the “lifestyle business” size. A positive decision to grow requires change and is usually challenging for both the original team and the lead entrepreneurs. Quite often the initial teams are unfit to take the company further.

Failure to make a clear decision can leave a company floundering with a lack of vision and no clear direction. And failure to recognise when help is needed can consign a healthy company to its death bed.

3. Marketing.
We live in an over-marketed world. So marketing must not be left to chance. Start with the basics. Who are your customers and why are they buying from you? What is your Unique Selling Proposition? Which media are you using to reach out to them? Most companies are using 1-2 channels only. But there is gold to be mined in using multiple-media approaches and fine-tuning your message that will be of interest to your ideal customers.

4. Insufficient funding.
Under-funding is not just a significant contributor to business failure, it’s also a barrier to growth. Even if your business does well, there’s a need to invest in growth: more marketing, more stock, more materials, more salespeople … the list goes on.

And with growth comes the cash-flow-crunch problem as you have to pay your suppliers before your customer pays you.

So how do you work the Cash Conversion Cycle? First you need to calculate the actual time between paying your suppliers for inventory and stock and the time you get paid from your clients. Even an average number of days will be eye-opening. This will show you the number of days your working capital is tied up and unavailable to invest further.

If you do only one thing then let it be a vigorous focus on shortening your cash cycle. This will release cash so you can invest in growth.

5. Poor Sales Management.
An essential issue that entrepreneurs and managers need to track is the sales pipeline. Is there enough new business? Will it come through in a month, three or six months? This should be done in a very systematic way.

It is easier to do in a smaller company where things are more open. As the company grows decision-makers become more removed from sales and visibility deteriorates sharply.
Working on pipeline visibility and planning can not be emphasised strongly enough. It is a vital activity not only for growth but survival as well. The longer the sales cycle, the more critical it becomes. Ignore this aspect at your peril. Without a clear picture of your pipeline your growth will be sporadic at best and in the worst case – non existent.

The good news, just by tackling one of these five barriers you can make a significant difference in the short term, but to achieve long-term, sustainable growth, all five areas need to be tackled and diligently maintained.