Category: Small Business News

Small business news

Will Rishi Sunak cut shop prices to boost the High Street?

(qlmbusinessnews.com via bbc.co.uk – – Mon, 22nd June 2020) London, Uk – –

“Timely, temporary and targeted” was the advice given to the Treasury Select Committee on stimulating the economy by the former US Treasury Secretary Larry Summers in the depths of the 2008 financial crisis.

These words found their way into the pre-Budget documents to describe the immediate 13-month VAT cut from 17.5% to 15% announced by then Chancellor Alistair Darling.

The same phrase was used by current Chancellor Rishi Sunak in his Budget in March to describe the first steps in pandemic support packages. And, following Germany's temporary 3% cut in VAT, the prospect of a similar tax cut is again up for discussion in the UK.

The policy is certainly timely, because it can be enacted with immediate effect. And because it is reversible, it serves as a temporary stimulus.

Stimulus

In 2008, it was argued that a general VAT cut was targeted because it was aimed at supporting consumer confidence. But that is far more debatable. It certainly was expensive, though. The upfront cost was £13bn over two years, amount to half of the Darling stimulus package.

Most of this shifted spending in time into the cheaper VAT period. The net impact? A 1% increase in retail sales, just shy of the 0.5% overall boost to consumers predicted by the Treasury at the time, according to the Institute for Fiscal Studies.

The argument floating around government earlier in the month was that there was little point in stimulating shops, restaurants and pubs that were not open. Physically enabling trade would be a prerequisite.

The thinking in Germany was to incentivise spending and consumer confidence as soon as retail reopened, rather than see those who could not physically spend during lockdown, and were so forced to save, choosing to maintain high savings.

Consumer confidence

The point about the temporary cut is to get money flowing in the economy quickly. It has some interesting quirks as a policy. Back in late 2008, 43% of local shops only changed their prices at the till, leaving shelf prices unchanged. It is a considerable logistical cost to do so.

However, the impact on consumer confidence was marked. There was a significant rise in sentiment towards both buying household goods and making major purchases, according to the Nationwide consumer confidence survey.

The major purchases index went above boom time levels and continued even after VAT went back up, but then fell sharply when VAT was increased again under the Coalition in January 2011.

The considerations here are whether the Treasury chooses to make this truly targeted on particular sectors – such as pubs and restaurants, rather than pass further boost to say mainly online retailers.

The cost may be less than normal, too, given VAT revenues are in any case going to be sharply down. But it is still pricey.

Also, it is unclear how much additional difference a 2.5% cut in prices will really achieve on top of already anticipated reopening sales and price cuts?

Wherever things go, a clear decision will be needed quickly. Speculating that VAT will be cut in the near future will simply serve to delay purchases, as consumers wait for an anticipated saving.

By Faisal Islam

How Much do Franchises Actually Make? Food, Cleaning, Senior Care & More

Source: FC

How much do franchises actually make, and why is this information impossible to find? We look at 5 of the biggest names in food compare with popular industries like beauty, cleaning, senior care, staffing and more. We'll also explore franchises that can make as much or more as some of the big name food franchises, for an investment that is 10X less. According to a Franchise Business Review report, 51.5 percent of food franchises earn profits of less than $50,000 a year; only about 7 percent of food franchises have profits over $250,000. The average profit for all restaurants in the report was $82,033. You can see a very small amount of food franchises earn decent money and many owners are struggling or have bought themselves a job. Also keep in mind, if you are looking at a very established big name franchise, you get the leftovers in terms of territory. In most cases the owners making the most money are the locations that opened up long ago and received the best territories. And this is an argument we often hear, someone knows someone who owns 10 Dunkin Donuts and they did well, yes, but they bought them 20 years ago. There is 20 years worth of competition that has built up since that time.

UK Government-backed loan schemes for businesses top £31bn

(qlmbusinessnews.com via news.sky.com– Tue, 2nd June 2020) London, Uk – –

The data shows a steady rise in claims under the so-called furlough scheme but a further leap in so-called bounce back loans.

Three government-backed loan schemes for UK businesses have paid out more than £31bn to date, according to updated Treasury data on taxpayer support for firms and workers' wages.

The latest figures showed almost 750,000 companies had seen loans approved by Sunday 31 May under the emergency COVID-19 funding initiatives; the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loan Scheme (BBLS).

The data showed that £31.3bn had been paid out by banks – up from £27.5bn a week ago.

The growth continued to be led by demand for the BBLS, in which sums – 100% guaranteed by the government – can be borrowed up to a maximum of £50,000.

The Treasury said £21.3bn had been dispersed by lenders to 699,354 companies.

The total number of applications for bounce back loans stood at more than 873,000.

A sum of £8.9bn had been lent to nearly 46,000 companies under CBILS, and a further £1.1bn to 191 companies as
part of CLBILS, the figures showed.

It was also confirmed that the number of workers' wages being supported by the Job Retention Scheme, also known as the furlough scheme, which is aimed at limiting the lockdown's impact on employment, had topped 8.7 million – up from 8.4 million a week earlier.

The Treasury put the cost at £17.5bn to date.

There are growing worries about the total cost of the taxpayers' support – estimated by the Office for Budget Responsibility to top £120bn – and the government's exposure should small firms default on bounce back loans.

RBS chairman Sir Howard Davies told a Sunday Times panel last week that a central pool should be set up to carry bad debts held by banks under the scheme, should borrowers go under in the looming recession for the UK economy.

Chancellor Rishi Sunak announced changes to the Job Retention Scheme (CJRS) last week that will let businesses bring back staff part-time from July, but introduce a taper requiring firms to contribute to salaries from August.

The scheme itself is to be closed at the end of October.

This week until Thursday, Dermot Murnaghan will be hosting After the Pandemic: Our New World – a series of special live programmes about what our world will be like once the pandemic is over.

We'll be joined by some of the biggest names from the worlds of culture, politics, economics, science and technology. And you can take part too.

James Sillars Business Reporter

Most small UK companies have no pandemic insurance – watchdog

(qlmbusinessnews.com via uk.reuters.com — Wed, 15th April 2020) London, UK —

LONDON (Reuters) – Most insurance policies bought by smaller companies do not cover for disruption caused by the coronavirus pandemic, Britain’s Financial Conduct Authority said on Wednesday.

The watchdog also told banks they must designate a senior manager accountable to the regulator for ensuring that their lending to small businesses is fair.

Britain is in lockdown, with many companies shuttered and millions of people furloughed as the country heads for a deep recession.

The FCA said most insurance policies for small and medium sized companies (SMEs) only gave basic cover, with no obligation to pay out in relation to the COVID-19 pandemic.

“While this may be disappointing for the policyholder we see no reasonable grounds to intervene in such circumstances,” FCA interim chief executive Christopher Woolard said in a letter to heads of insurers.

“In contrast, there are policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly.”

Interim payments could be made on valid claims to speed things up, Woolard said.

“If you disagree with doing so, we would like you to send to us the grounds for reaching that decision including how you believe it represents a fair outcome for customers,” Woolard said.

The smallest companies could take their complaints to the Financial Ombudsman Service, he said.

The FCA has also set up a new small business unit to ensure that the firms it regulates are supported in the crisis.

In a separate letter to heads of banks, Woolard said that each lender must designate a senior manager that oversees small business lending.

While business loans are generally not directly regulated, the FCA can fine and suspend a senior manager who is not treating customers fairly.

The government has set up a scheme for business disruption loans that banks are implementing, and Woolard said the FCA is monitoring how much money is flowing to companies.

Small companies have complained about treatment by banks in the past, accusing Royal Bank of Scotland’s “global restructuring group” of stripping assets from clients.

Two former bankers at HBOS, now owned by Lloyds, and four business partners were jailed in 2017 for a fraud that siphoned off money from struggling businesses.

“Our objective will be to ensure that there is not a repeat of the well documented historic issues in the treatment of SMEs,” Woolard said.

Reporting by Huw Jones

Revamped loan scheme will make ‘big difference’ says Royal Bank of Scotland

(qlmbusinessnews.com via bbc.co.uk – – Fri, 3rd April 2020) London, Uk – –

A revamped loan fund for ailing firms hit by the coronavirus lockdown will have an immediate impact, RBS has said.

RBS chairman Sir Howard Davies admitted there had been problems but expects to see a “sharp increase” in lending to small firms in the next few days.

On Thursday, Chancellor Rishi Sunak overhauled the scheme amid claims banks were taking advantage of the crisis.

The government has pledged to guarantee £330bn of loans but only £145m has been lent so far.

Small firms say they have struggled with onerous eligibility criteria for the government-backed loans, which are being issued by High Street banks and other lenders.

They have also complained of facing interest rates of up to 30% and being asked to make unreasonable personal guarantees.

It comes as the UK is facing recession as large parts of the economy are shut down.

On Friday, the influential Purchasing Managers' Index (PMI) survey showed Britain's dominant services industry suffered its biggest slump in March since 1996, sinking from a reading of 53.2 to 34.5.

Any figure below 50 marks contraction.

Mr Sunak said that under changes to the Coronavirus Business Interuption Loan Scheme (CBILS):

  • Applications will not be limited to businesses that have been refused a loan on commercial terms, extending the number who benefit. However, the Treasury has not capped the interest rates banks can charge.
  • Banks will be banned from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000
  • Larger firms with a turnover of up to £500m will also be eligible for more help – with state-backed loans of up to £25m available to firms with revenues of between £45m-500m.

Sir Howard, who used to chair the Financial Services Authority (now known as the Financial Conduct Authority), told the BBC's Today programme that the process of checking borrowers' eligibility had been “difficult”.

He also said RBS had struggled with the demand after inquiries about the loans jumped “by 45 times” in a week.

“I think we have to accept that the scale of this process and the speed with which it's been put in place has caused challenges for everybody,” he said.

“But we've had good discussions with the Treasury and small firms, and I think the changes announced overnight will make a quite a big difference.”

On Wednesday, Business Secretary Alok Sharma said it would “completely unacceptable” if any banks were unfairly refusing funds to good businesses in financial difficulty.

He also referenced the financial crisis – when taxpayers bailed out a number of the UK's largest banks – suggesting lenders should now repay the favour.

However, Sir Howard told the BBC that comparing the current crisis to 2008 was “rewriting history”.

“In the last crisis the problem was that the banks didn't have the money to lend, there was a credit crunch.

“We're not in that position at all. The banks have got the money to lend, we have a large amount of capital, we are not constrained in the volumes we can lend.”

On Thursday, Mr Sunak said the government was making “great progress” on supporting businesses to help manage their cashflows but needed to take “further action” by extending the scheme.

Analysis: By Simon Jack

There has been widespread concern, acknowledged by the government, that some of the emergency measures to provide financial assistance to businesses are not working.

Too few firms felt able or willing to take on loans that carried an 80% government guarantee to the lender but not the borrower. The Treasury has announced new rules, meaning business owners asking to borrow less than £250,000 will no longer have to offer up personal guarantees.

Perhaps most importantly, the requirement for companies to have first tried to get a normal commercial loan elsewhere will be dropped.

However, they are still loans. Companies wishing to take them out will be 100% liable for the debt and the government has not capped the interest rate banks can charge even though banks are able to borrow at close to 0%.

The loans may now be available to more businesses but what's not clear is whether firms want them.

‘Big step forward'

Labour welcomed the measures but accused the government of being “behind the curve” when implementing support measures.

“There remain huge gaps in support for employees and self-employed that must be addressed immediately if people are to avoid facing serious hardship in this crisis,” said shadow chancellor John McDonnell.

The head of the Confederation of British Industry, Carolyn Fairbairn, described the changes as a “big step forward” although she said more detail was needed.

“Each week brings unprecedented levels of economic support and it's encouraging to see the government stepping in where urgent help is needed.”

Mike Cherry, national chairman of the Federation of Small Businesses, told the BBC's Today programme: “It's a very necessary and timely intervention by the chancellor, because clearly, businesses were being promised interest-free, fee-free, government support by the banks.

“Time and time again, the FSB has heard from our members and other small businesses who've approached banks seeking these emergency loans that they were being offered anything but.”

Stephen Jones, the chief executive of UK Finance which represents the banks, also welcomed the changes.

Speaking to the Today programme, he said: “It was clear that those viable businesses, who were required to be offered under the terms of the scheme commercial lending under commercial terms, felt aggrieved that they were not given access to the scheme and therefore the change gives the scheme to all businesses who are capable of repaying debt after this crisis is over.

“This change is extremely welcome and it means that banks will not be forced to make very unenviable assessments in terms of who cannot or can access the scheme in terms of viable businesses out there.”

Hundreds of loans have been made under UK coronavirus scheme – Treasury

(qlmbusinessnews.com via uk.reuters.com — Wed, 1st April 2020) London, UK —

LONDON (Reuters) – Hundreds of loans have been made under an emergency scheme launched last month to help small and medium-sized companies get access to bank credit during the coronavirus crisis, a spokesman for Britain’s finance ministry said.

“There are hundreds of these loans that have gone out,” the Treasury spokesman told reporters when asked about reports of companies struggling to use the Coronavirus Business Interruption Loan Scheme. “Cash has very much gone out the door.”

By William Schomberg

Chancellor Sajid Javid Sets Date for Budget

(qlmbusinessnews.com via bbc.co.uk – – Mon, 14th Oct 2019) London, Uk – –

The Budget has been announced for 6 November, with Chancellor Sajid Javid saying it will be “the first budget after leaving the EU”.

“This is the right and responsible thing to do – we must get on with governing,” he said.

It will be Mr Javid's first Budget since he became chancellor in July.

The Budget date is normally announced in September. Mr Javid said the Budget would detail the government's plans to “shape the economy for the future”.

BBC assistant political editor Norman Smith said that in the event of a no-deal Brexit, the full Budget would be delayed and the 6 November announcement would be “a simple economic statement”.

Understand if there is No deal, then Budget will be delayed for several weeks – and Nov 6 will just be an economic statement.

The government's independent financial watchdog, the Office for Budget Responsibility (OBR), which produces economic forecasts for the Budget would normally get ten weeks notice to prepare.

The OBR said it was able to prepare some information in advance, but that its forecasts would be based on the UK securing a Brexit deal.

It said since the EU referendum, its forecasts had been based on “broad brush assumptions for a relatively smooth [Brexit] outcome”. The OBR said that approach would continue “in the absence of any specific information”.

Shadow chancellor John McDonnell said he expected the Budget to be “an electioneering stunt rather than a Budget to rebuild our stalling economy and reset the direction of our country”.

The Budget is the government's yearly announcement on its plans for tax and spending for the coming financial year, which starts in April 2020.

There are expectations that the chancellor could relax the government's borrowing rules to give him more spending power.

The rules state that borrowing should remain below 2% of national income, at about £46bn.

Mr Javid has already suggested he is prepared to borrow more to take advantage of current record-low borrowing costs, and has previously said he plans to review the borrowing rules.

In August's spending review, Mr Javid declared the government had “turned the page on austerity, announcing its largest increase in spending for 15 years.

Analysis: Faisal Islam

Naming the date of a Budget is a sign from the chancellor to communicate that at least some Treasury business continues as normal.

But there is nothing routine about a government yet to win a vote in the Commons, trying to pass a Budget.

In theory there will be measures to boost infrastructure, spending and some taxes.

But if there is a no-deal Brexit, the Treasury will instead turn its focus on giving immediate support to the economy, businesses and households.

So, in that case, there would be a delay to the Budget.

In a no-deal scenario, there might be some extra scope for a cut to VAT which could be part of a general fiscal stimulus package for the economy.

Whatever happens, a new set of Budget numbers and economic forecasts is being prepared by the government's independent financial watchdog, the Office for Budget Responsibility. The Bank of England too will be preparing its new forecasts for the 7 November Inflation Report, and any implications for interest rates.

The Treasury will also reveal its new self-imposed constraints on borrowing – “fiscal rules”- designed to help create more space for spending and tax cuts.

And if there is a Budget a week after a Brexit deal has passed the Commons, there could be a chance that the government could get support for its fiscal measures too.

Or rather it could be part of the pathway to a general election next month.

How The RealReal Consignment Company is Cashing in on Pre-Owned Luxury Brands

Source: WSJ

Resellers of designer clothing and apparel say there’s no reason to be closeted about buying and selling pre-owned luxury wearables. The RealReal consignment company is cashing in on the trend.

The Jerk Chicken Queen of the Bronx

Source: SFI

Fauzia Abdur-Rahman has been serving Jamaican food in the South Bronx from her cart Fauzia's Heavenly Delights, right outside the courthouse, for the last 25 years. The menu changes every day, but there are always two meat options, a fish option and three vegetarian options.

With the help of her daughter and husband, Fauzia makes her famous jerk chicken three times a week, and finishes it with her homemade jerk sauce that she makes with pimiento and scotch bonnet peppers, plus a host of other ingredients.

UK wage growth accelerates to levels not seen since 2008 but hiring remains slow

(qlmbusinessnews.com via news.sky.com– Tue, 16th July 2019) London, Uk – –

The latest employment figures give some support to growing evidence of a reluctance to hire but the overall picture remains rosy.

Average wage growth has accelerated to levels not seen since July 2008, according to official figures.

The Office for National Statistics (ONS) said earnings, excluding the effects of bonuses, rose by 3.6% on an annual basis in the three months to May – beating the forecasts of economists.

When bonuses were included, the percentage figure rose to 3.4% from 3.2% a month earlier.

The data suggests a boost to household spending power as the rate of inflation, due to be updated on Wednesday, currently stands at 2%.

But the latest employment figures also betrayed a possible early sign that the jobs market – resilient since the EU vote in 2016 – may be showing a sign of stress as the clock ticks down to the next Brexit deadline of Halloween and the world economy slows because of the US-China trade war.

Employment growth slowed to its weakest level since August last year with 28,000 positions created over the three months though the jobless rate remained at 3.8%.

The ONS released its findings at a time when closely-watched surveys of companies have pointed to growing caution over hiring.

The latest research from recruitment firm Reed showed a 2.3% decline in jobs advertised in the second quarter of the year – the largest drop since 2010.

It blamed political and economic uncertainty as the Conservatives prepare to choose the country's next prime minister – a leader set to preside over the ultimate fate of Brexit.

Commenting on the ONS figures, employment minister Alok Sharma said: “Wages outpacing inflation for 16 months in a row, more people in work than ever before and joint-record female employment, means better prospects for many thousands of UK families and shows the continued resilience of the UK labour market.”

But he conceded in an interview with Sky News that continued uncertainty over Brexit was dragging on investment – and therefore UK economic growth.

He said: “It's not good for business, it's not good for government so I think Boris Johnson's right.

“We have this hard deadline (of) 31st October. We leave, hopefully with a deal, if not without a deal”.Sponsored Links

By James Sillars, business reporter

Two million UK employees in line for government-funded sick pay

(qlmbusinessnews.com via bbc.co.uk – – Mon, 15th July 2019) London, Uk – –

Two million low-paid workers could receive government-funded sick pay for the first time.

Currently, employees must earn at least the equivalent of 14 hours on the minimum wage to qualify. But the government is looking at whether to extend eligibility to those earning below this threshold.

There could also be more help for those returning to work after sick leave.

The government has launched a consultation on the proposed changes.

Health Secretary Matt Hancock said: “We need to remove the barriers that stop people with disabilities or health conditions from reaching their full potential – these steps will help us achieve that.”

Workers need to earn at least £118 a week to receive statutory sick pay, although the threshold is reviewed every tax year.

It is unclear if the plans would benefit “gig” workers on freelance or short-term contracts, but the Department for Work and Pensions said the consultation did not seek to “undermine the flexibility in the UK labour market”.

Around 1.1 million people in the UK are considered gig economy workers, receiving little or no holiday or sick pay.

Sick pay: What are my rights?

  • To qualify for statutory sick pay (SSP) you must be classed as an employee
  • Agency workers are also entitled to SSP
  • You need to earn at least £118 per week to be eligible for SSP
  • You need to have been ill for at least four days in a row, including non-working days to claim SSP
  • SSP is £94.95 a week. If your employer has a sick pay scheme you may get more
  • The maximum amount of time you can claim SSP for is 28 weeks

Phased returns to work

The government is also looking at making statutory sick pay more flexible, as it seeks to reduce the number of people quitting work after a period of sickness.

Each year more than 100,000 people leave their job after a sickness absence lasting at least four weeks, it said.

It will explore allowing phased returns to work, in which people would continue to receive statutory sick pay, as well as offering small businesses who help employees return to work a rebate.

It will also consider whether to change legal guidance to encourage employers to intervene early during a period of sickness absence.

For example, employees could be given the right to request modifications to their working patterns – similar to the right to request flexible working – to help them return to work.

Matthew Fell, chief UK policy director at lobby group the CBI, said managing sickness absence effectively made “good business sense”.

UK inflation falls to Bank of England expectations reducing chance of interest rate rise

(qlmbusinessnews.com via uk.reuters.com — Wed, 19th June 2019) London, UK —

LONDON (Reuters) – Britain’s inflation rate cooled in May and cost pressures in factories fell to a three-year low, according to data that might reassure the Bank of England there is no urgency to pursue its stated policy of gradually raising interest rates.

Unlike in the euro zone and United States, where waning inflation has spurred expectations for interest rate cuts, the British central bank has stuck to its view that rate hikes will be required at some point to prevent the economy overheating.

Still, Wednesday’s data pointed to muted price pressures.

Britain’s Office for National Statistics said consumer prices rose at an annual rate of 2.0% in May after a 2.1% rise in April, matching the BoE’s target as well as the consensus in a Reuters poll of economists.

Sterling, which has fallen sharply in response to growing expectation that Prime Minister Theresa May’s successor will take a more hardline approach to Brexit, showed little reaction to the data.

“With inflation relatively subdued, and against a backdrop of heightened political and economic uncertainty, the case for raising interest rates anytime soon remains weak, despite recent warnings by some Monetary Policy Committee members,” the British Chambers of Commerce’s head of economics, Suren Thiru, said.

Stable inflation, combined with the lowest unemployment rate in 44 years and rising wages, has taken the edge off the uncertainty about Brexit for many households whose spending drives Britain’s economy.

Britain’s modest rate of underlying inflation is also helping the BoE to hold off on fresh interest rate hikes while it waits for the outcome of the Brexit impasse, although some officials in recent weeks have said increases may be needed sooner rather than later.

Core inflation, excluding energy, food, alcohol and tobacco, dropped to 1.7% in June, the lowest annual rate since January 2017 and as expected in the Reuters poll.

“Inflation eased in May, as travel prices such as air fares fell back after their Easter highs in April,” ONS statistician Mike Hardie said.

Britain’s inflation rate surged in 2017, pressured by the slump in sterling after the Brexit referendum in June 2016.

It peaked at a five-year high of 3.1% in November 2017 but has now fallen back to the BoE’s 2% target.

Britain’s on-target inflation differs from the euro zone’s where the European Central Bank has struggled to get inflation to match its target of just below 2%. ECB President Mario Draghi on Tuesday raised the prospect of further monetary stimulus to end the persistent undershoot.

Investors will also watch for signals that the U.S. Federal Reserve might plan to cut rates later this year — as markets expect and U.S. President Donald Trump has demanded — when it announces its policy statement at 1800 GMT.

By contrast, when the BoE announces its policy decision on Thursday the focus will be on policymakers’ enthusiasm for higher, not lower, rates.

Still, the ONS figures suggested less short-term pressure in the pipeline for consumer prices.

Among manufacturers, the cost of raw materials — many of them imported — was 1.3% higher than in May 2018, slowing from 4.5% in April and marking the weakest increase since June 2016.

Economists polled by Reuters had expected input prices to rise by 0.8%.

Manufacturers increased the prices they charged by 1.8% last month compared with 2.1% in April, broadly in line with forecasts and the lowest rate since September 2016.

The ONS said house prices in April rose by an annual 1.4% across the United Kingdom as a whole compared with 1.6% in March. Prices in London alone fell 1.2%, the tenth consecutive fall.

Bank overdraft fees to undergo major shake-up

(qlmbusinessnews.com via bbc.co.uk – – Fri,7th June 2019) London, Uk – –

Bank overdraft fees are to undergo a major shake-up, which the UK financial regulator is calling the biggest overhaul for a generation.

Banks and building societies will no longer be allowed to charge fixed daily or monthly fees for overdrafts.

In addition, there will no longer be higher fees for unplanned overdrafts than for arranged ones.

The Financial Conduct Authority (FCA) said the new rules would start by April 2020.

Under the new measures, which were first proposed in December, banks will also be required to charge a simple annual interest rate on all overdrafts, and overdraft advertisements will need to come with that rate clearly displayed, to help consumers compare various products.

In 2017, banks made more than £2.4bn from overdrafts – with 30% alone coming from unarranged overdrafts.

Previous research showed those aged between 35 and 44 were most likely to have some form of overdraft, and about 10% of all 18 to 24-year-olds had exceeded their overdraft limit in the previous 12 months.

The regulator said the changes would make overdrafts “simpler, fairer, and easier to manage”.

It will mean:

  • No difference between arranged and unarranged overdraft prices – but no cap on the cost either
  • An end to monthly or daily fees
  • A requirement for banks to advertise their overdraft rate as a single annual interest rate, or APR
  • Banks will still be able to refuse to make a payment if a customer does not have the funds to cover it, but any resulting fee for the customer must reflect the cost to the bank
  • Banks must do more to identify and help customers who are showing signs of financial strain or are in financial difficulty

When the new rules come into force, the typical cost of borrowing £100 through an unarranged overdraft would drop from £5 a day, to less than 20p, the regulator said. However, some fear that the costs to those who previously used arranged overdraft charges might rise, or charges for accounts may rise.

Banks and building societies will be required to charge a simple annual interest rate on all overdrafts, and overdraft advertisements will need to come with that rate clearly displayed, to help consumers to compare various products.

The FCA's chief executive, Andrew Bailey, said the overdraft market was currently “dysfunctional” and “causing significant consumer harm” because vulnerable customers are often hit by excessive charges for unarranged overdrafts, which can be 10 times as high as fees for payday loans.

“Consumers cannot meaningfully compare or work out the cost of borrowing as a result of complex and opaque charges, that are both a result of and driver of poor competition,” said Mr Bailey.

“The decisive action we are taking today will give greater protections to millions of people who use an overdraft, particularly the most vulnerable.”

Eric Leenders, from bank trade body UK Finance, said: “Overdrafts can provide a convenient way for customers to smooth their short-term cash-flow, and there is a highly competitive market in the UK. The banking industry is committed to helping customers manage their money and we will be working closely with the FCA to implement these rules.”

Charity reaction

Gillian Guy, chief executive of Citizens Advice, said overdrafts were one of the most common areas of concern when worried consumers contacted the charity.

“Overdraft charges can have serious knock-on effects for people's debt and mental health. These new rules should help thousands of people from getting trapped in a debt spiral,” she said.

“If, after these measures are introduced, people still pay over the odds, the FCA should review the need for an interest rate cap to ensure no one is paying back more than twice what they borrowed.”

Peter Tutton, of debt charity StepChange, said: “We would like the regulator to be more pro-active and fleet of foot in identifying and refining the specific, practical steps banks should be taking to help customers escape the overdraft trap more quickly, and to break the cycle of repeat use of overdrafts.”

‘Bad bank’ repays £50bn taxpayer bailout loan

(qlmbusinessnews.com via bbc.co.uk – – Wed, 5th June, 2019) London, Uk – –

The ‘bad bank' which runs loans granted by Northern Rock and Bradford & Bingley before their financial crisis bailouts has repaid its £48.7bn taxpayer loan.

UK Asset Resolution had not expected to repay the crisis-era loan until the mid-2020s but has been able to do so more quickly by selling off packages of loans to private equity buyers.

UKAR has 35,000 customers, fewer than around 800,000 at the outset.

The aim is to sell the last of those loans in 2020.

This would be done by finding buyers for what is left of NRAM – which holds the remaining loans from Northern Rock – and also B&B.

‘Protecting customers'

“I am delighted that, in under ten years, we have been able to repay in full the government loan of £48.7bn,” said Ian Hares, UK chief executive.

“Looking forward, we are focused on the disposal of the remaining government investments in NRAM and B&B whilst ensuring that customers are appropriately protected.”

UKAR which does not grant new loans and only manages existing ones, would then become a government-owned holding company. Among its responsibilities would be pensions for around 10,000 people.

The other part of Northern Rock was sold to Virgin Money in 2011.

The government has already sold off its crisis-era shareholding in Lloyds Banking Group but continues to hold a stake of more than 60% in Royal Bank of Scotland.

Mortgage prisoners

UKAR was created in October 2010 and since then it has cut its balance sheet by £104.4bn, including £43.5bn of customer loan repayments and £37.4bn of asset sales.

It now has 140 staff and just £5.5bn of mortgages left, 55% of which are buy-to-let mortgages.

The BBC's Panorama programme reported last year that Cerberus, one of the private equity buyers for the loans, had told the government it was planning to offer homeowners better mortgage deals – but had not done so.

This left homeowners trapped on high interest rates, it said. Cerberus denied the allegation.

The Financial Conduct Authority, though, is working on plans to help so-called mortgage prisoners – which include some Northern Rock and B&B customers – find lower loan rates.

UKAR's annual report shows Mr Hares was paid £650,000 last year and could receive £823,000 next year if all the performance conditions on bonuses are met, including the sell-off of the remaining loans.

Natwest to double growth funding programme for UK small and medium-sized businesses

(qlmbusinessnews.com via cityam.com – – Tue, 23rd April 2019) London, Uk – –

Natwest will double its growth funding programme for small and medium-sized British businesses, citing the need to help them navigate Brexit disruption.

The UK bank’s growth funding loan pot, which was started in May 2018, will be immediately doubled to £6bn in the latest sign that companies are demanding resources to cope with political impasse and that banks and investors can cash in by helping them.

The money will be available immediately and will help businesses looking to grow, fund green initiatives and navigate the current uncertain business climate, Natwest said.

Last week the government announced it had handed over £200m to help support smaller businesses in the 2019-20 financial year as the future of European Union funding remains uncertain.

The Treasury made the cash available to the British Business Bank, a public-private partnership which provides loans to small companies looking to increase in size through investment and venture capital firms.

The national chairman of the Federation of Small Businesses (FSB), Mike Cherry, said at the time: “With Brexit on the horizon, serious questions regarding future funding for a UK small business support network that’s heavily reliant on the EU remain unanswered.”

Natwest figures released today showed that £2.9bn of its already-expanded £3bn growth funding pot had been approved for investment.

The bank said it would increasingly focus on financing eco-friendly projects and intellectual property.

Alison Rose, chief executive of commercial and private banking at Natwest, said: “We are working every day to look at what businesses need to not just survive, but grow. In many cases this is bespoke funding.”

Referencing Brexit, she said: “We recognise that the challenges businesses face evolve all the time, which is why we try to innovate whenever we can.”

By Harry Robertson

Santander announced plans to close 140 branches across the UK

(qlmbusinessnews.com via cityam.com – – Wed, 23rd Jan 2019) London, Uk – –

A total of 1,270 jobs are at risk after Santander announced plans to close 140 branches across the UK today.

The bank said it expects to redeploy around a third of the employees affected within the business.

A shift in customer behaviour is to blame for the closures, the lender said, after research found that the number of transactions carried out in Santander branches has fallen by 23 per cent over the last three years while digital transactions have grown by 99 per cent.

The bank plans to refurbish 100 of its remaining 614 branches over the next two years, with an investment of £55m.

Santander head of retail and business banking Susan Allen said: “The way our customers are choosing to bank with us has changed dramatically in recent years, with more and more customers using online and mobile channels. As a result, we have had to take some very difficult decisions over our less visited branches, and those where we have other branches in close proximity.

“We will support customers of closing branches to find alternative ways to bank with us that best suit their individual needs. We are also working alongside our unions to support colleagues through these changes and to find alternative roles for those impacted wherever possible.”

By Jessica Clark

The UK business shining a light on retail stores

 

(qlmbusinessnews.com via telegraph.co.uk – – Sat, 19 May 2018) London, Uk – –

With LEDs widely regarded as the modern lighting solution of choice, one family-run company is looking to enlighten the masses
How is the Internet of Things changing the way we shop? We might expect inventory or the supply chain to be affected by changes in technology, but there is one aspect of the shopscape that is hiding in plain sight: lighting.

Modern lighting systems have undergone a transformation. Incandescent bulbs are hot, wasteful, don’t last long and many countries have restricted their sale. Fluorescent lighting is cheaper but harsh, difficult to control and less attractive. Both types of lighting have given way to LEDs, which offer more flexible lighting solutions, but not all retailers have caught up yet.

Shoplight, founded in 2014 by Mark and Melanie Shortland, puts the power of LEDs into the hands of stores. “Shops have always been about creating an experience for the customer,” says Ms Shortland, “and with the threat from online shopping, customer experience is only becoming more important.”

Thinking about the customer experience is what kickstarted the business in the first place, she notes: “Mark felt after 20 years of working with large manufacturers in the lighting business that there was a gap in the market. As the offer was getting more high-tech, old fashioned customer service was missing and that’s where we stepped in with Shoplight.”

Mr Shortland decided to differentiate the business by demonstrating to clients that the business understood the fast-paced nature of store opening programmes and the dynamic requirements of the retail sector that often drive down costs and force more nuanced competition through product and service.

“Early on, we secured an order from Skechers,” he says. “Although it was a small order it led to us supplying Skechers with their lighting solutions across the UK, Europe and in Africa and certainly allowed us to gain confidence and momentum with other clients.”

Today, their client list includes Moss Bros, Selfridges, T2, Waterstones, Jigsaw and Lush. Mr Shortland says: “Some of these clients have moved from long-established relationships with our larger competitors, which really reinforces our belief that great service matters now more than ever and that we are definitely doing many things right.”

Looking ahead, he predicts that flexible lighting will become more responsive to customers, with IoT-enabled luminaires allowing shopping environments to adapt to new moods and settings at the flick of a switch – or increasingly a tablet. “This will help retailers put the customer at the centre of retail experiences, encouraging people to visit, stay and buy,” he says, “and Shoplight are playing a leading part in this evolution.”

Parlez Media

 

 

Enterprising SMEs garnering the power of social media to become local hotspots


Jorge Quinteros/Flickr

(qlmbusinessnews.com via telegraph.co.uk – – Sun, 22 Apr 2018) London, Uk – –

How small and medium-sized enterprises (SMEs) use Instagram, Twitter and Facebook to become local hotspots.

‘We reach people who don't know we exist’
Paula Milner, founder, The Crafty Lass

For every workshop that we hold, we set up a Facebook event and post that link to local Northamptonshire Facebook groups.

It means that we can keep track of people interested in our events
(they can click the “interested” button) and reach locals who may not even know that we exist, but are only a few clicks away from purchasing a ticket.

Facebook reviews are also key, because people check these when they visit your profile page, the star rating of which is visible when your page appears in Google search, so a poor score can put someone
off before they have even clicked through.

Encourage customers who have a good experience with you to give
a high-star rating and leave some positive words, which are vital if you want to improve word-of-mouth recommendations.

‘I use hashtags to stand out’
Pragya Agarwal, founder, The Art Tiffin

Across all my craft company's social media, I use location-specific hashtags, such as #lancashirehour and #liverpoolhour, which are used by locals during specific time periods to find out what’s going on in their area.

I do this on a regular basis and during specific times; for example, #liverpoolhour takes place every Thursday from 8-9pm.

The local hashtags create a real sense of community. This especially works with social enterprises like ours, because people are particularly keen to chat with and retweet businesses that are engaging with the community and have a sense of social responsibility.

I also use location tags in Instagram’s live “Stories” feature,
which is good for attracting followers and messages. I recently posted an Easter-themed short video of my kids painting eggs, which was viewed more than 500 times – and thanks to the local hashtag, half the views were from Formby, Merseyside.

I have also made quite a few sales to locals who have seen my Instagram or Twitter posts.

I once posted images of a red squirrel linocut that I made on Twitter, so tagged the local Formby National Trust Red Squirrel reserve and the location hashtag. It resulted in quite a few sales of the linocut print.

As a small firm operating primarily online, it’s difficult to be found in Google keyword searches, but with customers more conscious about supporting their local businesses, social media offers an opportunity to be seen in a crowded marketplace.

It’s also good for offering attractive discounts such as free delivery, because local people will likely be able to pick the goods up in person.

‘It’s powerful marketing on a budget’
Russell Jenkins, managing director, Thomson’s Coffee Roasters

We make sure that our social media posts are tailored to our local Glasgow customers. We will also use hashtags such as #glasgowcentral and #glasgowcafe to reach local people who want to find out what’s going on in their area.

Don’t forget to use your local knowledge and include directions for those who don’t know how to find you.

Social media also means that we can engage directly with the locals.
For example, a post about our policy of welcoming dogs, which featured pictures of canines sitting in the café, was our most successful to date; we got 50 shares and 568 likes within 24 hours. People commented about how excited they were to come to visit with their pups.

Across the three main social media websites, we have built up a community of more than 5,500 followers, which is increasing daily.

If you think of social media as a digital version of word of mouth – and local social media followers as a community group who make recommendations to each other about where to go – then it’s a really powerful tool, especially on a
budget.

We make sure to target messages to the most relevant consumers by location, demographic and interest – and we respond to reviews
and feedback, whether they're positive or negative. It shows customers that we're actually listening.

‘We tap into people’s interest in buying local’
Charlotte Mitchell, co-founder, Charlotte’s Butchery

People are more interested in buying local meat and social media enables us to tap into that.

We use Instagram, Twitter and Facebook to encourage people to
place orders for big events and we share little bits of information about the meat to garner interest. We recently started “did you know” Mondays, where we write about different cuts and share recipe ideas.

It shows that we provide a service, rather than just sell meat.

Customers have also become accustomed to using the messenger service on Facebook and Instagram. When they watch cooking shows that feature unusual cuts of meat that the supermarkets don’t
provide, such as lamb neck fillet or marrow, they send us messages straight away to order the ingredients.

It means that we can do business 24/7, even when the physical shop is shut.

By The Telegraph Small Business Connect community