Confidence creeping up for small firms in the north west

New research from the Federation of Small Businesses shows confidence is creeping up for small businesses in the north west.

According to the FSB’s Voice of Small Business index, firms in the region are displaying cautious optimism heading into the new year, compared to the same period in 2011.

Overall, the index in the north west rose by two points, from -5 in 2011 to -3. This compares favourably with small business confidence in London, which fell significantly from +2 to -12; in Scotland, which increased slightly from -11 to -10; and in the West Midlands, which remained stagnant at -6. Firms in the East Midlands recorded a score of +1, but this was down from +5 in 2011.

Regions with the same level of small business confidence as the north west were the south west (rising from -9 to -3) and Yorkshire (-4 to -3).

Areas with the lowest confidence levels overall also recorded the sharpest year-on-year increase. These were Northern Ireland (-65 to -49) and Wales (-25 to -16).

Small business confidence in the east of England went up from 0 in 2011 to +2, and in the south east the increase was from -2 to 0.

The north east recorded the strongest confidence levels, rising from +4 to +11 year-on-year.

Nationally, confidence in Q4 fell by 1.1 points against Q3 to record a score of -5.6, but it was 18.8 points higher than the same period last year, when the economy entered into double-dip recession.

Overall, fewer small firms applied for finance in Q4, but of those that did a higher proportion were accepted – 49.3%, up from 42.8% in Q3.

The FSB believes this is a move in the right direction, but in total fewer than one in 10 respondents consider credit to be easily available. The FSB wants to see the new business bank improve competition in the sector and promote alternative sources of finance, freeing more businesses to bring forward investment decisions.

British Government to help fund SMEs through Crowdfunding

In this year’s Budget, the Chancellor announced that the Government was allocating £100 million for investment in ‘non-bank’ channels to help improve the flow of finance to growing businesses.
Today, the Government will announce their plans to join Funding Circle and lend £20 million to businesses directly through our marketplace. This is exciting news and represents the first time a UK Government has directly lent money to growing businesses in this way.
We understand this news represents a significant evolution for Funding Circle and we wanted to share with you how this will work, and the new lending opportunities we believe it will create for all investors.
Why is the Government doing this?
Despite many initiatives to stimulate bank lending over the last few years, net lending to businesses has continued to decline. Whilst bank lending to businesses has deteriorated, Funding Circle has rapidly grown. In two years since we launched, thousands of British people have helped to lend £65 million to more than 1,300 businesses. Last month investors lent £7m to British businesses.
The Government has now recognised the impact that non-bank channels, such as Funding Circle, can play to help ease the flow of finance to businesses.
How will it work?
The Government plans to lend £20 million to British businesses through Funding Circle over the next 12- 24 months. This is subject to parliamentary approval and agreement of legal terms and conditions.
The current proposal is that:

• The Government will lend on every loan that comes on to the marketplace and fund up to 20% of each loan at the average rate
• We believe this is the clearest option and enables the Government to fulfil its wishes to participate in every loan whilst having no adverse effect on investors’ bidding experience

What does the Autumn Statement mean to UK Businesses?

Corporation tax

The Government announced that the main rate of corporation tax will be reduced to 21 % from April 2014. This is an addition to the one per cent reduction already announced. As previously announced, the main rate of corporation tax will reduce to 23 % from 24 % on 1 April 2013, with the Small Profit rate remaining at 20 %

Capital allowances

From 1 January 2013, the Annual Investment Allowance (AIA) will increase ten-fold from £25,000 to £250,000 for two years, in a measure principally designed to encourage and support investment by small- and medium sized businesses in plant and machinery.

Taxation of controlling persons

The Government has decided not to pursue the proposal to tax, at source, those who meet the definition of a ‘controlling person’. It is believed that the new approach adopted by HM Revenue & Customs and the existing measures for tackling IR35 are sufficient to avoid the loss of tax revenue through disguised employment. The legislation will be strengthened to ensure there is no doubt that the rules apply to office holders.

Small Business Rate Relief and property rates

The temporary doubling of the Small Business Rate Relief scheme has been extended until April 2014. It is estimated that over 500,000 businesses will benefit from this extension. Subject to state aid approval, an exemption from empty property rates will be available for 18 months on all newly-built commercial property that are completed between 1 October 2013 and 30 September 2016.

Cash basis of accounting

The Autumn Statement confirmed that the new cash basis for small, unincorporated businesses with receipts of up to £77,000

to calculate their tax will be introduced as planned from April 2013. The use of flat rates to calculate some expenses will also be

introduced.

Employee share ownership

Following a recent consultation on providing shares to employees in return for giving up employment rights, the Government will go ahead with the proposals, as planned from 6 April 2013. Amendments to the original plans are being considered, which include the first £2,000 of shares received under the new status being free of income tax and national insurance.

Company cars and vans

From 2013/14, there will be further tax increases for some company car drivers as the car fuel benefit charge multiplier will see

another increase from £20,200 to £21,100. The van fuel benefit charge will also increase from £550 to £564.

Funding for business

The Government has announced further support for UK businesses by seeking to improve access to finance. Several schemes

will be established to promote trade and investment, which include a scheme providing up to £1.5 billion of loans for the purchase of UK exports when there is no other suitable finance available. The scheme is intended to provide UK firms with greater confidence to bid for export contracts knowing that finance will be available.

Business Bank

In September 2012, it was announced that the Government would create a Business Bank. This bank will have £1 billion of additional capital to stimulate the private sector market for long-term capital and address structural gaps in the supply of finance to small- and medium-sized companies. It is reported that the Business Bank will be operational from spring 2013, with the institution becoming fully operational in autumn 2014. Further announcements are expected before the end of December 2012.

Business Growth Fund Investment

It has long been considered that banks are not doing enough to help small- and mediumsized enterprises. The £2.5 billion Business Growth Fund (introduced by Barclays, HSBC, Royal Bank of Scotland and Lloyds TSB to invest in small business equity) is budgeting to substantially increase its level of investment to £200 million in 2013.

Start-up loans

The Government will provide £72 million of follow-on funding for start-up loans.

Other business measures

From next year, the Bank Levy will be increased to 0.130 %

UK’s small firms optimistic about next year

New research from American Express states that more than half (51%) of the UK’s small business owners expect their firms to grow in the coming 12 months.

A further 37% expect their businesses to stay in the same shape, and only 11% expect their businesses to contract.

The American Express UK Small Business Barometer also states that seven in 10 small business owners are expecting growth to come domestically. Regarding the emerging markets sector, only one in 10 business owners said they would be looking to this region for opportunities.

Attracting new customers and maximising sales will be the key focus for small businesses in the next year, with only 14% focused on cutting budgets to ensure their business is in better financial shape. The vast majority (76%) are relying heavily on word-of-mouth to attract new customers, therefore having a good customer service experience will be key in driving future growth. Just over a quarter (26%) are expecting social media, such as Facebook and Twitter, to help build their new customer base.

Strategy and planning for the future is the area where more than half (56%) of the business owners interviewed wish they could devote more time. However, most admitted that they are operating on a short-term basis, with 38% saying they are only planning six months in advance and a third operating on a week-to-week basis only.

Stacey Sterbenz, director for American Express Small Business Services UK, said:  “While previously the focus might have been on cost-cutting or fixing cashflow issues, it’s encouraging that the majority of small businesses seem to be focused on growth, acquiring new customers and maximising any potential upturn in consumer confidence.

“Our research shows that it is more important than ever for businesses to invest in planning, marketing and customer service. With so many companies relying on word-of-mouth, going that extra mile for customers will be key in gaining a competitive edge and to take advantage of new trading opportunities.”

SMEs are depending on cash reserves to survive the recession

Research undertaken by Aldermore confirms that small and medium-sized businesses are continuing to rely on their cash reserves to see them safely through the recession and finance their future growth.

The research, which was conducted among 300 SMEs throughout the country, confirms that nearly two fifths (38%) are depending on cash reserves to fund their future growth ambitions. Of the remainder, 12% say they will turn to a bank loan, 9% to an overdraft, 10% will use leasing or hire purchase, 7% will use factoring and invoice discounting, and 4% cite funding by a commercial mortgage. Of the business owners surveyed, 8% said they will fund their future growth using their own cash and 10% say they are not planning to finance future growth at the moment.

Damon Walford, managing director of Aldermore Invoice Finance, said: “Given the continuing reluctance of big banks to lend to small businesses, it’s understandable that business owners have been forced to rely on their cash reserves to fund their future growth. But as these reserves become depleted, so business owners will need to consider alternative forms of funding, such as invoice finance and asset finance.”

Aldermore’s findings are supported by data released by International Trade Monitor, which said that a lack of confidence has led more than a fifth of all SMEs to consider alternative sources of funding. It says the top three sources are asset-based finance (44%), factoring (31%) and personal savings (26%).

Damon concluded: “Although SMEs have relied heavily on bank loans and overdrafts in the past, many business owners have realised the vulnerability of having all their eggs in one basket and are now considering diversifying their funding sources. SMEs have more choice than they may realise; it’s worth consulting an accountant or commercial finance adviser to discover just what’s available.”