Sales Team Restructuring at Lloyds Bank

Lloyds TSB Commercial Finance has restructured its sales team, in a move designed to give customers greater access to senior funding professionals.

Each regional team will have three heads, with respective responsibility for companies with turnovers of up to £15m, £15m-£100m, and £100m+, across a wider geographical remit.

The changes will simplify the bank’s structure, with the aim of creating teams that will focus on facilitating the growth of SMEs, mid-market businesses or large corporations.

The new structure also aims to make the bank’s asset-based finance division work more closely with divisions across the wider banking group, to provide better-suited funding solutions.

Ian Larkin, managing director for Lloyds TSB Commercial Finance, said: “By aligning more closely with the structure of the wider banking teams, we will be able to work with our colleagues in wholesale and commercial banking to determine the most appropriate source of finance to best suit the needs of our customers on an individual basis. This will help us to supplement loans and overdrafts with tailored invoice finance and complementary products.”

SME Confidence edges up

UK businesses are regaining some confidence despite concerns about the eurozone crisis and slow UK growth.

However, firms risk losing out to global competitors if they fail to invest for future development, according to the latest Business in Britain report from Lloyds TSB Commercial.

The twice-yearly report, which canvasses the views of 1,800 UK businesses, shows that confidence has edged up since January despite continuing tough economic challenges.

However, confidence is still not back to levels witnessed in the preceding two years and some firms are holding back from making crucial decisions about their future as a result.

The overall confidence balance is the average of the individual net balances, for sales (19%), orders (20%) and profits (-2%). The current overall business confidence balance is 12, a four-point increase on the balance of eight recorded in January. However, while confidence among businesses has improved since January, the majority of UK businesses are still keeping investment on hold.

David Oldfield, commercial managing director for Lloyds Banking Group, said: “If firms continue to take advantage of profitable opportunities that will maximise their growth potential, we have reasons to be hopeful for the future.”

One in five businesses (20%) believe they will need to cut investment before the end of the year, while nearly half of businesses (47%) state that their investment will stay the same. Only a fifth (18%) plan an increase. The resulting negative balance of -2% is an improvement on January, but shows that businesses are still cautious about committing to investment spending, which could be to the detriment of UK competitiveness.

Expectations for total sales and orders in the next six months have both improved, after falling to their lowest levels in two-and-a-half years in the last survey in January.

More than a third of businesses (34%) said that they expect their orders will increase during the next six months, compared to 14% that think their orders will fall.

Two fifths of businesses stated that they think sales will increase in the next six months, while more than a fifth (21%) expect a decline.

When asked what the greatest threat to their business would be during the next six months, nearly half (49%) of businesses cited weaker UK demand, compared to 60% when asked in the last survey in January.

David continued: “Firms continue to see weaker UK demand as the main threat to their businesses, so it is crucial that they improve their competitiveness on the international stage.

“However, given that UK businesses have not been increasing their investment levels since the drastic cuts at the beginning of the financial crisis, they should be bold and do so now, especially if they want to improve their competitive edge in demanding export markets. Our job is to work closely with businesses to help them take advantage of opportunities for growth.”

SMEs lead the fall in business insolvencies

The latest Business Insolvency Index from Experian has shown that during June, 1,650 businesses became insolvent, compared to 1,841 in May and 1,783 in June 2011.

SMEs with one to 100 employees were the only group to see improvements in their insolvency rates, with the biggest rise coming specifically from SMEs with 51 to 100 employees, from 0.19% in June 2011 to 0.12% in June this year.

Businesses with more than 100 employees experienced an increase in the rate of insolvencies compared to June 2011. Firms with between 101 to 500 employees experienced a 0.16% failure rate, compared to 0.08% in June last year, and businesses with more than 500 employees saw an increase in insolvency rate from 0.12% in June 2011 to 0.15% in June this year.

Max Firth, managing director of Experian Business Information Services in the UK and Ireland, said: “Although the overall figures for June show a fairly stable environment at the moment, led by smaller firms, the higher insolvency rate at the top end of the business world will have an impact on the supply chain. Many smaller suppliers, unless they have a good credit management process in place, will find themselves short of a major customer and left with unpaid bills. They will need to move quickly to fill the gap in their customer base.

“When taking on new business, it is vital they start to monitor the health of both customers and suppliers. They can be forewarned of any issues and be in a better position to deal with the impact of another business’s failure.”

The cost of starting a business

Research from borro’s Enterprise Ladder Report reveals that, on average, micro businesses and SMEs require £94,000 start-up capital to get their business going.

The study also found that since launching their businesses, more than a third of SME owners (38%) have had to invest additional funds from their own savings into the business, and one in 10 have taken out short-term loans in the last 12 months to assist with business cashflow.

Those businesses that have needed to take out a loan have had a higher average start-up cost of £127,992, of which they have borrowed £84,500.

The last five years have seen the nation’s small business owners really struggle to keep their heads above water; 46% of all small business owners have seriously considered either selling their business or closing it down completely, so it is no surprise that business owners have had to take out loans or dip into their own pockets.

Paul Aitken, CEO of borro, commented: “It is a real worry to see that the future outlook and struggle that SMEs are going through is so grim. For those that take the time and effort to start up a business it is only fair that they are rewarded.”

Who are the High Street Banks connecting with?

Research commissioned by retail and banking solutions provider Wincor Nixdorf has highlighted a disconnect between consumer preferences and the service being offered by some high street banks.

The study of more than 2,000 consumers looked at attitudes to in-branch technology. It revealed that despite certain technologies such as self-service becoming a staple of branch banking, some customer education is still needed with regards to more innovative services if they are to realise the potential benefits. For example, while the majority of consumers are comfortable using self-service kiosks to take out cash, more than half do not yet feel as comfortable using the machines to pay in. Many consumers also admit they are suspicious of the industry’s intentions in adopting such services. Interestingly, 58% believe that technology innovations such as mobile banking are simply a driver to cut staff numbers and costs, with only 22% believing the aim is to improve service to customers.

Ed Brindley, director of marketing at Wincor Nixdorf, explained: “Technology like cash deposit machines, self-service and mobile can never replace good customer service. Banks know this but the key is to show customers that they are simply tools to improve service. What this study proves is that consumers want to know that whatever technology is being adopted, it is safe and they are using it correctly to ensure it benefits them.

“Consumers want a choice, and if they wish to use self-service, they will. If not, they want to know that staff are on hand to help. Ultimately, they just want good service, and technology can help achieve this but only if the customer feels comfortable using it.”

The study also revealed concern among consumers about the continued boom of mobile banking, with 72% of consumers believing such services to be insecure and unsafe.

Ed added: “When you look at some technology such as the ATM, this has become a retail banking mainstay. Consumers feel comfortable using it and see that it is of benefit. However, the key here is that it was rolled out gradually and consumers were given the right education in how to use it.

“The problem now is that while banks are doing the right thing by innovating to improve service, the speed of technology-adoption has accelerated. If consumers are given the right level of education and help initially, they will soon feel comfortable, see that it is of benefit to them and the concern and distrust this study has identified will no longer be an issue.”

Santander's new SME intership scheme

Santander UK chief executive Ana Botín has extended the bank’s support for SMEs with the launch of a new programme to place graduates from the country’s top universities on internships with SMEs across the UK.

The programme aims to promote the benefits of working for an SME to third-year or recently graduated students, while also providing smaller businesses with an injection of talent not always easy to obtain by companies with limited administration resources.

Santander will work with its partner universities to find students and companies who will benefit most from the scheme and will help with placement and administration, including project management, as well as part-funding a basic salary for the students.

Ana said: “Youth unemployment, and particularly graduate unemployment, is one of the most pressing issues for the UK economy. We hope our new programme, offering 500 student internships to SMEs, can help our talented graduate community to gain vital experience in the workplace, opening their eyes to the benefits of working for smaller companies.

“SMEs have not typically attempted to compete with the graduate recruitment schemes of the big FTSE players, and we hope that this initiative will give a wider range of companies the benefit of fresh young talent.

“As the engines of progress and invention, universities have an important role to play in incubating the enterprises of tomorrow.”

Financial Services Activity shows strong growth

Financial services business volumes and income both grew strongly in the three months to June, but firms say they are less optimistic about their business situation than in the last quarter.

Of the 108 financial companies that responded to the CBI/PwC survey, 59% saw volumes rise in the quarter to June, and 21% reported a fall. The resulting rounded balance of +39% marks a further acceleration in the rate of growth, as well as being the ninth consecutive quarter of growth. Companies reported that overall levels of business were above normal (+10%), for the first time since June 2007.

The improvement in growth was driven by business with overseas customers (+42%) and financial institutions (+15%). Business with private individuals continued to rise at a similarly solid pace to the previous quarter (+19%), but with industrial and commercial companies it was broadly flat (+3%).

Income also rose strongly, with the increase in income from fees, commissions and premiums (+43%) and net interest, investment and trading (+37%) relative to the previous three months, both beating expectations. Further growth is expected next quarter, but at a slightly slower pace.

At the same time, average spreads widened further during the past three months (+37%), rebounding from a slight weakening in the March survey (+11%).

The combination of strong growth in business volumes and income and a widening of spreads meant that profitability continued to rise solidly (+25%), at a similar pace to the previous quarter (+21%), marking the twelfth consecutive quarter of growth.

But despite strong growth in activity and expectations that this trend will continue, financial services firms overall were less optimistic about their business situation in the three months to June (-13%). This partly reversed the rise in sentiment in the previous quarter (+32%).

Furthermore, in the three months to June, the number of people employed in the financial services sector fell modestly (-7%), against expectations of a rise. However, companies expect to resume hiring during the next three months (+15%).

Firms’ investment intentions for the year ahead have softened compared with the previous quarter. Spending on marketing is expected to remain unchanged (0%) relative to the previous 12 months, and businesses plan to spend less on vehicles, plant and machinery (-18%). While investment on IT is expected to increase (+25%), intentions have weakened relative to the March survey (+47%).

The majority of firms continued to cite uncertainty about demand and business prospects as the factor most likely to limit capital expenditure (48%). The weak level of demand also remained the factor most likely to constrain business expansion (83%).The number of firms citing a shortage of finance as a constraint to investment picked up, continuing the volatility in this data in recent surveys.

Regulatory compliance is once again a key driver of business costs and capital expenditure plans. The number of financial services firms anticipating having to spend more on regulatory compliance over the next 12 months relative to the past year rose to +77%, up from +58% in the last quarter. More firms also highlighted this as a motivation for capital spending in the year ahead (68%, the highest proportion since June 2010). More than half (54%) of respondents said that dealing with statutory legislation and regulation was likely to limit their ability to increase business over the next year.

Ian McCafferty, CBI chief economic adviser, said: “The financial services sector has seen another quarter of robust growth, with business volumes, income and profitability all rising solidly once again.

“However, businesses are less optimistic than in the previous survey, have reduced headcount and are reappraising investment plans. Regulatory compliance is an increasing factor shaping investment, activity and intentions.”