Services businesses in the UK continue to grow

Small business domestic turnover rose by 0.43% between Q3 and Q4 2012 according to The Cashflow Barometer, a quarterly study by ABN AMRO Commercial Finance.

The Cashflow Barometer is an indicator of the financial performance of UK small businesses, based on analysis of 700 companies. Despitethe latest quarter-on-quarter growth, SMEs experienced an overall contraction in turnover of 0.43% between 2011 and 2012. These results reflect a challenging year for the manufacturing, distribution and engineering sectors, all of which saw turnover fall during 2012, with this sector-specific decline cancelling out year-on-year growth in other industries, such as recruitment and services. 

Peter Ewen, managing director at ABN AMRO Commercial Finance, commented: “Since recession struck, we’ve seen sporadic recovery across all small business sectors. However, as time has gone on, some industries have been able to maintain that growth while others have stalled.”

Between Q3 and Q4 2012, turnover in the services sector grew by 4.18%, while recruitment fell by 4.96%.

However, year-on-year, both of these sectors saw a rise in turnover, services by 5.54% and recruitment by 5.97%. Both recruitment and services also experienced a reduction in days outstanding for payment of invoices between Q4 2011 and Q4 2012 – recruitment by three days, and services by one. 

Distribution businesses saw a significant spike in turnover of 10.74 between Q3 and Q4 2012 – historically a strong turnover period for this sector, due to seasonal demand. 

Across the longer-term though, distribution turnover fell by 5.97% between 2011 and 2012, and debtor days increased by one. 

Engineering experienced a fall in turnover of 8.22% between Q3 and Q4, and a year-on-year fall of 6.68%. 

Manufacturing turnover fell by a modest 1.75% between Q3 and Q4 but had the most severe year-on-year retraction of any sector, falling 7.16% between 2011 and 2012. 

Peter said: “Despite seasonal blips, we’re seeing an overall trend emerge of turnover decline in engineering, distribution and manufacturing, coupled with growth in services and recruitment. Temporary and part-time employment has increased, bolstering the recruitment and services sectors, but this growth is not guaranteed to last in the long-term and is giving something of a false reading that everything is ticking along. 

“In reality, engineering, distribution and manufacturing need a significant boost in order for a sustainable economic recovery to be truly achievable.”

Single Invoice Discounting Meets Crowdfunding

Single or selective invoice discounting as it is sometimes called, has been available for quite some time. It has been very useful for those organisations that neither need nor want to commit to a long term, full ledger, invoice discounting or factoring agreement with one of the high street banks or with one of the many independent suppliers. With single invoice discounting you are not signing a long term agreement and you can chose when and how often you want to use the service and which invoices you want to sell and raise money on.

Many organisations use single invoice discounting when they have a VAT bill to pay, or when corporation tax is due. More and more people are using it to relieve the pressure on their overdrafts, if they are lucky enough to have one, or to fulfil that unexpected order that cash flow would prohibit them from accepting.

The one disadvantage of single invoice discounting has always been the cost. Interest rates of 0.2% per day are not uncommon and many managing directors are unwilling to accept these rates.

There is now another solution and that is to link single invoice discounting to Crowdfunding and auction the invoices that you chose to raise money on to the bidder that offers you the lowest interest rate. This reduces the cost considerably.

The details are as follows

·         The client pays a one off lifetime membership fee of £310.

·         The funding network then charges a transaction fee depending on the payment terms of the invoice. If it is a 30 day invoice then the transaction fee is 0.5% per auction, if 60 days then it is 0.75% per auction and if 90 days it is 0.9% per auction. There is a minimum transaction fee of £100, so small invoices might not make sense unless you bundle them together.

·         There is then the interest rate that has to be paid to the successful auction bidders. The lowest that has been charged is 0.5% per 30 days; the highest has been 1.5% per 30 days. The average so far is 1.44% per 30 days.

·         The seller, the client, sets the length of the auction from half a day to 5 days.

·         The seller also sets out the interest rate that they are looking for and then the investors hopefully bid that downwards.

·         The seller sets out the % of the invoice they want to sell.

·         There are no personal guarantees

·         There are no debentures.

·         They have a 100% record of raising finance at an auction.

·         If you have debentures against your company then waivers have to be sorted.

·         You need to have the money paid into the networks trust account and then they pay you. The trust account details have to be put on the invoices that you are going to sell.

·         The network checks to see if the auction actually makes sense.

·         Invoices from one debtor can be bundled together to make a larger single invoice. No multiple debtors in the same auction.

·         Average auction is £40K but there is no minimum or maximum.

This is a very interesting way of raising short term finance. To find out more please phone the nearest Pegasus Funding Resources contact listed below.

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Finance for Growth Seminar in Winchester

Are you a business looking for finance to grow but are uncertain of what sources would be right for you? If so, these FREE seminars are for you!

Enterprise M3, the Local Enterprise Partnership for the wider M3 corridor, is hosting a seminar aimed at helping businesses both understand and access new and established sources of business finance.

During this seminar, you will:

·         Gain a valuable understanding of what you need to do to prepare for investment.

·         Explore what types of finance are right for your business at this particular stage of its life cycle.

·         Find out about the range of new and established sources of finance currently available to the market.

Sources of funding covered in the seminar include: crowd funding (debt & equity), invoice financing, equity funding such as venture capital and business angels and export finance.

Date: Tuesday, 19 March 2013,

Time: 9 am to 12 noon (Registration from 8.45 am)

Venue: Winchester City Council, Walton Suite, Guildhall,

The Broadway, Winchester. SO23 9GH

To book a place, go to:

www.190313financeforgrowth.eventbrite.co.uk

This seminar is at no cost to you thanks to the kind support of Winchester City Council who is hosting the event on behalf of Enterprise M3 and a range of private sector experts who are speaking at the seminars.

Pegasus Funding Resources are pleased to support this event.

Services Sector Expands in February

The UK services sector continued to expand in February, according to the latest figures from Markit and the Chartered Institute of Purchasing and Supply. The headline Purchasing Managers' Index for the sector stood at 51.8, marginally unchanged from 51.5 in January but remaining above the 50.0 threshold that points to output growth. As the sector makes up roughly three quarters of the total UK economy, these latest results are encouraging news.

The latest increase in service sector output was driven by levels of new work rising at the fastest rate in nine months. Promotions and stronger business confidence helped to boost demand, with confidence standing at its highest reading since May 2012. However, there is evidence that bottom lines continue to be squeezed by rising input cost inflation, with firms reporting pressure from higher fuel, food and utility prices. As a result, profitability continued to decline for the ninth consecutive period.

Today's figures come after PMI data from the manufacturing sector, released at the end of last week, showed a contraction in February. The overall reading for the sector was 47.9, well down from 50.5 in January and indicating a sharp drop in output. New orders for manufacturers fell for the second consecutive month and at the fastest rate since last July, constrained by tough domestic and overseas market conditions. Although cost pressures eased marginally this month, manufacturers cited the recent depreciation of sterling as producing upward pressure on the cost of their imports. In addition, PMI results released yesterday on the construction sector saw a steep decline in output in February, due to falling levels of commercial building and civil engineering work.

Although February's manufacturing and construction results were disappointing, the Markit/CIPS composite PMI indicator for the UK points to a marginal expansion in January and February for the economy as a whole. The economic outlook remains under significant pressure from squeezed real incomes, government austerity and an ailing eurozone, but the latest data continues to suggest that a fall back into technical recession will just about be avoided in Q1 2013.

Pegasus Funding Resources Newsletter

Keep yourselves and your clients up to date with the new Pegasus Funding Resources funding newsletter.

Do not miss out on the new and exciting developments in the UK funding marketplace.

To sign up for the newsletter either go to: www.pegasusfunding.co.uk and click on the newsletter logo at the bottom right of the landing page or press control and click on the link below:

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Peter Kelly

Peter.kelly@pegasusfunding.co.uk

01932 244810