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SNP write to UK Chancellor Nadhim Zahawi for business support package during energy crisis

The SNP has called on the UK Chancellor to bring in targeted support to assist the hospitality sector through the cost of living crisis.

In a letter to Nadhim Zahawi, Douglas Chapman MP, SNP Small Business spokesperson, warned that without additional UK government support businesses could be crippled under increasing energy costs and lack of trade induced by rising pressures on household incomes.

Mr Chapman has called on the Chancellor to reintroduce the 12.5 per cent rate of VAT for leisure and hospitality businesses, take steps to restrict energy price rises from increasing further and encourage UK workers to take up roles in the hospitality sector to fill vacant posts.

Regulator Ofgem warned the Government on Friday the government must act urgently to “match the scale of the crisis we have before us” as Britain faced the news that the average household’s yearly bill will rise from £1,971 to £3,549.

The Scottish Chambers of Commerce had pleaded for support for businesses in the build-up to the energy price cap announcement, calling on the Scottish Government to provide a relief package similar to that delivered during the Covid-19 pandemic, and to ensure the non-domestic rates (NDR) revaluation goes ahead as planned next year.

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Mr Chapman said: “The resilience our hospitality sector displayed throughout the pandemic was remarkable, but it would have been nigh-on impossible without the significant government support that was delivered by both the Scottish and UK governments.

“If we’re to ensure the survival of the hospitality businesses we know and love, safeguarding jobs and livelihoods in the process, then we must see the UK government adopt a similar approach and response to this Tory-made cost of living crisis.

So far they’ve done nothing to help businesses who are set to be shafted by rises to energy bills that will see firms paying 400% more for gas and electricity, and have done nothing to prevent a loss of trade from the hit households are taking to their incomes.

“Failure to act will result in a decades-long legacy of businesses in ruin, sky-rocketing unemployment, and barren high streets and towns.

“This is largely a crisis of the UK government’s own making – it’s time now they step up to the plate and offer the support that’s needed.

“If they won’t do that it’ll go to show, once again, why only with the full powers of independence can we fully support our treasured hospitality sector and the people upon whose income it depends.”

In an interview with the Daily Telegraph, Mr Zahawi said he is weighing up potential action to help small firms including the Covid-style cuts to VAT and business rates to support the hospitality and leisure sectors.

Mr Zahawi said a failure to help small and medium enterprises may potentially lead to a “longer-term scarring effect on the economy”.

He said: “So what we did on business rates, what we did on VAT for particular sectors like hospitality. So we’re working up all those options to look at those.

“And of course Liz Truss has talked about removing a moratorium on the green levies for a couple of years. We’re looking at that as well, which will help everyone with about £150.”

Tracy Black, CBI Scotland director, told BBC’s Sunday Show both governments need to step in to prevent businesses from closing and to encourage economic growth.

Ms Black said: “Raw materials have become more expensive, freight costs are more expensive so there’s real pressure on businesses and it’s not set to get better over the coming months.

CBI Scotland has asked the government to commit to business rate freezes and flexibility in paying loans with a pandemic loan scheme expanded.

The body has also asked for the industrial energy transformation fund to be expanded to help businesses use less energy and help households with bills.

Following the announcement of the energy price cap hike on Friday, Scotland’s energy secretary Michael Matheson said Ofgem needed to intervene to help support SMEs and the energy costs they were facing. However, he was unable to say whether or not the Scottish Government’s commitment to ensure the NDR revaluation due to take place in 2023 would go ahead.

By Hannah Brown

Source: Edinburgh News

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£50m funding line secured for Wilmslow bridging lending firm

MS Lending Group, the Wilmslow-based bridging lending firm, has secured an initial £50m senior-secured facility with Pollen Street Capital.

London-based alternative investment asset manager, Pollen Street Capital, invests in credit and private equity strategies, focusing on real estate, financial, and business service sectors.

Michael Stratton, CEO and founder of MS Lending Group, said: “This partnership with Pollen Street further boosts MS Lending Group’s ability to provide finance and funding solutions across the market.

“The injection of funds means we can remain agile in the market – not only with speed and ease for our customers, but also the hands-on, hassle-free service which is what we’re known for.

“With uncertainty around interest rates increasing, this is a huge statement from us as a lender to show our customers and brokers they can rely on us, knowing the security of our funding partners and that we have a fixed facility in place.”

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He added: “It has been refreshing to work with like-minded individuals at Pollen Street who understand and support our business ambitions and growth plans, plus it’s a huge credit to the MS team that we’re at this stage after only 18 months of trading. We are really looking forward to a long and successful partnership with Pollen Street.”

MS Lending Group have financed more than £55m since it began trading in January 2021, with in excess of half of that lent in the first half of 2022.

Ben Jackson, investment manager at Pollen Street Capital, said: “Our real estate strategy is built on selective partnerships with real estate lending platforms.

“This new facility with MS Lending Group fits well with our strategy and our aims to maintain liquidity in the short term bridge lending market. We are thrilled to be working with Michael Stratton and Robert Goodall who bring over 40 years’ experience in the industry to MS Lending Group.”

By Neil Hodgson

Source: The Business Desk

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£3,500 pay rise needed to keep pace with inflation

Research by RIFT Tax Refunds has revealed just how much the average person would need to see their pay cheque increase by in order to keep up with inflation and what it means when it comes to the tax they pay and the money left in their back pocket.

The average UK gross salary is currently £37,235 but with inflation rising at a rate of 9.4% at present, households are feeling the squeeze as their monthly pay simply isn’t stretching as far as it was.

In fact, in order to match the current rate of inflation, the average person would need to see a pay rise to the tune of £3,500. While this would see their tax bill increase by £1,164 per year, it would also leave them with an additional £2,336 in their back pocket.

The average beautician would need to see a £1,461 increase in their annual gross earnings in order to keep pace with the current rate of inflation, paying £486 more in tax contributions but taking home £975 more per year.

Those working in construction would need to see a pay rise of £3,074, boosting their annual net income by £2,053, while increasing their tax bill by £1,022 per year.

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The average nurse would need to take home an additional £3,138 per year which would increase their net income by £2,095 annually while seeing them pay £1,043 per year.

The average teacher also needs to earn £3,331 more than the current average earnings in order to battle the impact of inflation, seeing them take home an additional £2,223 after tax and paying £1,107 more in tax contributions.

CEO of RIFT Tax Refunds, Bradley Post, commented: “Many households are struggling to combat the increased cost of living due to the current rate of inflation, with many attempting to do so on a stagnant level of income that hasn’t seen the same level of growth.

In fact, in order to match this pace, the average person would need to see quite a considerable boost to their annual earnings to the tune of £3,500.

However, the unfortunate reality is that many simply won’t and this will leave them at a severe disadvantage when it comes to managing their household finances.”

Source: London Loves Business

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Rising costs and cash flow pressures squeezing businesses with company insolvencies up 67% year-on-year

Insolvency figures released today for July 2022 by the UK Government’s Insolvency Service showed corporate insolvencies at 1,827, up 67% compared to the same month last year (1,827 in July 2022 and 1096 in July 2021).

They were 27% higher than the number registered in the July before the pandemic (1,440 in July 2019).

Leading restructuring and insolvency professional Oliver Collinge from PKF GM in Leeds said, “The large rise in corporate insolvency numbers is not surprising compared to this time last year. But alarm bells ring when there is a material increase on pre-pandemic levels, as we are seeing now.

Many distressed businesses managed to keep afloat through Covid by using the high level of government support available. Most businesses are now repaying BBLS or CBILS loans and many are also still repaying HMRC liabilities deferred during the pandemic, and rising input costs are adding to these cash flow pressures.”

Challenging times ahead as cash flow pressure on businesses grows and even better-performing businesses won’t be immune, Oliver continued, “The current headwinds will create challenges even for better-performing businesses, not only those that were already in survival mode.

“The inflation rate suggests there may be more interest rate rises to come, and there’s open talk of a recession. The cost-of-living crisis has led to the biggest fall in real pay on record, and households are reining in spending.

“Pressure on cash continues, and unfortunately, we expect to see heightened levels of business failures for some time to come.”

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Creditors’ Voluntary Liquidations (CVLs)
The increase is primarily driven by Creditors’ Voluntary Liquidations (CVLs), where directors have chosen to place their business into an insolvency process. In July 2022, there were 1,609 Creditors’ Voluntary Liquidations (CVLs), 60% higher than in July 2021 and also 60% higher than July 2019.

PKF GM thinks this may partly be because creditors can now take enforcement action, forcing directors to take pre-emptive action. There is also significant anecdotal evidence that many of these liquidations involve small companies which had taken out Bounce Back Loans and are now unable to repay them.

Collinge said, “Whilst the Covid loans, support packages and interventions staved off many business closures; the repayments on these loans, together with the worsening macro-economic climate means many businesses are beginning to experience severe cash flow pressure.

“It’s critical businesses act early and seek advice if they are struggling now or think cash flow may be squeezed in the coming months. The earlier they act, the more options they’ll have to secure the business’s long-term survival.”

Other types of insolvencies
Numbers for other types of company insolvencies, such as compulsory liquidations, remained lower than before the pandemic, although there were 3 times as many compulsory liquidations in July 2022 as in July 2021, and the number of administrations was twice as high as a year ago.

A message to company directors
Collinge added, “There are plenty of proactive things you can do now to build resilience into your business for the post-Covid economy; don’t leave it too late. Having a restructuring professional guide you through the process can be invaluable in getting the best outcome and will also help you understand and mitigate your risk as a director.”

“For struggling businesses, it’s not too late to begin negotiations with landlords and creditors to develop manageable repayment plans. Will revenues be high enough to support your cost base?

“Will cash flows be sufficient to deal with the additional debt burden (both formal and informal) that has accrued during Covid? Perhaps a CVA is something which should be considered or, where you may need to take the difficult decision to make redundancies to survive, consider applying for government funding to meet the short-term cash impact of this.”

Source: London Loves Business

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Nine steps to starting a business

There are a lot of things to consider when starting a business. But don’t worry; this article is here to help. Follow these simple steps, and you’ll be on your way to success in no time.

  1. Figure out what you want to do
    This may seem like the most obvious step, but it’s important to take some time to really think about what you want your business to be.

What are your passions and skills? What needs are not being met in the marketplace? Once you have a good idea of what you want to do, you can move on to the next step.

  1. Do your research
    Before you start putting any money into your new venture, it’s important to do your research. This includes things like studying the competition, identifying your target market, and putting together a business plan.
  2. Get the money you need
    Starting a business takes money. You’ll need to have enough to cover your startup costs, as well as enough to keep the lights on and pay yourself (and any employees) until the business is generating income.

There are a few different ways to get funding, including taking out loans, selling equity in your company, business credit line, or using personal savings.

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  1. Find the right location
    The location of your business is important for a number of reasons.

You want to be sure you’re in an area that makes sense for your type of business, and you also want to make sure you’re in a place where people can easily find you.

  1. Get the right team in place
    No business can be successful without the right team in place. In addition to yourself, you’ll need to have employees or contractors who are experts in their respective fields.

It’s also important to have a good support system in place, including family and friends who believe in your vision.

  1. Promote, promote, promote!
    Once your business is up and running, getting the word out there is important. There are a number of ways to promote your business, including advertising, social media, and public relations.
  2. Be patient
    Starting a business is a lot of work and doesn’t happen overnight. So it’s important to be patient and to keep your eye on the long-term goal. Remember, Rome wasn’t built in a day!
  3. Be prepared for bumps in the road
    No business is immune to challenges, and there will inevitably be times when things don’t go as planned. It’s important to be prepared for these setbacks and to have a way you’ll overcome them.
  4. Celebrate your successes!
    Last but not least, don’t forget to celebrate your successes. Every milestone, no matter how small, is worth celebrating. This will help keep you motivated and focused on your goals.

In conclusion
By following these simple steps, you’ll be well on your way to starting a successful business.

Just remember to take your time, do your research, and surround yourself with a great team. And before you know it, you’ll be on your way to achieving your dreams.

Source: Retail Tech Innovation Hub

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Top tips for surviving a recession: Small businesses must think like mortgage switchers

Purbeck Personal Guarantee Insurance, the UK’s first and only provider of personal guarantee insurance is urging small businesses to think like mortgages switchers and consider a fixed rate loan now to support investment or to sustain a business, while rates remain low.

Since March 2021, businesses have, in aggregate, repaid more finance from banks and capital markets than they have raised. Company insolvencies are also returning to pre-pandemic levels after the lows recorded in the pandemic.

Todd Davison, MD of Purbeck Personal Guarantee Insurance advised, “Bank risk-appetites are largely returning to what they were in 2019 but small businesses are paying back more than they are borrowing.

“That makes sense if you are on a floating interest rate for a loan. However, around 25% of small businesses made use of the Bounce Back Loan Scheme with a low fixed interest of 2.5%.

“Given the Bank Rate is forecast to peak at 1.9% during 2023, any small business considering new funding needs to act fast to protect themselves from the impact of rate rises, just like many people switching to fixed rate mortgages.

“While reticence to take on more debt is understandable, many business owners wouldn’t think twice about a mortgage for a dream home. One of the major comfort factors with a business loan is that Personal Guarantee Insurance protection cuts the risk of losing everything should a business fail, making the decision to take on a loan far easier.”

Purbeck’s advises on top tips for surviving a recession, they said, “Be proactive – confront potential trading difficulties head-on by assessing the impacts of a downturn/recession and what that means for the business.

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“Stay close to the cashflows of the business – undertake a regular financial assessment and measure performance against budget. This can help to identify potential cashflow problems in the future and to provide vital time to counteract these challenges. Look at the gearing and interest coverage ratio for the business to see whether the business can withstand higher rates of interest by undertaking stress testing on revenue and cost bases.

“Be collaborative – speak to key stakeholders, suppliers, customers, understand the supply chain and manage expectations to work together.

“Find new opportunities – is the business reliant on one revenue stream? Could it benefit from revenue and product diversification? Often, during difficult trading periods, expenditure on advertising and marketing is reduced – this can be detrimental in the long term. Analyse the market to see if there are any new opportunities and consider what the competition is up to for fresh ideas.

“Streamline operating margins – review the cost base and expenditure to see where savings could be made. Holding cash in reserve is also favourable to help the business withstand any trading downturns. If the business is looking to invest for example in plant and machinery, leasing arrangements could be better from a cashflow perspective to help spread the acquisition costs over a number of years.”

Source: London Loves Business

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SMEs Increasingly Concerned About Possible Recession

Small business owners are concerned about the possibility of a recession, according to iwoca’s latest quarterly SME Expert Index.

With both the cost of living and of doing business climbing, over three quarters of brokers surveyed (77 per cent) say SMEs are worried about the possibility of a recession. By contrast, fewer than seven per cent of brokers reported their small business clients as ‘unconcerned’.

iwoca’s Q2 2022 SME Expert Index is based on insight from UK brokers who collectively submitted over 1350 applications for unsecured finance on behalf of their SME clients in June.

Demand for finance increases as small business owners contend with rising inflation
As small businesses face mounting economic uncertainty, their demand for finance has risen sharply. Almost half of brokers (46 per cent) submitted more loan applications for small business financing in the last month compared to the one previous – a continuation of an upwards trend since the end of last year, with 28 per cent citing the same in Q4 2021, and 34 per cent reporting increased loan demand in Q1 2022.

In addition, the latest SME Expert Index saw 0 per cent of brokers reporting significantly fewer applications.

The survey also reveals that small businesses are looking for larger loans in light of the turbulent economic forecast. Over one in eight brokers (13 per cent) identified £200,000+ loans as most sought after for small businesses, the highest proportion since the Index was first released. Looking back at this trend, demand for loans valued above £200,000 has steadily increased since iwoca’s first Index in Q1 2021 when only four per cent of brokers reported these larger loans as the most commonly requested.

To meet this growing appetite for high value loans in the small business sector, iwoca recently announced that it is more than doubling the maximum size of its core lending product, Flexi-Loan, allowing small business owners to access business loans up to £500,000, up from a previous lending cap of £200,000.

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Managing cash flow a key priority amidst the economic storm
This heightened demand for financing, and larger amounts of it, suggests small businesses are gearing up for financial strain: in particular, cash flow issues. Over a third of brokers (37 per cent) reported managing day-to-day cash flow as the most common loan purpose for SMEs. This represents an increase of six percentage points since last quarter.

Nonetheless, as in Q1 2022, brokers report ‘growing the business’ as the most common reason for SMEs business owners to apply for finance, although it’s down by three percentage points since Q1. So, whilst managing day-to-day cash flow is becoming more important, small businesses are continuing to seek loans to finance broader growth ambitions.

Steven Scoufarides, head of broker channel at iwoca , said: “The current economic outlook for small businesses is precarious – we are seeing signs of an increasing number of SMEs searching for finance solutions to manage their cash flow and brace for the potential of a recession. But, as they’ve proven time and time again, small businesses are resilient and will shield themselves against this economic threat in every way they can; encouragingly, it looks like most are still seeking finance to grow their businesses, rather than to holster it up. At iwoca, we’re working hard to adapt to small businesses’ needs, which is why we’re now offering the higher-value loans up to £500,000.”

Leanne Barry, broker at LB Finance Solutions Ltd, added: “We have definitely been receiving more applications from smaller businesses over the last two months since the Recovery loan scheme came to an end. This is mainly from businesses that either did not manage to source any government backed funding, or indeed have already used any funding they received for cash flow and are now needing further funding to stay afloat.”

By Nathan Gore

Source: The Fintech Times