Finance and Business Opportunities - December 2009

Over £500m of Government-Backed Loans Boosts Business Prospects
On 22 December 2009, the Small Business Minister Lord Davies announced that companies, from printing firms to lighting groups, have improved their business prospects after benefitting from more than half a billion pounds of Government-backed loans.

More than £580m in loans has been drawn down by more than 5,840 businesses under the Enterprise Finance Guarantee (EFG), and is already being used to boost cash flow and help companies invest in new staff and equipment. Loans totalling around £720m have been offered to businesses.

The early stage assessment of EFG showed 94 percent of respondents shows that their business prospects had improved following receipt of the loan, and 84 percent reported EFG had helped their prospects of survival. Almost all EFG recipients felt that they wouldn't have been able to achieve the same business outcomes at the same speed or scale, if at all, without EFG.

Other benefits included:

  • Improved cash flow;
  • The introduction of new products or processes;
  • Using EFG as a platform for businesses growth;
  • Around 60 percent said the funding helped to create jobs at their business, either already or anticipated at some point in the future;
  • 57 percent of the respondents reported they had saved jobs, all attributed to EFG.

According to the 385 respondent businesses, some 1,870 jobs have been saved, 350 jobs have already been created and a further 550 new jobs are expected in the future, due to receiving EFG-backed lending.

Scaling up this sample to the entire population of firms offered EFG-backed loans up to the start of October, suggests EFG could have already been responsible for saving and creating an estimated 31,600 jobs, with potentially around a further 8,400 jobs to be saved or created in the future.

As of 18 December, more than £1.04bn of eligible applications from over 9,200 firms have been granted, are being processed or assessed. More than 7,100 businesses have been offered loans totalling nearly £717m. This is lending that would not have otherwise taken place.

At Pre-Budget Report, the Chancellor announced EFG would continue for another year. The decision will enable up to £500m of additional bank lending between 1 April 2010 and 31 March 2011 to companies which lack the collateral to get a normal commercial loan. It is available for viable firms with an annual turnover of up to £25m, looking for loans of up to £1m for a period of up to 10 years.

Source and access to full report available at: http://nds.coi.gov.uk/clientmicrosite/Content/Detail.aspx?ClientId=431&NewsAreaId=2&ReleaseID=409842&SubjectId=36
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-----------------------------------------------------------------------------------------------------------------------------------------Firms should get in shape for New Year run of export success
On 22 December 2009, Lord Davies urged UK firms to make a New Year's resolution to get in shape for a run of export success.

In the last 12 months, UK Trade & Investment (UKTI) has helped almost 24,000 firms to generate £3.6 billion in additional revenue. It has advisers in all English regions and cooperates with the devolved administrations in Scotland, Wales and Northern Ireland. Local experts can help businesses to identify which markets are most suitable for them. They then link into a network of trade experts in almost 100 markets that can do the research and find appropriate contacts for businesses to meet.

Helping to get firms to market, UKTI offers grants under its Tradeshow Access Programme (TAP) of up to £1,800 for businesses to take part in hundreds of tradeshows overseas.

Source and access to full report available at: www.newsroom.uktradeinvest.gov.uk/~/content/oil-gas-business/firms-should-get-in-shape-for-new-year-run-of-expo.ashx
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-----------------------------------------------------------------------------------------------------------------------------------------Trade credit insurers pay record amount in claims as businesses are helped through the recession
On 23 December 2009, the latest Association of British Insurers (ABI) figures showed that trade credit insurers have paid out a record amount in claims in Quarter 3 (Q3) 2009.  The total amount paid in claims was £125m, an increase from £38m in Q3 2008, a 227 percent increase year-on-year.  This is a reflection of the global recession and the liquidity crisis affecting UK businesses.

These latest figures demonstrate the real value trade credit insurers add to businesses that are facing particularly challenging times during the recession.

Source and access to full report available at: www.abi.org.uk/Media/Releases/2009/12/Trade_credit_insurers_pay_record_amount_in_claims_as_businesses_are_helped_through_the_recession.aspx
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-----------------------------------------------------------------------------------------------------------------------------------------Card processing help for small businesses
The Forum for Private Businesses (FPB) and Accept Cards Ltd (ACL) have been helping small businesses make the most of the Christmas trade by providing mobile credit/debit card terminals on a short-term basis, rather than the usual deal of 12 months at a time.

Members of the FPB already accepting cards make an average saving of 30% on the processing costs, with no joining fees (typically £150-£200) for switching acquiring bank. Members of the FPB new to cards make an average saving of £465.

Benefits include low rates for cardholder-not-present transactions, independent advice on all areas of card processing and the choice of a wide range of processing banks. Other options include a zero minimum monthly service charge and either static, portable or fully mobile terminals with flexible rental terms.

Source: FPB press release: www.fpb.org/news/2288/The_Forum_of_Private_Business_and_Accept_Cards_Ltd_help_businesses_make_the_most_of_Christmas_trade.htm
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-----------------------------------------------------------------------------------------------------------------------------------------Pop-up shops give Christmas cheer to start up businesses
On 15 December 2009, the Head of Enterprise at the Institute of Chartered Accountants in England and Wales (ICAEW) offered tips to new businesses wanting to test their concept with a temporary lease before taking it to market on a more permanent basis.

Temporarily converting an empty shop unit into your retail business venture may seem like a novel idea but many successful businesses started life in a temporary unit. Cosmetics company Neal's Yard Remedies, which was started by Romy Fraser in a disused warehouse in Covent Garden in 1981, is just one example.

A pop-up shop is created when a business uses empty premises on a short-term basis. They are especially popular at Christmas time as companies can take advantage of heightened consumer spending over the festive season.

By adopting the pop-up shop format, small businesses can:

  • Be in a stronger position to negotiate terms with their landlord;
  • Have the opportunity to extend the lease after Christmas should the trial period be a success;
  • Have the chance to check their product specification in a live situation;
  • Gain actual experience in preparation for writing a business plan;
  • Get feedback from their customers before they fully commit to taking their product to market;
  • Use the novelty value of the pop-up shop to help sales volumes.

Another factor in the equation is that since the cancellation of the Empty Property Rate Relief in April 2008, landlords with vacant properties are penalised and so are obviously keen to have their units occupied. As a result, new leases are often on significantly better terms than in the recent growth years.

Source and access to full report available at: www.icaew.com/index.cfm/route/169407/icaew_ga/en/Home/Press_and_policy/Press_and_policy_home/Pop_up_shops_give_Christmas_cheer_to_start_up_businesses
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The Department for Business, Innovation and Skills: venture capital support to small businesses
On 10 December 2009, the National Audit Office released a report which said that so far Venture capital funds have not been managed as a programme and lack a robust framework of objectives to measure performance. In the absence of baselines for measuring benefits, and with evidence of poor financial performance from some of the early funds, the programme cannot currently be said to demonstrate value for money.

Since 2000, the Department for Business, Innovation and Skills and its predecessors have invested around £338 million in a series of venture capital funds to support young companies, which may find it difficult to obtain funding elsewhere. Nearly half of these businesses were not confident that they would have been able to go ahead anyway without finance from the Department's funds. Of those that felt they would have gone ahead, most felt that in doing so their activities would have been more limited or delayed.

The report points out that the Department failed to establish a robust framework, and associated baselines, against which to measure the impact of the funds: objectives were not clearly set out or prioritized. It was therefore not in a position to judge whether the taxpayers' investment offered value for money. The Department, however, is now planning to take steps to strengthen its programme management and evaluation so that it is better able to demonstrate value for money.

Improvements have been made to the design of more recent funds to strike a better balance between protecting taxpayers' interests and attracting other investors. The recent creation of Capital for Enterprise Limited, a company wholly-owned by the Department, has the potential to strengthen oversight of the funds.

The taxpayer is unlikely to receive financial returns on investment from the early funds. The £74 million invested in the Regional Venture Capital Funds, for example, is currently valued in the Department's accounts at £5.9 million and the Department will get a financial return only if the individual funds outperform the preferential 10 per cent return to other investors. The economic benefits derived from the programme have yet to be measured.

Source and access to full report available at: www.nao.org.uk/publications/0910/venture_capital_support_to_sme.aspx
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Solutions for business on track to deliver 100 scheme target
On 7 December 2009, the government announced that its programme to simplify and streamline publicly-funded business support has almost reached its March 2010 target.

The 'Solutions for Business: a Foundation for the future' report published sets out how the Government is delivering on its 2006 Budget commitment to reduce the number of business support schemes from 3000 to no more than 100 by March 2010.

The most recent information shows that less than 200 schemes remain to be aligned to the Solutions for Business portfolio in order to reach the target of less than 100 schemes.  The report also sets out plans to ensure the March 2010 target is met.

From April 2010 a new Strategic Management Board with the power to approve new and remove old products will ensure schemes remain flexible enough to react to business needs, while delivering value for money.

The streamlined package of support packages, delivered through Business Link, will provide real benefits for business by offering:

  • easier access to support;
  • removal of duplication;
  • potential for savings.

Source and access to full report available at: www.berr.gov.uk/whatwedo/enterprise/simplifyingbusinesssupport/page44805.html
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Small firms are growing but still need support to sustain a full recovery
On 2 December 2009, a new survey by the Federation of Small Businesses (FSB) and ICM showed that more than half of businesses have resisted the worst of the recession by innovating, creating new products and services.

The FSB-ICM 'Voice of Small Business' Annual Survey 2009 reveals that 53 percent of businesses introduced new or improved products and services last year, and 51 percent intend to continue innovating next year, showing that small businesses are keen to grow and develop, despite the tough times.

The FSB argues that small businesses are the solution to getting the UK out of recession in its election manifesto, Small Business, Big Vote: The Route to Recovery - FSB 2010 Election Manifesto, in which it shows that small businesses are innovators and job-creators, with more than 80 percent of new jobs created by small businesses in the five years to 2007.

The 'Voice of Small Business' survey indicates that there is more good news from the small business sector: 27 percent of the 10,000 respondents said their profitability increased over the last year and 30 percent said their sales volume had increased over the last financial year.

This research, the most extensive survey of the small business sector since the start of the recession, reveals that despite the difficulties they have faced over the past year, small firms are already leading the way out of recession and back into growth.

However, a third (32 percent) of respondents who have borrowed finance in the last year reported that they had been charged more, the vast majority saying their rates increased by more than one percentage point. Half (49 percent) also said they had not taken out any loans at all in the last 12 months, which could be a sign that they were put off by the prohibitive cost of finance.

Three in 10 (31 percent) small businesses in the survey said a cut in employers' National Insurance would improve their economic prospects in the recession. Respondents identified growing their business (42 percent), employing more staff (19 percent) and coming up with new services and products (23 percent) as the key things they would invest in with the savings from a tax cut. Other uses include capital investment in the business (35 percent), marketing (32 percent) and increased wages (28 percent).

Another three in 10 businesses (31 percent) said if banks were to lend more, or more fairly, that would be key to improving their prospects.

The banking system in the UK does not currently provide the channels for finance small businesses need. As demand for credit will be higher still during the recovery, the FSB is warning that the right financing structures must be in place to get us back on the road to recovery. The FSB is calling the Government to put in place a renewed stimulus package of specific and targeted measures to get the economy going again, nurturing the small business sector's tentative growth.

The FSB is calling for a stimulus package that includes:

  • Renewal of the Enterprise Finance Guarantee when it runs out in March;
  • Suspension of tax increases, including a freeze on employers' National Insurance Contributions, and a National Insurance rebate for new jobs in small business;
  • Alternative routes to finance for small firms, including through the Regional Development Agencies, a Post Bank and competition among high street banks, as well as a Regional Stock Exchange.

Source and access to full report available at: www.fsb.org.uk/News.aspx?loc=pressroom&rec=5742
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Consumer Prices in OECD area rise 0.2 percent in year to October 2009
On 1 December 2009, the Organisation of Economic Co-operation and Development (OECD) reported that consumer prices in the OECD area rose by 0.2 percent in the year to October 2009, a positive rate for the first time since May 2009. Month-on-month, prices increased by 0.1 percent in October, after remaining stable in September 2009.

Consumer prices for energy were down by 9.2 percent in the year to October 2009, following a fall of 13.9 percent in September. Consumer prices for food fell by 1.0 percent in the year to October 2009, compared with a fall of 0.4 percent in September. Excluding food and energy, consumer prices rose by 1.6 percent in the year to October 2009, after 1.5 percent in September 2009.

Source and access to full report available at: www.oecd.org/dataoecd/34/10/44161529.pdf
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