News

The industry’s biggest event of the year: 15 June

UK PMI surveys suffer biggest fall for 4½ years as weakness spreads to services

Commenting on the January UK PMI survey results, expert from Markit Chris Williamson said:

“UK economic growth slowed to its weakest for almost three years in February, according to the latest Markit/CIPS ‘all-sector’ PMI data. At 52.9, down from 56.1 in January, the headline index measuring growth of business activity fell to its lowest since April 2013. The 3.2 index-point slump in the PMI was the largest since August 2011.

“The extent of the slowdown will be a shock to policymakers and surely puts to bed any talk of the Bank of England raising interest rates. The focus will instead increasingly shift to whether policymakers may soon need to dig deeper into their toolbox to introduce new measures to shore-up the economy with additional stimulus, and what tools might be used. History shows that the PMI has now moved down into territory normally consistent with the central bank cutting interest rates rather than hiking

“The slowdown in February leaves the PMI suggesting that economic growth could slow to 0.3% in the first quarter, down from 0.5% in the final quarter of last year, but there are downside risks to even this modest expansion.

“The February PMI alone is consistent with just a 0.2% quarterly rate of GDP growth, and there may be worse to come. Despite rising slightly compared with January’s three-year low, business confidence in the service sector remained at a level which has historically presaged an imminent slowing in the economy to near-stagnation or worse in coming months.

“Survey responses reveal that firms are worried about signs of faltering demand (inflows of new orders across the three sectors combined registered the smallest monthly increase since April 2013), but boardrooms have also become unsettled by concerns regarding the increased risk of ‘Brexit’, financial market volatility and weak economic growth at home and abroad.

“Growth slowed across the board in February, with survey gauges falling in manufacturing, services and construction. However, the slowdown in services was arguably the most worrying, as the sector has provided an important support to UK economic growth in recent years, not least due to its sheer size. Service sector business activity showed the smallest monthly increase since March 2013. Expansions meanwhile hit ten- and seven-month lows respectively in construction and manufacturing, the former suffering from a housing market slowdown and the latter wounded by falling exports.

“Not surprisingly, the slowdown in order book growth and the recent drop in optimism have taken a toll on hiring, resulting in the smallest monthly increase in employment since August 2013 in February. Slower rates of job creation in services and construction accompanied a second successive monthly drop in factory payrolls.

“Inflationary pressures meanwhile remained subdued. Average prices charged for goods and services once again barely rose, while average input prices showed one of the smallest increases seen this side of the 2008-9 recession. While some of the weakness of inflation continues to reflect low global commodity prices, companies also report that price competition remains fierce amid softening demand.”

Invoice finance facility from Ultimate Finance leads to exceptional growth for courier company

Kenilworth-based Rothwell Logistics is experiencing growth of 400% per quarter helped by an invoice factoring facility provided by Ultimate Finance.

The company, which is in the process of being renamed Mail2Freight Ltd, arranges the delivery of everything from envelopes to shipping containers. It started trading almost two years ago and has grown rapidly through recommendations and word of mouth.

In just the first quarter of year two, business matched the turnover and doubled the profit of the first year’s trade, and growth is increasing with additional services such as ‘storage’ and ‘pick & pack’ being offered. It has now been offered a £1.9m contract to provide a total despatch management solution for a Coventry based firm, who approached them after recommendation.

It had reached a point where the company was forced to turn business away, as it had to pay its carrier suppliers within seven days, with customers wanting 14-30 days or more to settle invoices. This resulted in a huge strain on cashflow to the point where the company was reliant on being supplemented from personal funds, restricting the growth.

The factoring facility, which includes bad debt protection, means the invoices issued to customers are paid by Ultimate Finance almost immediately, enabling Rothwell Logistics to pay the suppliers without needing huge reserves of cash.

It is now able to take on more business including the £1.9m contract, which it would never have been able to consider without invoice finance.

Founder of the company, Naomi Rothwell-Smith, was initially put off invoice finance after being advised it was associated with companies in financial trouble.

Naomi said:

“I can’t believe how wrong the misconception is about factoring. We are a growing company and there’s no way we could have taken on any more new contracts without the facility in place.

“We looked at mainstream lenders but they made both the initial application and ongoing processes so complicated, whereas Ultimate Finance kept every step simple. They complete the credit checks on our customers, insure the debt and chase up the payments; enabling our team to get on with running the business.

“With cash freed up we are now pleased to be able to provide further support to our smaller customers by offering them better prices and 30 day payment terms, which they can’t get direct from national couriers.”

Regional director of Ultimate Finance, Simon Hooks, had no hesitation in supporting Rothwell Logistics, he said:

“The company has done an excellent job in building a very successful business purely through referrals and recommendations. It would not have been offered a contract of almost £2m if they had not developed a reputation for providing an excellent service at the right price.

“Naomi and her team work extremely hard and thoroughly deserve the phenomenal growth they are enjoying.”

Photo caption: Simon Hooks, Ultimate Finance with Naomi Rothwell-Smith, Rothwell Logistics

Oldham Haulage firm TTX looks to make inroads into new market with funding from Aldermore

TTX (TT Express), the Oldham-based warehouse and distribution firm, has agreed an invoice finance facility of £1.4m and an additional asset finance facility of £260k from Aldermore. This will help the business expand operations to meet demand at its current facility near Manchester and assist in the opening of a new branch in the Midlands. TTX is further looking expand by the way of organic growth and acquisitions.

The business, which employs over 90 people, specialises in providing its clients with transport and distribution services including warehousing and delivery throughout the UK. With over 30 years’ experience, TTX has an established reputation as a market leader in the North West. Notably, the firm has its own dedicated onsite workshop, which allows for tight control over vehicle safety and serviceability.

With this finance facility from Aldermore, TTX will continue its growth and development, and the additional support will allow the business to purchase additional vehicles and recruit additional staff.

Dave Taylor, managing director at TT Express, said:

“All businesses have to consider their cash flow, and this funding from Aldermore will allow us to close that gap. We are really excited about our plans to expand, and look forward to being able to deliver great service to more customers and regions in the future.

“When TTX was looking for a finance provider, Aldermore stood out as having a good reputation within the industry. From our initial meeting it was clear that Aldermore was interested in fully understanding TTX rather than simply lending us the funds which was refreshing. The service we have had from them has been fantastic and we have built a great relationship with our new partners.”

Carl Finlayson, regional sales manager, invoice finance at Aldermore, said:

“TTX is a well-established business with a strong track record of success. They have a blue chip customer base and were looking for a flexible finance facility to help expand this.

“With the new finance facility in place, TTX is able to grow and expand its fleet, and will be well-placed to continue as the haulier of choice for the North West while at the same time making inroads into the Midlands market.”

Dave Taylor, managing director from TTX with Carl Finlayson from Aldermore

UK200Group member responds to FSB call for budget to simplify taxes

A member of the UK200Group of independent accountancy and law firms has responded to a call by the Federation of Small Businesses that the chancellor should simplify taxes in the Spring Budget.

In its submission to the Chancellor of the Exchequer, in advance of the 2016 Spring Budget Statement, the FSB has called on the Government to strengthen small business confidence by clearly and consistently backing enterprise.

The chancellor recently spoke to FSB members stating that he would back small business. The FSB has now called on Mr Osborne to use his budget to do just that – to boost business confidence, to deliver fundamental reform of business rates and to simplify the tax system. One option proposed by the FSB is to create a simplified small business tax regime centred on a single tax payment. This would provide a proxy of a business’s overall tax liability, essentially combining many taxes into one and removing the complexity of applying a number of different taxes, as is the case under the current system

Duncan Montgomery, tax partner at UK200Group member firm Whittingham Riddell said:

“Taking some of the stress out of the tax system would be great for many; micro business already has VAT exemption or for medium sized margin schemes and cash accounting help. Moving to a proxy system like the FSB suggests would likely only add another option as otherwise business sectors would lose out materially if, for example, they don’t occupy premises. So our preference is for simplification of existing systems and higher registration thresholds, not single proxy taxes.”

India’s future prospects and global emerging markets

Luke NG, senior vice president of FE Research Asia gives us his thoughts on India’s future prospects and global emerging markets in general:

India
“Over the past few months we have been seeing rising market uncertainties due to two major issues – the intensifying worry over the Chinese economic slowdown, and the sharp fall in oil / commodity prices.

“Among emerging market economies, India seems to be one which is less impacted by these external factors. Unlike other emerging Asian economies, the Indian economy is less reliant on exports and trades with China, and therefore investors have fewer concerns on the impacts coming from the Chinese economic slowdown. At the same time, India is a commodity importer, and oil accounts for around 35% of Indian’s imports. Therefore India has been one of the beneficiaries of the oil price correction as it helps lower the cost of production, inflation and current account deficit.

“Overall, the Indian economy is in a fine position backed by moderate debt level and strong foreign reserve. Inflation is also within central bank’s target range of 2% to 6%, which allows the Reserve Bank of India to stay accommodative in its monetary policy. As PM Modi came into power in 2014, there was a high expectation that he could drive a series of reforms, i.e., ‘Made in India’, ‘Digital India’, bring in labour market reforms, tax reforms and deregulation of petrol and diesel prices etc to move the economy forward. While major reform progress has yet to be seen since Modi came into office, the government is gradually paving the way to drive changes in various areas. These success of these efforts are key for India to maintain a sustainable high growth rate going forward.

“Because India is less attached to the global market uncertainties and has decent future growth prospects, it is an area that investors could consider to include for a globally diversified investment portfolio.”

Global emerging markets
“Global emerging market equities are generally trading close to historical lows in terms of valuation over the past two decades, and present huge discounts over developed market equities.

“It could be a value play for long term investors, however, it could also be a value trap – especially for commodity oriented economies where commodity-related companies make up of a large component of the equity markets. These companies continue to face structural changes in demand as China transits from a secondary focus to tertiary focus economy – and therefore resulting in a decrease in commodities consumption.

“While valuations of emerging Asia equities are also attractive, they may present better opportunities for long term buyers as these economies are potential beneficiaries of the falling commodity prices.

“Asian governments are engaging in series of reforms to drive sustainable economic growth going forward, and in order to capture these opportunities investors need to be selective by focusing on industries / companies which present sustainable growth / leadership in the region and avoiding those with excess capacity in the face of mild global growth and structural economic changes. Therefore, fund manager selection plays an important role in order to capture the long term opportunities emerging in the region as equity markets try to recover.”

New figures reveal record amount withdrawn from LINK ATMs in 2015

New figures published reveal that LINK cash withdrawals from ATMs in 2015 amounted to a record £128bn – made during over two billion visits to the UK’s 70,270 LINK-connected ATMs.

The total number of cash withdrawals only grew slightly in 2015 (by 0.8%) with the value of those withdrawals increasing by 2%. The amount cash machine users withdrew also went up – with the average withdrawal value increasing from £61.25 in 2014 to £61.93 in 2015.

LINK’s share of all UK ATM cash withdrawals continues to rise with LINK accounting for around three-quarters of all cash withdrawals, with the total value dispensed through LINK transactions rising by almost 35% in the last 10 years.

John Howells, LINK CEO, said:

“These figures show that cash remains a very important part of our lives here in the UK and is still the most attractive payment option in lots of situations. With the amount of money being withdrawn continuing to increase, it is clear that cash has an important place in our wallets and purses for the foreseeable future.

“With over 70,000 cash machines in the UK, LINK is committed to continuing to make sure everybody has safe, reliable and easy access to their cash.”

The Law Practice acquires the client portfolio of Rebus Investment Solutions Limited

National law firm, The Law Practice (UK) Limited (TLP), has acquired the client portfolio of Rebus Investment Solutions Limited (Rebus) from the administrator (ReSolve Group) following the company being placed into administration on 28 January 2016.

TLP were advised throughout the acquisition process by Jason Oakley managing director of London based Mantra Capital.

The Rebus client portfolio comprises of some 1,800 high net worth individuals and celebrity names involved in pursuing complex claims for compensation for financial services mis-selling.

Paul Harris, managing director of TLP commented:

“TLP has been looking to make key acquisitions in the legal sector and the Rebus client portfolio presented an ideal opportunity. When TLP was approached by ReSolve Group to put forward proposals to acquire the client portfolio, the senior management team considered this an opportunity in this market place. ReSolve Group were seeking an established solicitors practice who could immediately give the necessary levels of client care and expertise and be able to meet the stringent time limits on recovering client damages to ensure that the claims by the Rebus clients are secure.

“I will be writing to each individual client personally to welcome them to the TLP brand and introduce them to the team dealing with their claims. In addition to this a series of client seminars are being arranged where clients can meet the team and deal with any issues on their particular claim. A dedicated administration centre is being established in London to specifically deal with the clients transferring to TLP and new clients instructing us in this particular area of law”.

The Markit/CIPS UK Manufacturing PMI report and reaction from Lloyds Bank

Summary:
February saw the rate of expansion in the UK manufacturing sector slow back towards the stagnation mark. Output growth ased sharply, as levels of incoming new business showed little movement on one month earlier. The slowdown was also reflected in the labour market, with job losses registered for the second straight month.

At 50.8 in February, down from 52.9 in January, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI®) posted its lowest reading since April 2013 – the first month of the current 35-month sequence of expansion.

The growth rate of manufacturing production slumped to a seven-month low in February, led by sharp decelerations in the consumer and investment goods sectors.

Both the capital and consumer goods industries saw levels of total new business decline in February, reflecting subdued trends in domestic and foreign demand. The intermediate goods sector saw new order volumes tick higher. Subsequently, output growth in this category slowed less sharply than at consumer and investment goods producers.

The level of new export business placed with UK manufacturers declined for the second straight month in February. Companies reported weaker order inflows from Brazil, mainland Europe, Russia and the USA (Please note that the survey collection window ran from 12-24 February, meaning that the vast majority of responses were received before the sharp falls in the sterling exchange rate at the start of week beginning 22 February).

Manufacturing employment fell for the second successive month in February, although the rate of reduction was only mild. Job cuts were registered in both the consumer and investment goods categories. Intermediate goods producers reported a negligible increase in head counts.

Price pressures remained on the downside during February, as both input costs and output charges fell further. The rate of purchase price deflation eased to a seven-month low, but remained strong by the historical standards of the survey.

Companies reported lower costs for commodities (especially oil). There were also mentions of competition between suppliers driving down input prices.

Manufacturers passed on part of the decrease in costs to their clients, leading to a reduction in factory gate prices for the sixth straight month. However, the rate of decline was slower than in January.

Rob Dobson, senior economist at survey compilers, Markit, said:

“The near-stagnation of manufacturing highlights the ongoing fragility of the economic recovery at the start of the year and provides further cover for the Bank of England’s increasingly dovish stance.

“The breadth of the slowdown is especially worrisome. The domestic market is showing signs of weakening while export business continued to fall. Price pressures also remained firmly on the downside, with the survey signalling input costs falling at a double-digit annual pace and average factory gate selling prices showing a further decline. A lot of this is driven by the ongoing weakness of global commodity prices. However, there are also signs that weaker growth is driving up competition between manufacturers to secure new business and among their suppliers too.

“While these factors will help keep a lid on inflationary pressures, it is worth noting that the recent sharp drop in sterling came late in the survey collection window and so is not yet fully reflected in the results. Although sterling’s drop will hopefully boost exports, the likely increase in import costs in coming months will be unwelcome to manufacturers, especially given the imminent introduction of the new National Living Wage.”

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said:

“A distinct lack of progress has revealed a disappointing slowdown amongst manufacturers in February, with the weakest overall performance for nearly three years. Nevertheless, the overall index still remained in positive territory – but only just.

“The trend in staffing levels also registered a downward trajectory, with some job losses thrown in, and only the intermediate goods sub-sector showing signs of employing more staff. Intermediate goods was also the only bright spot in terms of new orders and showed a less marked slowdown in output growth than the other sectors.

“Manufacturers reduced their input stocks for the fourth month in a row in anticipation of a slowing growth rate and poor demand. Despite a cut in purchasing, suppliers’ delivery times lengthened for the thirty-third month running.

“Demand from the domestic market was weak and there was little hope to be gleaned from export orders which were in a similar downbeat mood. It appears the global slowdown is continuing to challenge markets and though it may be too soon to envisage another financial downturn, the possibility will have crossed the minds of key decision makers.”

Commenting on behalf of Lloyds Bank Commercial Banking following the release of the Markit/CIPS UK Manufacturing PMI report, Dave Atkinson, head of manufacturing at Lloyds Bank Commercial Banking, said:

“Continued volatility in the financial markets and signs of a slowdown in China are dragging on the confidence of the British manufacturing industry. The relative stabilisation of crude oil prices has lifted the market marginally, but will do little to allay fears of further falls in output.

“Factory bosses will be tested in the coming weeks as the looming uncertainty of the EU Referendum starts to hang over management teams. Businesses will be exploring the impact it could have on their operations and investment in the long-term.”

Bibby awarded 31st place in Sunday Times Best Companies

Small and medium sized business funder, Bibby Financial Services, has been awarded a place in the Sunday Times 100 Best Companies for the fifth time, climbing 19 places to take 31st position.

Advancing more than £26bn in funding to SMEs since 2010, BFS is the country’s largest independent invoice finance provider employing over 700 people in 19 UK offices.

Commenting on the award, global chief executive for BFS, David Postings, said:

“Being a great place to work is one of our key strategic pillars, alongside setting the standard for service and value, and growing profitably.

“I’m delighted that we have been able to build on our 2015 ranking and to reach the top 40 is a significant achievement for us.

“This award is genuinely testament to the hard work and commitment of our teams throughout the country and it reflects our focus on both customer service, and employee development and well-being.”

The Sunday Times list is compiled by Best Companies and businesses are ranked on areas such as leadership, charitable giving, employee well-being and personal development.

BFS’ global HR director, Wendy Taylor added:

“Attracting and retaining leading talent is key to providing excellent service to our customers. As a business we have heavily invested in employee wellbeing and workplace benefits over the past 12 months, and we’re thrilled to have been awarded a place in this prestigious list for the fifth time in recent years.”

The award ceremony was held at London’s Battersea Evolution on 25 February.

Formed in 1982, BFS is part of the Liverpool-based Bibby Line Group, a 200 year-old family owned business. Today, BFS supports more than 7,000 UK businesses in over 300 industry sectors.

David concluded:

“There are some fantastic businesses included in the Sunday Times Best Companies list, so we’re in great company. One of our core values is working as a family and I’d like to thank our teams right across the country for contributing to our continued success.”