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July 7, 2020

Big costs and plummeting share prices ahead for companies

Companies hit hardest by social distancing will face high premiums and shares falling, according to new research by Christian Wagner and Josef Zechner from the Vienna University of Economics and Business (WU) and their co-author Marco Pagano from the University of Naples Federico II.

The study found that in the viewpoint of investors, companies that feel the effects of social distancing the most, are seen as less resilient in a crisis, therefore premiums rose whilst at the same time share prices fell.
This was particularly the case in companies with a strong connection to tourism, whereas, companies in the tech and communications sectors, were found to be hardly affected and will return to pre-Covid levels by early next year.

At the beginning of April 2020, the expected returns of stocks with low pandemic resilience, such as Royal Caribbean Cruises and United Airlines are 40-60% lower than those stocks with high resilience, like Apple and Microsoft where the expected returns were between 3-4% lower.

“Sectors like tourism, which are more strongly influenced by social distancing, lost around 10% more value in the investigation period from February 24 to March 20 2020 than companies that were affected less,” says Professor Wagner.

The authors also analysed if investors were aware of the risks of a pandemic before the current crisis, therefore in addition to the first quarter of 2020, the authors included the years 2014 to 2019 in their analysis.

“In the period between 2014 and 2019, the cumulative differences in returns between more and less pandemic-resilient companies were about the same as during the outbreak, i.e. between late February and early April 2020. We assume that investors were aware of the potential threat of pandemics long before COVID-19 broke out,” says Professor Zechner.

The researchers say that it cannot be ruled out that the most alert investors may have started taking into account such concerns in their portfolio choices well in advance of the current pandemic, shying away from the stocks of companies that would be less resilient.

The study looked at 3,600 US listed companies.

July 7, 2020

Manufacturing industry optimistic for recovery from Covid-19

A new survey from SteelScout has found that more than 60% of professionals in the manufacturing industry expect the sector to recover from Covid-19 and return to business as usual by mid-2021. However, they highlighted issues in the wider supply chain which might impact the recovery, with almost 30% unable to access the materials they need and 36% adding that it is taking longer just to receive a ‘winning quote’.

One key driver behind the confidence in recovery is that 62% of respondents reported having orders waiting to be fulfilled once lockdown rules have eased. The orders on hold within SteelScout’s survey base of 100 people exceeded £17m in value.

In order to fully understand the impact of lockdown on manufacturers and their supply chains, SteelScout – a multi-supplier procurement platform that connects buyers with a UK network of suppliers – sought the opinions of more than 100 manufacturing professionals to gain insight into the current state of affairs.

The survey demonstrated that it has been a tough few months for the sector, with more than half of respondents reporting that they have been working at a reduced capacity or with some staff furloughed. More than 10% of respondents reported whole companies being mothballed and all staff furloughed.

Almost 80% of those surveyed reported that they have adopted new working practices to deal with rules and guidelines around lockdown in the UK. The most common change was remote working, which was used by 49% of those surveyed. Video conferencing, flexible hours and instant messaging have also helped to navigate the impact of Covid-19. To address supply concerns, almost a third had also increased their use of digital platforms in order to secure the materials they need. 22% of businesses pivoted to produce items from masks and screens to medical device parts to help the national effort. Around half of those companies added that they intend to incorporate the products and services into their offer on a long-term basis.

To solve the identified supply issues, greater visibility and more alternatives in the supplier network were the most called for improvements, whilst having an easier method to collect and compare quotes was also selected by many in an effort to reduce basic admin costs and save time.

Matt Yeates, managing director of SteelScout, said: “The innovation and determination shown by the manufacturing industry to continue operating through lockdown also reveals a clear shift towards the adoption of new technology to enable that continuity.”

“Many businesses may never return to the previous way of working & I believe a key part of the recovery will come from locking in lessons learned during the pandemic. Eradicating inefficiency sounds simple but often trying new approaches requires a bold step to really understand what you can achieve. Our platforms continue to offer a smarter way to quickly source the best deal for many manufacturers using steel and other metals.”

July 7, 2020

Klarna & BigCommerce research highlights shopper journey fragility

Four in ten UK shoppers (38%) abandon a purchase at least once a week, with a fifth (21%) claiming to do so more regularly. That’s according to new research by Klarna and BigCommerce, published today with a call for retailers to prioritise shoppers’ most fundamental needs for the sake of their bottom line as the UK heads towards a recession.

The research reveals a lack of fast and affordable delivery options as the number one reason behind cart abandonment, with over half of UK consumers (54%) admitting they have abandoned their online shopping cart due to delivery frustrations. The burden of needing to create an account and frustrations with the functionality of a mobile website came second, cited by 32% and 33% respectively as reasons to drop out.

Meanwhile, 27% of consumers have abandoned a purchase because they couldn’t remember their log in details for an existing account, whilst more than a quarter of UK shoppers (26%) admitted they have left a purchase halfway through because they ‘couldn’t be bothered’ to prepare their card details.

The findings, which highlight the fragility of the shopper journey, form part of a new report — Navigating Needs: the path to profit in eCommerce — published by global payment provider Klarna and leading SaaS ecommerce platform provider BigCommerce, in partnership with retail expert Andrew Busby.

Inspired by Maslow’s well-known hierarchy of needs theory, the report considers the shopper needs retailers must satisfy in their quest to gain and retain customers.

  • Functionality makes up the foundation of the pyramid as the need that must be met first and foremost, with 37% of respondents saying the ease of using a retailer’s website has the biggest influence over their purchase decisions. Almost a quarter (23%) said they’d also be influenced by the speed of the checkout process, while 22% are encouraged by flexible payment options.
  • Safety comes next, with three quarters (75%) of consumers saying they would be likely to abandon their shopping cart if they did not trust a website’s security. In the current context, this also means the safety of deliveries, with many retailers now offering essential non-contact delivery options to minimise the risk of cross-contamination.
  • Moving further up the pyramid, the research reveals the importance of engagement, with 39% of consumers saying good customer service would encourage them to shop again with an online retailer. An additional 27% said poor customer service would deter them.
  • An intrinsic need to be recognised and valued – esteem – comes next, with a third (33%) of consumers noting that personalised offers or discounts would encourage them to shop with an online brand, and a fifth (19%) being swayed by a personalised checkout experience. In fact, a fifth (19%) even said they would be likely to abandon a purchase if they weren’t treated to a personalised offer.
  • And, with all other needs met, many consumers are looking for entertainment and inspiration — enriching experiences — to capture their attention, with over a third (35%) of UK shoppers saying they are more likely to shop with a retailer that is associated with fun content and experiences.

Commenting on the research, Laurel Wolfe, VP marketing at Klarna, said: “Consumer behaviour might feel particularly unpredictable right now, but fundamental needs remain the same. Just like Maslow’s theory, this means starting with the basics and working up. Customers won’t feel comfortable if a website feels insecure, whilst a fast, smooth checkout process is likely to encourage loyalty. From flexible payment options and shopper security, to relevant content and referral traffic, we’re proud to help retailers improve the shopping experience at every stage of the journey, enabling them to create closer connections with customers.”

Andrew Busby, top 20 global retail influencer, CEO of Retail Reflections and IBM Futurist, commented: “Even before Covid-19 struck, retail was undergoing a seismic shift – and now its transformation is almost inevitable. Innovation is key, and retailers are right to consider new ways of reaching customers and bringing the same enriching experiences to them in this strange new world. But, in a matter of months, functionality and safety have shot to unprecedented levels of importance. Physical stores may never look the same again – and, from the ability to try before you buy to the need for secure spending and rapid returns, online retailers are under peak pressure to make the shopping experience as safe and seamless as possible.

Jim Herbert, EMEA general manager at BigCommerce added: “Shopping should always be easy and enjoyable. Consumers want ecommerce to be as quick and flexible as possible, and as this research shows, anything less than a seamless experience will result in abandoned baskets. As stress levels rise and purse strings tighten, shoppers will buy more from those merchants that match their needs. Every abandonment represents a dent in the retailers’ revenues and potentially a sale lost to a competitor, making it incredibly important to consider every aspect of the shopping experience – from security and website speed to the power of personalisation – across all channels where customers engage.”

You can download a copy of Navigating Needs: the path to profit in eCommerce here.

July 7, 2020

SMEs at risk from unqualified advisers during Covid-19 changes

The Institute of Financial Accountants (IFA) is cautioning small businesses to check that their accountant or accountancy practice is qualified to give advice, to avoid making ill-informed choices or potentially even committing unintended fraud.

Recent findings have revealed it is not so widely known that anyone can call themselves an “accountant”, as shown by research from the IFA which found that only 18% of respondents know the term “accountant” isn’t a protected term, and that you do not have to be qualified in order to set up a practice.

John Edwards, CEO of The Institute of Financial Accountants explains “Everyone assumes that to be an accountant there is a due process an individual must go through to qualify, and that there are stringent controls or regulations in place to manage who and how these people can operate their business. The sad reality is that this simply isn’t true; “accountant” is not a protected term which means that literally anyone can decide they want to be an “accountant” and start up a business tomorrow. While the number who do this is small, SME businesses are most at risk of hiring an unqualified accountant, and in doing so may be leaving their business vulnerable to incorrect or potentially even fraudulent advice.”

He continues “This risk has grown over recent months, when even qualified accountants and businesses are grappling with the rapidly-changing legislation and business support schemes, let alone those “accountants” who are unqualified and operating without the support and oversight of a professional body. We are concerned that businesses might have made decisions based on relationship, price or similar, without ever checking their “accountant” is qualified to give good advice. In normal day-to-day business this is of course a risk, but some operators might know enough to convince prospective clients they are qualified and expert; now, however, when legislation is changing at a pace, the gaps in their knowledge will widen and SME businesses could be left dealing with the consequences. At worst, this could mean a business inadvertently committing fraud, resulting in fines or even enforced closure of the business. What an unnecessary risk.”

The term “accountant” is not defined or protected by UK law and thousands of small businesses and individuals, believing they have engaged qualified accountants, may be at risk from harmful and costly business advice from unqualified, unregulated, and possibly uninsured advisers. It is accepted that although some unqualified accountants may do good work, an unqualified accountant is not answerable to any regulatory body and so cannot be disciplined. Generally speaking, the term “unqualified” in respect of accountancy, is used to describe those who are legally allowed to offer accountancy services to the general public even though they are not professionally qualified to do so, are not regulated by a professional accountancy body or have any professional indemnity insurance.

The key to checking that your accountant is qualified, is to ask if they are a member of a professional accountancy body and then check that membership with said body. This is a steadfast, fool proof way of ensuring you are working with a credible accountant or practice, as to be a member the professional bodies require proof of qualifications and insurance, and also mandate minimum standards their members must meet. This does of course vary slightly from body to body, but to join the IFA for example, members must be qualified, have experience, have all correct insurance and up-to-date regulatory requirements, and subscribe to a code of ethics which guides their behaviour. In turn, practising members are issued with annual practising certificates – which you can ask to see – and they must also commit to continued professional development throughout the year to keep skills up to scratch and current too.

July 7, 2020

Van market shrinks – 24.8% in June

The UK new light commercial vehicle (LCV) market declined -24.8% in June, as lockdown measures eased and businesses began to return to work, according to the latest figures released today by the Society of Motor Manufacturers and Traders (SMMT). After a -74.1% fall in registrations in the previous month1, this is an improvement but betrays weak demand given the sector was effectively shuttered for nearly three months. However, 30,041 vans and pickups joined British roads in the month, some 10,000 fewer than the previous year, as uncertainty kept operator confidence subdued.

Demand for smaller vans weighing 2.0 tonnes or under dropped -49.4% while registrations of medium-sized vans weighing more than 2.0-2.5 tonnes and larger vans weighing more than 2.5-3.5 tonnes also fell, down -19.1% and ‑22.8% respectively. Meanwhile, demand for pickups continued to decline, with registrations down -26.9%. Elsewhere, 4x4s saw 1.1% growth despite tough economic conditions, as more high-tech, ultra efficient new models joined the market.

Prolonged lockdown measures mean performance in the year to date has almost halved (-44.6%), down more than 87,500 units, with registrations of light commercial vehicles in negative growth for five of the six first months of the year, and all segments experiencing a double-digit decline in the first half of the year.

Mike Hawes, SMMT chief executive, said, “Although we are seeing a gradual improvement in demand as the UK starts to get back to business, we are still a long way off normal. The pandemic has stalled all but a few essential businesses, and those restarting now are doing so at reduced pace to ensure safety of their employees and in response to a cautious buyer appetite.

“Restart has been slow, while more uncertainty lies ahead as the UK grapples with business nervousness and potential regional lockdown measures. The industry will do all it can to attract buyers but restoring operator confidence remains the vital next step. A successful restart for the sector will be critical to fleet renewal – and the UK’s long-term green recovery – given the crucial role light commercial vehicles play in urban areas.”

July 7, 2020

MCI Mortgage Club grows BTL Panel by adding Zephyr Homeloans to its panel

lThe MCI mortgage club has appointed Zephyr Homeloans to its growing panel of specialist lenders for buy-to-let products.

Zephyr supports a product range tailored for individual landlords and limited companies, including HMOs, multi-unit freehold blocks, flats above commercial premises and ex-local authority properties.

MCI Club members will benefit from Zephyr’s application-fee-free approach. LTVs are available up to a maximum of 75% with a maximum loan value of £750,000, and up to 70% LTV for properties up to £1m. In addition, members will have access to specialist products, including new builds, with a maximum LTV of 70% and a maximum loan value of £750,000 within the M25, or £500,000 outside the M25.

Zephyr joins an expanding lender panel with MCI Club providing specialist coverage across multiple sectors, along with a unique technology offering, including a free CRM with AML and credit report functionality.

Melanie Spencer, head of MCI Club, said: “The rental market continues to be an attractive market for property investors, especially post-lockdown where a surge in demand has already been observed. By adding Zephyr to our panel, our members have a wider set of product options to service their investment clients whether they are looking to expand or restructure their portfolio.”

Paul Fryers, managing director at Zephyr, said: “We’re really pleased to be able to join the MCI Panel and bring our range of Buy-to-Let products to MCI Club members.

“In light of the unprecedented events of this year, it is more important than ever that distributors and lenders work closely together to provide access to the broadest range of mortgage products and insight to brokers.”

“We look forward to working with the MCI team and adding value to the relationship.”

July 7, 2020

£11bn of Bounce Back Loans set to go bad at taxpayers’ expense

UK banks are gearing up to 40% (circa £11bn) of loans from the Bounce Back Loan Scheme (BBLS) to potentially be written off as irrecoverable according to RSM, and all this at the expense of the taxpayer.

Banks are already preparing and building their teams to pursue businesses that default on the BBLS, a scheme established by the government in April to enable smaller businesses to access finance more quickly during the coronavirus outbreak. The taxpayer-backed scheme allows borrowers to self-certify their eligibility and need for loans of up to £50,000; 100% guaranteed, and; with no fees or interest payable for the first 12 months.

Since March 20, over 1 million UK businesses have borrowed nearly £43bn in government backed loans (£29.5bn of which came through the BBLS), a figure which excludes any ‘normal’ commercial loans from funders. It also excludes HMRC deferred payments; arrears of rent; and any build-up in trade debts which have been necessary to ride out the crisis.

RSM has voiced concern over what it calls a ‘ticking time-bomb’ of Bounce Back debt waiting to go bad from Q2 2021. The incurred debt will turn out to be unaffordable for swathes of businesses who turned to the loan but only as a means of prolonging the inevitable.

Gareth Harris, partner at RSM Restructuring Advisory LLP, comments: ‘This is neither a matter of if or when. The banks are readying themselves because they already know that this will form one of next year’s problems. If the estimated rate of default materialises then we will see somewhere in the region of £11bn written-off in BBLS alone. And because they’re 100% government-backed, this will all land on the taxpayer’s lap. What will be a particularly bitter pill to swallow is that between 10 to 15% of the portion that’s due to go toxic will have been down to fraudulent applications.’

This latest news comes on top of figures for 2019 which suggested that UK corporate net debt had risen for the eighth year in a row; some 70% higher than the low point in 2011; and with most of this increase in the period 2016-2019.

July 7, 2020

Staycations boost for motorhome dealership as demand accelerates

The 102-year-old Warners Motor Group in Gloucestershire has seen soaring demand for motorhome rentals as holidaymakers plan UK trips because of restrictions on overseas travel.

The family-owned firm was forced to close its showrooms and furlough most of its 75 staff during lockdown, but has kept its servicing and maintenance operations open for NHS vehicles and key workers since the start of the pandemic.

Now its showrooms in Gloucester and Tewksbury are back open and managing director Mark Jones says he is seeing strong demand from car buyers who want to avoid public transport when they return to work, though he anticipates revenues for 2020 will be significantly down on last year.

Lloyds Bank has provided Warners with a loan through the Coronavirus Business Interruption Loan Scheme (CBILS) to support the firm’s working capital needs during these extremely difficult and unprecedented times.

Mark said: “We needed cash to help us get through this crisis and this funding has enabled us to navigate our way through the lockdown and get back open as soon as possible to offer customers what they need.
“From day one of lockdown we have worked extremely hard to keep the business ticking over, offering a completely safe service for the local community who need us.

“Our Motorhome Rental business, M5 Motorhome Hire, has gone from a total collapse in bookings to seeing huge demand for UK based staycation holidays due to foreign travel restrictions and we are hoping things will recommence from the 4th July, when camping and caravan sites are expected to reopen.

“There is definitely increased demand for car servicing and MOTs and we are seeing customers who currently don’t want to use public transport driving up the demand for cheaper cars.”
Warners is one of the only family-run franchised motor dealers in Gloucestershire, selling new and used Peugeots, Citroëns, Isuzus and commercial vehicles, as well as offering maintenance and servicing, parts and accessories from their leisure division.

Social distancing measures have been implemented at both sites in Tewkesbury and Gloucester including unaccompanied test drives for buyers, plus PPE and extra training for all staff.

Daniel Tregunna, relationship director at Lloyds Bank, said: “Warners Motor Group has been serving the community for more than 100 years and it has continued to do so during lockdown, helping the NHS and key workers stay on the road.

“We remain hugely proud of our long relationship with Warners, which has diversified over the years, helping it weather this storm, and I’m sure it will be firing on all cylinders again soon.”

Lloyds Bank is working closely with business customers right across the UK to guide them through this challenging period and help them access the support that’s available.

July 7, 2020

UK cybercrime has doubled in last five years, costing businesses £87bn since 2015

The number of UK businesses succumbing to cyber attacks has doubled in the last five years, with the sharpest spike in victim rates coming in the small-business community, according to Beaming, the specialist business ISP.

Beaming’s five-year cyber security study, details of which are published in its Five Years in Cyber Security report, suggests that a quarter (25%) of UK businesses were victims of cyber criminals in 2019. This equates to 1.5 million businesses, up from 755,000 (13%) in 2015.

In every year of Beaming’s study, large companies (250+ employees) were most at risk, culminating last year with nine out of 10 (87%) falling victim. Small businesses experienced the steepest rise in victim rates: 28% of 11-50 person firms were hit in 2015, rising steeply to 62% last year.

The total cost of cyber security breaches over the last five years – including damaged assets, financial penalties and lost productivity – is believed to be more than £87bn.

Sonia Blizzard, managing director of Beaming, comments: “Cybercrime was one of the first fields to embrace automation, allowing hackers to launch increasingly sophisticated attacks with unprecedented scale and frequency. Businesses of all sizes need to think hard about improving the resilience of their IT and communication systems, to minimise the chances of being breached and the potential impact.”

“The threat has grown astronomically over the last five years. What used to be seen as a big-business problem has become a serious concern for every company director, manager and IT professional out there.

“Small businesses are now on the front line in the war against cybercrime. But they haven’t invested in cyber security or employee education at the same rate as their larger counterparts, and they are easier targets as a result.”

Cyber security trends identified through Beaming’s study

  • As companies grow they become more likely to be victims of cybercriminals. Over the past five years larger companies were consistently breached at a higher rate than smaller businesses. The risk of becoming a victim increases by more than 60% when a company hires its first employees.
  • Although more companies are taking measures against cyber crime, uptake of these measures remains very low overall. In 2015, 5% of businesses had a cyber security policy; that figure is now 9%. In 2015, 30% of businesses had a firewall at the network perimeter; that figure is now 37%. In 2015, 20% of businesses put in place employee training and awareness-raising measures; that figure is now 22%.
  • Concern about cyber-crime has grown among senior business leaders over the last five years. More than fifth of small (20%), medium (24%) and large companies (36%) now discuss a range of cyber threats at board level. The proportion of businesses taking additional steps to mitigate a range of cyber-risks has increased from 16% in 2015 to 37% last year.
  • Malware continues to be the biggest concern for business leaders, with 45% now taking additional measures to combat it (compared to 26% in 2015). Hacking and password attacks, where criminals use scripts that try a wide range of possible password combinations, were also big concerns for leaders.
  • Phishing is now the type of attack most likely to hit businesses. In 2019, Phishing was the most common form of successful attack on every size of business – with the exception of micro companies, where 1% more fell victim to malware (although in 2018 phishing was also by far the biggest threat to micros too). The proportion of businesses hit by phishing attacks grew by 50% in five years, from 6% in 2015 to 9% in 2019.
  • Staff members were responsible – either through malicious intent, neglect or genuine mistakes – for breaches in more than a third of cases. Business leaders held employees accountable for 37% of breaches in 2015, and 36% in 2019.
  • Beaming’s research indicates that almost two-thirds (61%) of UK businesses have minimal levels of cyber security defences in place, relying on anti-virus software and basic router protection to keep them safe. 69% of micro businesses and 58% of small companies were in this situation at the start of 2020.
July 6, 2020

Leumi UK appoints Sidharth Mishra as head of client operations and services

Sidharth Mishra has joined the London-based subsidiary of Israel’s leading international bank as head of client operations and services. In his new role, he will report directly to recently appointed chief operating officer (COO), George Evans, and will be responsible for helping to streamline and automate Leumi UK’s risk mitigation processes, while ensuring scalability and efficiency.

Sidharth has over 15 years’ experience in IT, process improvements and operations, having started his career at India’s largest private sector bank, ICICI Bank.

During his tenure there, Sidharth led operations in one of the bank’s most active branches before being selected to set up and head retail operations for ICICI Bank UK in 2007. Most recently, he headed operations for Axis Bank UK, where he was responsible for setting up processes for corporate and retail operations along with IT infrastructure.

Commenting on the appointment, George Evans, COO at Leumi UK, says: “Sidharth’s extensive experience in IT and operations provides a boost to our current offering, while ensuring our clientcentric, high-quality service is upheld – we are thrilled to have him on board.”

Sidharth adds: “I am delighted to be joining the exceptional team at Leumi UK and look forward to playing an active role in the optimisation of its operations processes while helping the bank to achieve its ambitious growth objectives. I’m sure it will be an exciting year ahead.”

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