Archive for April, 2013

More on the Co op

An interesting piece by Robert Peston. There is a suspicion that the co op may pull out of banking altogether citing the regulatory restrictions that have been and are being imposed by the government. As Robert points out, the government’s desire for more competition in the market is at odds with the desire for stricter rules. It’s a complicated and sensitive balancing act

This maybe a case of crying wolf or trying to twist the authorities arm but those that call for increased legislation ( as we are seeing in the invoice finance market) have to be
aware of the other side of the coin

My view is that competition is essential and still sadly lacking in the uk market

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Co-op falls down

Bank 1-2

The UK has fewer major banks than most major economies and the dominance by the four largest is seen by many as unhealthy. For those of us that believe there should be more choice in the market the above news is not good news.

Co op have a good reputation and although there are some strong new players in the market such as Metro we need more diversity and urgently so

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Turning the corner?

Survey from Begbies Traynor would indicate so

Across all sectors, ‘critical’ financial problems dropped from 5,000 cases in Q1 2012 to 3,283 in Q1 2013, indicating a possible positive turn in the UK economy, although the figures still show struggles within consumer-facing sectors.

Exactly 5000 last year? And I would also question exactly what the criteria for “critical” is. but it looks like positive news

And then

A lack of funding to the UK SME market is still a concern, with the report finding that the number of companies that secured new funding was 15,804 in Q1 2013, a 14.5% decrease (18,493) from Q1 2012 and an 11% decrease (17,823) from Q4 2012.

As a finance broker, this does not surprise me. I have certainly sensed a tightening of lending over past few months.

Either way one indicator is out of step with the other and we shall have to wait and see whether the banks catch up

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Shame on John Lewis

john-lewis-kitguru1Rightly lauded for its customer service and treatment of its staff (or partners to be more accurate), John Lewis is seen in a very different light to most high street chains. The image of ethical trading is a strong draw to its many loyal clients and its an image they would clearly wish to maintain

But when it comes to suppliers, the chain appears to be acting in the same grubby manner as the least likeable tacky retailers

They are rightly blasted by the outgoing WH Smiths boss here

Retrospective discounts are unseemly and corporate bullying at its worst. Maybe its a tricky one to legislate against and I would always defend free trading conditions, but frankly this should be curtailed

John Lewis has much to be proud of but this is a stain on their reputation

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Bad marketing habits


A very interesting article with some excellent quotes.

Scattergun email marketing is viewed very negatively and rightly so. I work with clients to carefully target potential accounts and it surely makes more sense to focus. Spam is resented and viewed as a violation but it is pretty difficult to get through filters these days


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Supply Chain Finance article

This is an article that may not now be published in Business Money so I thought I would give you a preview

Do you know a business that is tearing its hair out whilst some huge multinational sits on their cash for months on end? Of course you do  and the issue of slow payments to SMEs is not going away. However the good news is that the  government has vowed to “do something about it”.


David Cameron has announced the Supply Chain Finance initiative. Many of you will be well aware of the details of the scheme but essentially the outline is that suppliers will receive 100% advances against their invoices upon client approval. The advance will be issued by the “participating bank” at “substantially lower interest rates”


Both the buyer and the bank have to buy into the scheme and the list of participating companies is quite impressive without being entirely comprehensive. It all sounds very promising and in theory many SMEs will have much to gain from this form of financing. However theory is fine but what about the practicalities?


There are a few issues that spring to mind ranging from the mundane to the bigger picture


Lets start with a rather prosaic issue first. Three parties are of course required to make this work . That’s fine if all three parties are keen and motivated but my suspicion is that the driving will have to come from the supplier.  Also remembering that with most of the corporations involved, the suppliers contact will be with some distant overseas call centre and the vision of an increasingly irate small business owner trying to explain the whole process to someone staring at a script is an image that readily springs to mind.


And then there is the bank. Understandably this can be seen as competition to the banks existing products and regardless of the current business and political climate, the banks are here to make money. Will they be enthused about this scheme? Naturally the headlines will project a positive angle but having briefly googled  “Supplier chain finance” together with the identity of a number of the  leading banks , the results for the government scheme were virtually invisible. Google “factoring” and “abc bank” and you will see a very different set of results


Maybe im being overly cynical but has the government considered in full what the banks stand to gain or lose from this scheme?


This financing will be seen as an alternative to existing invoice financing arrangements and lets face it, with 100% advances and “low “ interest rates this will be very competitive indeed.  Borrowers will naturally look at the options and who could blame them? The cost saving could be significant and I am sure the lenders will be willing to advise the same. Through gritted teeth



But there will be questions which should spring to the mind of an astute borrower. Firstly the issue of how long will the facility be in place? Would for instance a less business friendly administration quickly close this down leaving suppliers with a sudden and critical cash flow issue? Government initiatives come and go but banks are here to stay. At least we hope so


Borrowers would also do well to look carefully at the clients approval process too and many may well forget that the time difference between advances at point of sale as opposed to point of authorisation can be a little more protracted than they may anticipate


Having said all this there is a serious wider question and its one that will not go away. Simply put, does the scheme legitimise extended terms of payment to suppliers? Despite a lot of hot air, legislating payment terms between two parties is frankly impossible and the dominant party will remain in place unless the economy develops into a very different model, so in many ways we are stuck with what we have. Many of these “slow payers” are actually sitting on pretty big cash piles which does rather beg the question as to why the banks should be expected to fund what many would consider to be simply bad bullying practice


The intentions are well meaning but when John Lewis for instance takes care to ensure all its suppliers are paid to reasonable terms and without delays many will rightly ask why shouldn’t everyone else?


There is a stock market driven reason for that maybe but is the long term solution to this to effectively such practices approval?


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Latest article on credit checking


My monthly piece in Business Money with some fairly strong opinions

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