Italy stops trade deal

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With all this weeks fuss aboit brexit one story has seemingly slipped under the radar which would a significant continuing argument for Brexit. The EU have made a great fuss out of their trade deal with Canada (without ever asking why its taken 60 years to get there) and now it could be scuppered by Italy’s new government who significantly claim there are doubts right across the 28 member nations. The dispute is over Italian Cheese

This is of course the perennial problem and why the EU has been so poor at concluding trade deals.

 

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Barclays. Sign of things to come?

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Barclays have strongly signalled more restrictive lending in the months to come.

Chief executive Jes Staley says Brexit uncertainty was helping to stunt economic growth and that was something the bank could not ignore.

Whichever way anyone voted on Brexit, this was a near inevitability. Clearly the doom laden forecasts of George Osbourne and Mark Carney did not come to pass and frnakly looked pretty ridiculous but its impossible to dismiss the fact that “uncertainty” is damaging.

“In no way do we pull back in a radical fashion – but we will look at our credit exposures and see whether that’s proper given the direction of the economy,” Mr Staley said.
“We can at the margin tighten some of our underwriting criteria and credit standards just to be prudent for the stability of the bank.”

Ignoring the rather mangled poor english, I think this is a clear meassage. I sense that many SMEs will feel the pinch and those banking with Barclays should perhaps consider options. Having said that they are the least proactive big four bank in invoice financing which gives an indication that their strengths lie elsewhere.

The question that does arise is whether other banks will follow suit. I sense that they will

 

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Landlords bite back

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Apparently a number of commercial landlords are going to consider voting against CVAs proposed by the likes of House of Fraser. They clearly believe they are in a position of strength because they no doubt have a queue of interested tenants for vacant department stores.

That of course is not the case and as I blogged before, the landlords may just have to accept that they have a lot of supply but not much demand

Tough

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CVA’s abused by retailers?

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Last week, Chris Geaves, chief executive of Sovereign Centros, a landlord with nearly £3 billion of retail properties under management, said that CVAs were becoming a “daily occurrence that needs to be halted” as retailers were using the process as a “loophole to break binding lease commitments”.

But is this correct? It is true that CVA’s are used to restructure a business and huge element of that for retailers is the rent. This is where the landlords are squealing.

Tough. If the landlords dislike it then they can find another tenant. Breaking the lease due to insolvency (even if the actual insolvency may be a little tenuous at times) works both ways. The landlord is free to kick the tenant out.

So rather than complain, why dont they do so? The answer is obvious. The supply is exceeding demand by a huge margin and thus the rents are way to high.

Commercial landlords will just have to live with the rapidly falling demand for high street retail just like everyone else

 

 

 

 

 

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The current lending market.

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I am often asked how the lending market is performing and its not always an easy question to answer. None of us handle a large enough share to give a conclusive answer. On the other hand conversations with the right people and monitoring certain indications can give a reasonable outline.

At the present time I would say that the invoice financing market is pretty stale. Many lenders and contacts will always claim they’ve “had their best month ever” of course so the true picture isnt always easy to ascertain, but I have my trusted sources

I have been quietly busy myself althoigh the pipeline is relatively low but more significantly lenders whos opinions I trust are saying much the same thing. The reasons for this are not hard to understand. Invoice financing is dependent on businesses seeking growth and with so much uncertainty around few enterprises are prepared to take risks. Brexit is the clear elephant in the room here

Its naturally easy for outsiders to state that there should be relatively little effect from the exit and I would certainly agree with them. The predicted effects of brexit have been laughably and irresponisbly overstated by so called experts such as Mark Carney right through to obsessives on social media. Much the same could be said about those claiming future benefits too. But for small businesses its their livelihood and prospertity thats on the line. Something those with career structures and wages often do not appreciate.

This has led to many lenders looking to find gaps in the market with alternative products and with the continuing growth of PTP lending this has greatly expanded the scope of the market

Its is now possible to obtain lending against items such as R&D tax credits as well as WIP balances. In fact ive just completed an excellent arrangement for an accountancy firm whereby WIP was a large element of the lend.

And there are still new entrants into the market. A major new player is a very long private established bank which has hired a very qualified team. With well over 50 lenders to choose from competition should remain fierce

And naturally enough all of these factors increase the role and importance of a broker who truly engages with your client and explores the market fully

 

 

 

 

 

 

 

 

 

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Damning report on Carillion

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I am simply going to quote some of the salient paragraphs from the MPs report on the collapse of this seedy enterprise. There are any number of issues to consider here including that highlighted in my previous piece but most significant could be the fuel this gives to those that understandably state that too many of these major enterprises are run purely for the directors personal benefits without any long term thinking, commitment to employees and straightforward pride in the business

This has to stop.

Here are the quotes (taken from here)

Carillion collapsed as a result of “recklessness, hubris and greed” among directors who put their own financial rewards ahead of all other concerns, according to an excoriating report into the firm’s demise that spreads the blame between board members, the government, accountants and regulators

A damning 100-page report compiled by two select committees, published today, found that directors prioritised senior executive bonus payouts and dividends for shareholders even as the firm neared collapse, while treating pension payments as a “waste of money”.

A damning 100-page report compiled by two select committees, published today, found that directors prioritised senior executive bonus payouts and dividends for shareholders even as the firm neared collapse, while treating pension payments as a “waste of money”.

It claimed that KPMG had been “complicit” in signing off Carillion’s “increasingly fantastical figures” and internal auditor Deloitte had failed to identify “terminal failings” in risk management and financial controls, or “too readily ignored them”.

The report named Adam as the “architect of Carillion’s aggressive accounting policies”, which disguised the firm’s financial woes until July last year, when it admitted that £729m of revenues it had previously accounted for were unlikely to be obtainable.

 

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“Break up the big four”

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A scathing report by MPs published today into Carillion accused the Big Four of being “complicit” in its collapse. They were “guilty of failing to tackle the crisis” at Carillion, “prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope.” It called for the firms to be dismantled to break up the “cosy club” audit market. The ICAEW chief executive Michael Izza warned, “It’s a watershed moment. If we don’t fix this I don’t think we’ll have a profession in 20 years’ time.”

Maybe the last sentence is a little melodramatic but this has been a serious problem for some consiederable time. The relationships between supposed auditors and large corporations is unhealthy and works for their own ends and not those of clients, suppliers, employees and shareholders. Reform is now surely essential

One possible solution would be that which was ( and maybe still is) imposed in Spain whereby if i recall rightly,  no audit firm can audit the same client for more than four years on the trot.

 

 

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