Last year, the UK’s five largest banks agreed to lend £190 billion to UK businesses in 2011. By the end of the third quarter, they had lent £157.6 billion, which put them ahead of the target. However, only £56.1 billion of that was made available to SMEs, slightly below the small business lending target.

A British Bankers Association spokesman recently said that the Project Merlin banks are on course to meet their lending targets and their performance over the first three quarters shows that they are committed to helping businesses grow despite weak demand and the challenging economic environment.

On the other hand, FSB spokesman Andrew Cave, says lending conditions for small businesses have deteriorated since Project Merlin commenced. Lending has actually decreased whilst the cost of borrowing has gone up, he explained.

Chris Leslie, the shadow Treasury Minister, also pointed out that Project Merlin does not lay down conditions regarding the cost of small business loans. It’s fine to say the banks are offering loans, but not if they are so expensive companies cannot afford to take advantage of them.

In order to meet the small business lending target, the Project Merlin banks should have lent 19.9 billion to SMEs in the final quarter of last year. The Bank of England will be publishing figures later this month that will confirm whether or not this actually happened.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Banker Quotes Karl Marx by Vectorportal

What measures would umbrella company contractors like to see laid out in the Chancellor’s Autumn Statement?

The business community has compiled its “wishlist” ahead of George Osborne’s speech on November 29^th. Not surprisingly, credit easing features on this list, along with less bureaucracy, super-fast broadband and tax changes for R&D.

The Chancellor’s Autumn Statement outlines measures designed to stimulate our fragile economy and will come at the same time as the Office of Budget Responsibility releases its new economic forecasts.

Small businesses in particular will be hoping to see a bold, affordable and readily available initiative to enable them to access much needed credit. As the FSB points out, the smallest businesses get the worst deal when it comes to lending; they pay the highest rate of interest and are most at risk of refusal.

John Walker, the chairman of the FSB, explained that micro-businesses must be able to benefit from credit easing. However, because the high street banks already dominate the SME market, many firms are put off applying for finance simply because they expect to be refused.

The EEF agrees that measures must be taken to help companies obtain credit.  It points out that in order for the economy to grow, firms must be able to access the finance and skills necessary to help individual businesses expand.

The Forum of Private Business would like to see the Chancellor reduce the burden of employment law. The Forum claims its legal helpline has been bogged down with calls since new employment regulations came into force at the beginning of October.

A lot of businesses believe the best thing the Chancellor could do is reward companies that create job opportunities with a lower rate of tax. Entrepreneurs are the lifeblood of the UK economy, said Andy Raynor of RSM Tenon, and yet they are paying the highest level of taxes in 30 years.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Thinking RFID by @boetter

Umbrella company contractors may be concerned to learn that small business confidence collapsed in the third quarter, according to the Federation of Small Businesses.

The FSB runs a Voice of Small Business Index and after registering +0.3 at the end of Q2, it fell right back to -9.3 last quarter. As a result of such a dismal showing, the FSB has called on the government to make targeted cuts to VAT and extend the National Insurance holiday scheme for small businesses.

The national chairman of the FSB, John Walker, explained that it is hardly surprising that businesses are losing confidence when they are faced with rising costs and falling revenues. An unfortunate consequence is they have to lay off staff to compensate for the increased expenditure on overheads.

For the first time since the Index began, 5.8% more businesses think they are going to have to make staff redundant than hire them over the coming months. The government must take heed and develop a more robust growth plan, he continued.

Furthermore, for the first time confidence in all UK regions is now in negative territory and we urge George Osborne to carefully consider the NICs holiday proposal and implement this when he delivers his Autumn Statement on November 29^th. Unless measures such as this are implemented, there is a very real fear that the economic recovery will falter, Walker concluded.

Despite the drop in business confidence, most small businesses expect their condition to deteriorate only slightly over the coming 12 months.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: house of cards by olliethebstard

The Bank of England says that the quantitative easing programme that was rolled out after the credit crunch boosted the UK’s economy by 2%, adding weight to demands for the Bank to print more money.

During the QE programme between March 2009 and January the following year, the BoE bought assets valued at £200 billion, to help bolster the economy. This helped to increase GDP by between 1.5% and 2%.

Fears that the UK could slip back into recession have increased calls for a further programme of QE.

Interest rates cannot be lowered any further, so speculation is rising that the Bank will once again print more money. The downside of doing this is that inflation could rise, heaping more misery on already cash-strapped families.

The Bank says the first round of QE measures boosted growth, but points out that there may be different effects next time.

Adam Posen, a member of the BoE Monetary Policy Committee, has been voting for more QE, saying it is needed if we are going to avoid long-lasting damage to the economy.

Meanwhile, the FSB says the government is out of touch with reality when it comes to growing the economy.

The Federation says that very few of the coalition’s policies tackle the problems facing small firms. Reducing red tape and providing initiatives to encourage small businesses to take on staff are welcome, but the government still needs to do more.

Small businesses are facing some of the same challenges that they faced during the credit crisis. Uncertainty surrounding contracts, poor cash flow, the inability to access finance and the cost of credit are preventing them from hiring.

The FSB is calling on the government to extend both the work trials scheme and the NIC holiday for micro-businesses. It also suggests reducing VAT in the construction and tourism sectors to 5% on a temporary basis.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Belt. by Ollie Crafoord

The FSB has called on politicians to stop playing politics when it comes to the economic recovery and formulate a realistic plan to help small businesses grow.

Ed Balls, the Shadow Chancellor, has been vocal in his call for the 20p VAT rate to be reversed but the FSB thinks this would not be a sensible move and could actually harm the UK’s fragile economy.

The Federation thinks that rather than reversing the rate, the UK should do as some other EU countries have done and implement a temporary cut in VAT to 5% in the tourism and construction sectors for a period of 12 months.

Such a move would kick start growth, lead to the creation of more jobs and increase the amount of money the Treasury receives. The FSB believes this is a much better option than rushing through infrastructure projects costing £5 billion. The FSB also says Labour must develop more policies to bolster growth than just cutting VAT and that real talks must commence into ways of rebuilding and strengthening the economy.

John Walker, the FSB’s national chairman, said that unless we see a more aggressive, proactive approach to growth the economy is going to decline. The Federation agrees that action must be taken, but reversing the VAT increase is not the answer.

The UK has a very fragile economy at the moment and the political parties shouldn’t be kicking it around like a football at their party conferences. Instead, the parties should stop sparring and work together to deliver tangible growth policies.

Although business owners in the UK have little confidence in the national and world-wide economies, they are still confident about the prospects for their own company over the next six months. Only 25% of business owners think the coalition is doing enough to encourage growth and stimulate the economic recovery.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Scissor Kit by LollyKnit

Umbrella contractors may be interested to learn that the government recently disclosed the locations of the remaining 13 English Enterprise Zones that it hopes will help kick-start economic growth.

New zones will be set up in Cambridgeshire, Cheshire, Cornwall, Gosport, Hereford, the Humber Estuary, Kent, Leicestershire, Norfolk, Northampton, Oxfordshire, Suffolk and West Essex.

Businesses in Enterprise Zones will benefit from superfast broadband, cheaper business rates and less planning control.

Glenys Chatterley, the chair of the Mid and North West Essex branch of the FSB, said the West Essex zone would create a focal point for employment and business growth. She explained that more than 100 new firms will be attracted to the zone area and an extra 2,500 jobs will be created. She went on to say that she expected the West Essex zone would focus on health and medical technology companies.

The Cornwall zone will be based around Newquay and focus on the aerospace sector. The MD of Newquay Cornwall Airport, Al Titherington, said the zone was important to the entire economy of Cornwall and would enable companies to create high-value jobs.

However, Phil McCabe from the FPB pointed out that there was a similar scheme in the 1980s and that didn’t work because it simply relocated existing workers rather than adding new jobs.

David Cameron has said the present government is determined to make Britain the best place to start a business and Enterprise Zones are a key part of the plan. By reducing business taxes and easing the restrictions on planning, companies stand a better chance of being able to invest and expand. The government expects the Enterprise Zones will create an additional 30,000 jobs by 2015.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Circles – 52 Weeks Pix by kiwinz

The FSB claims that small businesses cannot start-up and grow with the present lending targets set by the government.

Although UK banks appear to be on course to meet their Project Merlin lending targets, this is not enough to genuinely help smaller businesses, the Federation says. Recent data shows that £37.4 billion has so far been lent to smaller businesses, £0.6 billion short of the Project Merlin target of £38 billion.

The banks must provide a total of £190 billion this year, of which £76 billion must go to smaller firms. So far gross new lending to UK firms has reached £100.4 billion.

John Walker, the FSB’s national chairman, said the targets are not addressing the underlying problem which is that a handful of banks have control over most of the market. With global financial fears, there should be a genuine attempt to help new businesses start-up and grow, rather than concentrating on meeting targets.

A recent survey by the FSB found that 20% of small businesses have tried to obtain finance over the past year and one-third of them had their application turned down.

Pernille Bruun-Jensen, the MD of Intuit UK, said that it was encouraging to see that UK banks are sticking to their Project Merlin targets but they must prioritise lending to small businesses for the remainder of this year. Furthermore, it will be interesting to see if specific measures to support small firms will be implemented after the Independent Commission on Banking gives its recommendations in September.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: targets by hans s

Chris Huhne, the energy secretary, has warned that the government must act now and update the National Grid, or face the prospect of blackouts within eight years.

Over the next forty years, demand for power could double, Huhne predicted and the existing market will be unable to cope with the unprecedented challenges. 25% of power stations are due to shut down and in order to replace them we need £110 billion worth of investment.

Huhne made his comments at the unveiling of the Electricity Market Reform White Paper and pointed out that everything comes at a price and we need to pay if we want to generate clean, reliable electricity.

He went on to point out that even without the investment in infrastructure, fuel bills will still rise due to increased wholesale costs and the price of carbon. It is therefore imperative that we implement plans to deliver cost-effective investment because the current electricity market cannot keep up to speed with our needs.

Alex Salmond, the Scottish First minister, welcomed many of Huhne’s proposals saying reform of the electricity market can help to realise the potential for generating clean energy in Scotland and ensuring the UK has a secure supply of power in the future.

Scotland is currently at the fore in the development of carbon capture and storage technologies as well as renewable energy generation. The multi-billion pound investments required to update the national grid will create thousands of employment opportunities and reindustrialise Scotland, he added.

The prospect of increased fuel bills has prompted the FSB to call on the government to implement safeguards to protect small businesses from escalating energy costs.

Recent research by the Federation showed that 81% of small businesses and limited company contractors are already worried about rising energy costs. For a long time, the FSB has been saying that micro-firms should be treated the same as domestic users when it comes to power consumption.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Lego Pancake Day 2 by jonathanb1989

It might come as no surprise to umbrella company contractors to learn that small businesses are losing faith in the UK’s banking system.

Research recently released by the British Banker’s Association shows that owners of small businesses are reluctant to visit their bank when they need finance. Figures show that 670,000 firms in the UK have needed a loan in the last 12 months but not apply for one. Furthermore 18% of business owners say they will only apply for funding in the next three months if the UK economy improves markedly.

The FPB claims the cost and hassle of preparing an application is a major deterrent and calls for moves to restore faith in UK banking institutions.

Alan Jackman, the senior policy adviser for the FPB, says this report clearly shows that small firms are experience a confidence crisis when it comes to the banking system in the UK. We need to see practical measures to restore people’s faith in the banks, but at the same time we also need to give alternative, innovative funders the opportunity to break the high street bank’s domination of the finance market.

Meanwhile, the FSB says it is the smallest businesses that suffer most from the lack of bank lending. John Walker, the Federation’s national chairman, said small firms are reluctant to approach the banks because they think they will be turned down, and even if they are granted a loan, it will be on terms that are not favourable.

He pointed out that the BBA’s survey clearly demonstrated that businesses with less than ten members of staff are most likely to be turned down when they first apply for a loan.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: happiness is a warm gun by badjonni

The FSB recently welcomed the news that unemployed dropped by 88,000 and that a similar number of people entered the workplace.

The vice-chairman of the Federation’s Peterborough branch, Amir Butt, said the increase in employment was good news but it is now important to continue the trend and encourage entrepreneurs to set up businesses and offer small firms incentives to increase their workforce.

Small businesses want to hire more staff and they would be willing to do so if only the government would reduce payroll costs. The coalition must put an extension of the National Insurance contributions holiday at the heart of its growth plans in order to continue reducing unemployment.

Chris Grayling, the employment minister, says more work still needs to be done. The latest figures are encouraging and its good news that employment is increasing. Compared to this time last year, there are now an additional half a million people working in the private sector, he pointed out.

He went on to say that unemployment among young people is now lower than when the coalition took up office.

The ONS data shows that public sector employment decreased by 24,000 in quarter one 2011. Local government departments shed 27,000 jobs whilst central government actually increased its workforce by 4,000. However, when you remove the temporary staff who worked on the 2011 census from the equation, public sector employment fell by 39,000 to 6.14 million.

According to the ONS report, regular salaries, excluding bonuses, have risen by 2% in the past 12 months, whilst total pay, including bonuses, rose by 1.8%.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: look downstairs into stairwell whirl by quapan

The small business sector is crucial to EU growth, according to Helena Walsh, the Brussels regional director for Cicero Consulting.

Ms Walsh said EU member states are looking to small businesses to help their respective economies grow out of the recession. She went on to stress that it is important to have venture capital available for small businesses but at the moment finance support indicators for this form of funding are very poor.

Small businesses continue to struggle as the banks have tightened up their lending criteria and fewer grants up for grabs. Walsh has now urged the respective EU governments to pass urgent reforms to increase small business lending. She did however warn business owners that they were unlikely to see any reforms in the near future.

Earlier this year, the UK government and the major banks agreed SME lending targets through Project Merlin, but the first quarter targets were not met.

Cicero Brussels recently launched a Green Paper entitled ‘Access to venture capital for SMEs’. The paper deals with issues such as allowing venture capital funds to operate across EU borders and reducing the burden of administration on fund managers.

In the UK it’s not only lack of finance that is holding SMEs back. A recent survey from the FSB found that a lot of small business owners say excessive red tape is their biggest obstacle to growth.

Everybody agrees that small business growth is vital to the economic recovery, so when will governments throughout the EU takes steps to ensure that they get the necessary finance to enable them to do so?

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: tiny foot by limaoscarjuliet

Freelancers, contractors and small business owners may want to make preparations so that they are not affected by public sector strikes.

On the 30th June, various unions with public sector members are planning strike action to protest against government cutbacks, salary freezes and pension reforms. One of the largest unions involved in this action is the Public and Commercial Services Union, which has a membership of 250,000 civil servants.

The unions hope that the government and the TUC can reach agreement before the end of June; otherwise three quarters of a million public servants will be involved in industrial action. A strike on such a grand scale could have a disastrous effect on businesses. Previous strike action by HMRC staff has not amounted to much more than extended lunch breaks. This new action however is expected to be lengthier and therefore more disruptive.

It’s not only HMRC that will be affected. Teachers could walk out leading to school closures, and transport and services will also be affected.

Andrew Cave from the FSB has warned that strike action could be counter-productive if staff cannot get transport to work and firms are unable to make deliveries.

David Frost believes industrial action will have an impact on confidence and could deter much needed inward investment.

The business secretary, Vince Cable, has pleaded with the unions not to organise mass strike action over the coming months but the TUC dismisses concerns that the strike will impact businesses. According to the TUC, the biggest effect will be people not getting to work on time.

Nevertheless, work-at-home contractors will no doubt be glad that it will not affect their ability to work!

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Closed by Jasoon