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PARLIAMENTARY SUPPORT FOR AN APR FOR SMES

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PARLIAMENTARY SUPPORT FOR AN APR FOR SMES

MPs have called for the Government to act to make it mandatory for providers to declare an Annual Percentage Rate (APR) on any finance they offer to SMEs. This change is required to bring much needed transparency to the commercial finance market.

An Early Day Motion calling for Government action was tabled in the House of Commons on Wednesday 11th May by Helen Goodman MP, a member of the influential Treasury Select Committee.

Helen Goodman MP commented: “I think it is important that lenders should have to give SMEs a transparent APR figure so that they can properly compare offers and drive a more competitive financial market. It is unfair that SMEs currently work under such a disadvantage. Now is the time to level the playing field and help our SMEs to succeed.”

The EDM has received cross party backing, including Conservative Julian Lewis who is part of the new 2015 intake and is a former financial journalist.

This motion adds further support to the APR4SMEs campaign which was started three months ago by alternative overdraft provider Growth Street, and is backed by the IoD and the Institute of Chartered Practicing Accountants among others, who are calling on all stakeholders to show their support for this critical issue that effects all British businesses.

At present, commercial finance offered to Limited companies in the UK falls outside the scope of the Financial Conduct Authority (FCA) and is therefore unregulated activity. There is therefore no requirement for commercial finance providers to disclose the Annual Percentage Rate (APR) of their products. This allows providers to employ opaque tariff charges, hide fees in complex terms and conditions, and make it difficult for firms to compare the cost of finance. As a result, SMEs are often misled and end up paying far more than they should, with a detrimental impact on profitability, growth and local employment.

The Early Day Motion tabled today directly addresses this issue:

“That this House acknowledges the value of small and medium sized businesses to the British economy; notes that SMEs often have difficulty in securing fair and transparent lending rates; and calls on the government to require lenders to provide an Annual Percentage Rate (APR) on any finance they offer so that SMEs can make informed choices.”

An investigation into SME banking by the Competition and Markets Authority (CMA) observed that:

“Prices are opaque and lending products are complex”, and concluded that “the generally bespoke nature of SME loan pricing…has meant that it is difficult to carry out an equivalent analysis of prices on SME lending products”.

James Sherwin-Smith, CEO of Growth Street, said: “We have been campaigning for some time to raise awareness of this issue which affects every UK small business seeking finance, and which constitutes the next UK financial scandal in the making unless it is addressed with urgency. We are delighted to have the public support of several MPs and other industry stakeholders.  Please visit http://apr4smes.co.uk to find out how you can support the campaign and help stand up for small businesses.”      

Andy Silvester, Head of Communications at the Institute of Directors (IOD), said: “Choosing how and where to access finance is one of the most important decisions that small businesses make, and it’s only right that entrepreneurs have access to all the information they need before making their choice. Openness and transparency is at the heart of all good business. Those that offer it will be rewarded.”

Tony Margaritelli, Chairman of the Institute of Chartered Practicing Accountants (ICPA), said: “Surely it is time that our business owners are provided with an APR for their business borrowings. Our small businesses deserve to be provided with this most vital piece of information at the outset and not have wade through obscure percentages and cost structures. If it is good enough for individuals it should be good enough for our businesses. Only with transparency of costs can a decision be made and this campaign will bring a layer of transparency that is presently missing.”

Victoria Raffé, former Director of Authorisations at the FCA and Growth Street Advisory Board member, said: “The lack of protection and transparency for Limited companies seeking finance within the current regulatory regime is a real concern – government and others must consider the potential detrimental impact this has on SMEs.”

Claire Spencer-Churchill, joint MD at fashion SME Claret Showroom, said: “When we were considering the various finance options for our business, at first glance there were some tempting headline rates. But when we dug further into the terms and conditions and added up all the charges, the overall price was actually going to be much higher. We were lucky to avoid signing up to a contract that would have cost us a lot more. SMEs desperately need an APR metric that compares the cost of finance, to expose the true cost of finance and ensure other businesses aren’t lured into a trap of paying more than they should.”

Justin Fairhall, Founder and Managing Director of Cambridge based SME, Lunchtime Company Ltd., which provides healthy school dinners for children, comments: “It should be of considerable concern to all business’ that APR is not a legal requirement in the commercial world. It’s worrying that if I personally borrow from a bank, they have to tell me the APR, but if I borrow as a business, they’re under no such obligation.”

Supporters can sign a petition on the campaign website supporting the call for SME finance products to carry a mandatory APR, and the website also includes an APR calculator tool which exposes the true cost of commercial finance for small businesses.

Growth Street urges all SMEs and anyone who supports them, to show their support for the campaign by using the #APR4SMEs hashtag on social media to promote this cause.

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Foxconn chairman says expects “limited impact” from chip shortage on clients

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Foxconn chairman says expects "limited impact" from chip shortage on clients 1

TAIPEI (Reuters) – The chairman of Apple Inc supplier Foxconn said on Saturday he expects his company and its clients will face only “limited impact” from a chip shortage that has rattled the global automotive and semiconductor industries.

“Since most of the customers we serve are large customers, they all have proper precautionary planning,” said Liu Young-way, chairman of the manufacturing conglomerate formally known as Hon Hai Precision Industry Co Ltd

“Therefore, the impact on these large customers is there, but limited,” he told reporters.

Liu said he expected the company to do well in the first half of 2021, “especially as the pandemic is easing and demand is still being sustained.”

The global spread of COVID-19 has increased demand for laptops, gaming consoles, and other electronics. This caused chip manufacturers to reallocate capacity away from the automotive sector, which was expecting a steep downturn.

Now, car manufacturers such as Volkswagen AG, General Motors Co and Ford Motor Co have cut output as chip capacity has shrunk.

Counterpoint Research says the shortage has extended to the smartphone sector, with application processors, display driver chips, and power management chips all facing a crunch.

However, the research firm predicts Apple will face a minimal impact, due to its large size and its suppliers’ tendency to prioritise it. Apple is Foxconn’s largest customer.

Foxconn is looking at other areas for growth, including in electric vehicles (EVs), and Liu said their EV development platform MIH now had 736 partner companies participating.

He expected it would have two or three models to show by the fourth quarter, though did not expect EVs to make an obvious contribution to company earnings until 2023.

Liu also said the company was still looking for semiconductor fab purchase opportunities in Southeast Asia after not winning a bid to take over a stake in Malaysia-based 8-inch foundry house Silterra.

(Reporting by Ben Blanchard and Jeanny Kao; Writing by Josh Horwitz; Editing by William Mallard and Ana Nicolaci da Costa)

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EU seeks alliance with U.S. on climate change, tech rules

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EU seeks alliance with U.S. on climate change, tech rules 2

By Sabine Siebold and Kate Abnett

BERLIN (Reuters) – Europe and the United States should join forces in the fight against climate change and agree on a new framework for the digital market, limiting the power of big tech companies, European Union chief executive Ursula von der Leyen said.

“I am sure: A shared transatlantic commitment to a net-zero emissions pathway by 2050 would make climate neutrality a new global benchmark,” the president of the European Commission said in a speech at the virtual Munich Security Conference on Friday.

“Together, we could create a digital economy rulebook that is valid worldwide: a set of rules based on our values, human rights and pluralism, inclusion and the protection of privacy.”

The EU has pledged to cut its net greenhouse gas emissions to zero by 2050, while President Joe Biden has committed the United States to become a “net zero economy” by 2050.

Scientists say the world must reach net zero emissions by 2050 to limit global temperature increases to 1.5 degrees above pre-industrial times and avert the most catastrophic impacts of climate change.

The hope is that a transatlantic alliance could help persuade large emitters who have yet to commit to this timeline – including China, which is aiming for carbon neutrality by 2060, and India.

“The United States is our natural partner for global leadership on climate change,” von der Leyen said.

She called the Jan. 6 storming of the U.S. Capitol a turning point for the discussion on the impact social media has on democracies.

“Of course, imposing democratic limits on the uncontrolled power of big tech companies alone will not stop political violence,” von der Leyen said. “But it is an important step.”

She was referring to a draft set of rules unveiled in December which aims to rein in tech companies that control troves of data and online platforms relied on by thousands of companies and millions of Europeans for work and social interactions.

They show the European Commission’s frustration with its antitrust cases against the tech giants, notably Alphabet Inc’s Google, which critics say have not addressed the problem.

But they also risk inflaming tensions with Washington, already irked by Brussels’ attempts to tax U.S. tech firms more.

Von der Leyen said Facebook’s decision on a news blackout on Thursday in response to a forthcoming Australian law requiring it and Google to share revenue from news underscored the importance of a global approach to dealing with tech giants.

(Additional reporting by Foo Yun Chee; editing by Robin Emmott and Nick Macfie; editing by Jonathan Oatis)

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Packaged food giants push direct online sales to gauge consumer tastes

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Packaged food giants push direct online sales to gauge consumer tastes 3

By Siddharth Cavale and Nivedita Balu

(Reuters) – Packaged food giants including Kraft Heinz, General Mills and Kellogg are pushing sales of their products to consumers directly via their own online channels, in a quest to gather more data about shoppers’ purchasing habits.

Velveeta-cheese maker Kraft Heinz saw its e-commerce sales double in 2020, now representing more than 5% of its global sales, Chief Executive Miguel Patricio said at the virtual Consumer Analyst Group of New York (CAGNY) conference this week.

The company sells Heinz baked beans and tomato soup by subscription or in bundles directly to consumers on a “Heinz To Home” website in the United Kingdom, Australia and Europe.

Sales on the site are “giving us valuable insights into consumer behavior, enabling us to quickly test and learn from innovations,” Kraft’s head of international business, Rafael de Oliveira, said at the conference.

Kraft would continue to use the site as a channel to generate strong sales in developed markets, he said.

The company also counts sales of its products through marketplaces such as on Amazon.com and Walmart.com as part of its e-commerce sales.

U.S. shoppers spent on average $1,271 buying groceries online last year, 45% more than they did in 2019 as the pandemic spurred shopping online, according to market research firm Earnest Research. In contrast, the average dollars spent in stores rose only about 7% to $3,849.

PepsiCo sells products including Doritos, Quaker oats and Gatorade directly to consumers through two websites, pantryshop.com and snacks.com, both launched in 2020.

Chief Financial Officer Hugh Johnston said that more than 45% of the company’s capital investments over the next few years would be dedicated toward manufacturing capacity, automation, and a “ramping up of investments in our e-commerce channel.”

As major online retailers including Amazon.com and Walmart.com continue to gather valuable data on shoppers, many packaged food manufacturers are keen to gather their own data on shoppers, too.

“COVID (has) simply accelerated our digital growth and has provided us with yet another source of data and insight,” Monica McGurk, chief growth officer at breakfast cereal maker Kellogg Co., told the conference.

Kellogg, producer of Corn Flakes as well as Pringles chips, said on Wednesday it had launched a direct-to-consumer website focused on digestive wellness. The group plans to sell its new Mwell Microbiome Powder for gut health via the site to gather data on customer interest before it launches the product more widely.

E-commerce sales have doubled in the past year and now represent about 8.5% of the group’s $13.77 billion in annual sales, Kellogg said.

Pillsbury dough-maker General Mills also sees the benefits of tracking consumer habits more closely.

“We’re aggressively investing in data and analytics. We are gathering unparalleled insights from the first-party data we collect through our brand websites,” General Mills’ Chief Executive Jeffrey Harmening said at the conference.

On its Bettycrocker.com website, General Mills provides hundreds of recipes using Betty Crocker cake mixes and frosting. The site leads people to the closest store or an online retailer where they can purchase the products, thereby generating data for General Mills on what a particular customer from a certain zip code is buying. The company does not sell the food products directly on its website.

Consumers, however, may have to shell out more if they shop directly from brand websites.

Prices on the two PepsiCo sites, for example, were generally higher than those on Walmart.com or Amazon.com, Reuters checks show. On Walmart.com, for example, a 10 oz pack of Doritos Nacho Cheese was on sale for $2.50 compared to $4.29 on Pepsico’s website.

Kraft Heinz offers tins of soup, beans, pasta and baby food bundled into packs ranging from six to 25 items and costing between 10 and 20 pounds ($14.01-$28.03) on its UK website. It told Reuters the relatively higher prices of items and bundling of packs than on some other online marketplaces was to be able to eke out a margin after including delivery costs.

“Longer term, we see real value in this channel to be an insight and data channel for us,” Jean-Philippe Nier, head of e-commerce for Kraft Heinz’s business in the UK and Ireland, told Reuters. People are more prepared to order directly from manufacturers than they were before. The time is now.”

Graphic: Direct online sales to cross $20 billion in 2021 – https://graphics.reuters.com/PACKAGEDFOODS-ECOMMERCE/rlgpdexngvo/chart.png

($1 = 0.7137 pounds)

(Reporting by Siddharth Cavale and Nivedita Balu in Bengaluru; Editing by Vanessa O’Connell and Susan Fenton)

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