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SME owners need a year’s financial buffer to feel safe: despite existing debts

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SME owners need a year’s financial buffer to feel safe: despite existing debts

With interest rates expected to rise during 2018, over four in 10 admit to having no such backup and average monthly debts of £3.6k   

Nearly a third (28%) of small business owners don’t feel financially confident unless they have a buffer big enough to cover running costs for a year, according to new research* from merchant services provider Paymentsense (https://www.paymentsense.co.uk). The study found that despite this, more than four in 10 small business owners (41%) admit to having no such buffer in place, meaning as many as 2.3m UK small businesses may have no financial backup plan.

This ‘financial confidence gap’ between what business owners need to feel secure, and what they actually have, comes after the British Business Bank published a report revealing that small business confidence and demand for finance are declining.

The government-owned development agency found the proportion of businesses confident of loan approval fell recently from 58% to 43%. The report also highlighted that lending was flat to small businesses in 2017.** These findings arrive at a time of uncertainty over European trade negotiation outcomes, and reports of an expected medium-term interest rate increase.

For those businesses that do have something in reserve, Paymentsense found that the most popular backup is cash savings – held by nearly six in 10 (59%) of prepared businesses. A third (34%) said their buffer included property and nearly a quarter listed an overdraft (23%). Plant and machinery featured for a fifth (20%), with 17% using business credit cards.

Michael Foote, who founded UK price comparison site Quote Goat (https://www.quotegoat.com) in 2015, said: “As a small business owner, feeling financially secure has always been one of my top priorities. For me, this means ensuring I have a cash buffer that covers company costs for at least half a year, to safeguard against potential cash flow problems.

“Initially it was difficult to build and meant taking the bare minimum out of the business whilst it grew. However, it’s let me focus my efforts elsewhere in the business, enabling Quote Goat to successfully compete against larger competitors in the industry.”

The Paymentsense study also found that almost two thirds (61%) of SME owners are in debt, with monthly repayments averaging almost £3,600 (£3,589). What’s more, over half (55%) admit to deliberately paying suppliers and partners late to ease cash flow problems. More than a fifth (21%) said they do this at least once a month.

Guy Moreve, head of marketing at Paymentsense, comments: “We know that feeling financially confident is critical for small business owners. Aside from helping you sleep at night, it enables accurate long-term fiscal planning for growth rather than just survival. Having a buffer is just part of the picture. Cash flow monitoring and proactive credit control are also essential. However, we’d caution against routinely delaying invoices to partners and suppliers, as it risks damaging important business relationships.

Working with over 60,000 small businesses across the UK, we understand their financial anxieties. Despite recent drops in the rate of inflation, a future increase may lead consumers to become more cautious with their purchases, and would make existing business loans more expensive to manage for SMEs. With this in mind, having a buffer makes great business sense. Actively setting aside a little each month will help balance slower trading periods, and unforeseen expenses. Even something as simple as a weekly cash flow report can provide insights that will enable you avoid future problems.”

The most popular financial buffer

Cash Savings 59%
Property 34%
Overdraft 23%
Plant / machinery / equipment 20%
Business Credit Cards 17%
Asset-based lending / factoring/ invoice finance 16%
Bank Loans 14%
Stocks and investments 13%
Help from family and friends 8%
Government funding scheme 8%

* Commissioned research took place in January 2018 amongst a nationally representative sample of 504 small business owners.

**Comparing the three months to August 2017 with the three months to November 2017. https://www.ft.com/content/9c5b9b56-1599-11e8-9e9c-25c814761640

Reference for inflation levels:

http://uk.businessinsider.com/uk-inflation-rate-in-february-brexit-2018-3

British Business Bank: Small Business Finance Markets Report 2018

https://british-business-bank.co.uk/research/small-business-finance-markets-report-2018/

Research source:

https://www.paymentsense.co.uk/blog/smes-financial-buffer-research/

Further reading:

A guide on how to cut down business costs:

https://www.paymentsense.co.uk/blog/16-ways-to-cut-business-costs/

Headshots of Michael Foote available here:

https://www.dropbox.com/sh/5lx7ynh5p7e6wm8/AACaUC4vSx4xNh9O4KVFLQ3ka?dl=0

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Australia says no further Facebook, Google amendments as final vote nears

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Australia says no further Facebook, Google amendments as final vote nears 1

By Colin Packham

CANBERRA (Reuters) – Australia will not alter legislation that would make Facebook and Alphabet Inc’s Google pay news outlets for content, a senior lawmaker said on Monday, as Canberra neared a final vote on whether to pass the bill into law.

Australia and the tech giants have been in a stand-off over the legislation widely seen as setting a global precedent.

Other countries including Canada and Britain have already expressed interest in taking some sort of similar action.

Facebook has protested the laws. Last week it blocked all news content and several state government and emergency department accounts, in a jolt to the global news industry, which has already seen its business model upended by the titans of the technological revolution.

Talks between Australia and Facebook over the weekend yielded no breakthrough.

As Australia’s senate began debating the legislation, the country’s most senior lawmaker in the upper house said there would be no further amendments.

“The bill as it stands … meets the right balance,” Simon Birmingham, Australia’s Minister for Finance, told Australian Broadcasting Corp Radio.

The bill in its present form ensures “Australian-generated news content by Australian-generated news organisations can and should be paid for and done so in a fair and legitimate way”.

The laws would give the government the right to appoint an arbitrator to set content licencing fees if private negotiations fail.

While both Google and Facebook have campaigned against the laws, Google last week inked deals with top Australian outlets, including a global deal with Rupert Murdoch’s News Corp.

“There’s no reason Facebook can’t do and achieve what Google already has,” Birmingham added.

A Facebook representative declined to comment on Monday on the legislation, which passed the lower house last week and has majority support in the Senate.

A final vote after the so-called third reading of the bill is expected on Tuesday.

Lobby group DIGI, which represents Facebook, Google and other online platforms like Twitter Inc, meanwhile said on Monday that its members had agreed to adopt an industry-wide code of practice to reduce the spread of misinformation online.

Under the voluntary code, they commit to identifying and stopping unidentified accounts, or “bots”, disseminating content; informing users of the origins of content; and publishing an annual transparency report, among other measures.

(Reporting by Byron Kaye and Colin Packham; Editing by Sam Holmes and Hugh Lawson)

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GSK and Sanofi start with new COVID-19 vaccine study after setback

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GSK and Sanofi start with new COVID-19 vaccine study after setback 2

By Pushkala Aripaka and Matthias Blamont

(Reuters) – GlaxoSmithKline and Sanofi on Monday said they had started a new clinical trial of their protein-based COVID-19 vaccine candidate, reviving their efforts against the pandemic after a setback in December delayed the shot’s launch.

The British and French drugmakers aim to reach final testing in the second quarter, and if the results are conclusive, hope to see the vaccine approved by the fourth quarter after having initially targeted the first half of this year.

In December, the two groups stunned investors when they said their vaccine would be delayed towards the end of 2021 after clinical trials showed an insufficient immune response in older people.

Disappointing results were probably caused by an inadequate concentration of the antigen used in the vaccine, Sanofi and GSK said, adding that Sanofi has also started work against new coronavirus variants to help plan their next steps.

Global coronavirus infections have exceeded 110 million as highly transmissible variants of the virus are prompting vaccine developers and governments to tweak their testing and immunisation strategies.

GSK and Sanofi’s vaccine candidate uses the same recombinant protein-based technology as one of Sanofi’s seasonal influenza vaccines. It will be coupled with an adjuvant, a substance that acts as a booster to the shot, made by GSK.

“Over the past few weeks, our teams have worked to refine the antigen formulation of our recombinant-protein vaccine,” Thomas Triomphe, executive vice president and head of Sanofi Pasteur, said in a statement.

The new mid-stage trial will evaluate the safety, tolerability and immune response of the vaccine in 720 healthy adults across the United States, Honduras and Panama and test two injections given 21 days apart.

Sanofi and GSK have secured deals to supply their vaccine to the European Union, Britain, Canada and the United States. It also plans to provide shots to the World Health Organization’s COVAX programme.

To appease critics after the delay, Sanofi said earlier this year it had agreed to fill and pack millions of doses of the Pfizer/BioNTech vaccine from July.

Sanofi is also working with Translate Bio on another COVID-19 vaccine candidate based on mRNA technology.

(Reporting by Pushkala Aripaka in Bengaluru and Matthias Blamont in Paris; editing by Jason Neely and Barbara Lewis)

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Don’t ignore “lockdown fatigue”, UK watchdog tells finance bosses

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Don't ignore "lockdown fatigue", UK watchdog tells finance bosses 3

By Huw Jones

LONDON (Reuters) – Staff at financial firms in Britain are suffering from “lockdown fatigue” and their bosses are not always making sure all employees can speak up freely about their problems, the Financial Conduct Authority said on Monday.

Many staff at financial companies have been working from home since Britain went into its first lockdown in March last year to fight the COVID-19 pandemic.

One year on, the challenges have evolved from adapting to working remotely to dealing with mental health issues, said David Blunt, the FCA’s head of conduct specialists.

“During this third lockdown, there has been a greater impact on mental well-being, with many people struggling with job security, caring responsibilities, home schooling, bereavements and lockdown fatigue.”

Bosses should continually revisit how they lead remote teams, he said.

“The impact of COVID-19 is creating a huge workload for those considered to be high performers, while the remote environment potentially makes it much more challenging for those who were previously considered low performers to change that perception,” Blunt told a City & Financial online event.

Companies should consider “psychological safety” or ensuring that all employees feel confident about speaking out and challenging opinions.

“We’ve heard varying reports of how successful this has been,” Blunt said.

Pressures in the financial sector were highlighted this month when accountants KPMG said its UK chairman Bill Michael had stepped aside during a probe into comments he made to staff.

The Financial Times said Michael, who later apologised for his comments, had told staff to “stop moaning” about the impact of the pandemic on their work lives.

Blunt was speaking as the FCA next month completes the full rollout of rules that force senior managers at financial firms to be personally accountable for their decisions to improve conduct standards.

There have only been a “modest” number of breaches reported to regulators so far as firms worry about being “tainted” but more cases will become public as sanctions are revealed, Blunt said.

“Regulators won’t be impressed by lowballing the figures.”

(Reporting by Huw Jones; Editing by Mark Heinrich)

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