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SMES AND THE BANKS – AN UNCOMFORTABLE LIAISON

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Mike Smith

I have been advising large, medium and small businesses for over thirty four years, especially when they have faced financial trouble. In my experience there has never been a time when the image of banking was worse than it is at present.

In short, I believe the banks can improve their image given time, but they must change to reflect the times that we live in now. So, when focusing around SMEs that face insolvency, what can the banks do to improve the perception of the banking sector’s relationship with these businesses?

Mike Smith

Mike Smith

Businesses fail for a variety of reasons, but in my experience the most common reasons are due to a lack of knowledge and experience. What a perfect opportunity for the banks to improve their image by getting back to their roots and helping local business. How? Providing local know-how and experience which used to be a given when you spoke to a bank manager in the past.

This may never have been in the old fashioned ‘managers’ job description, but I regarded my first bank manager with a great deal of affection and respect. He was extremely knowledgeable about business and would point me to this book or that seminar, or had an answer to all my questions.

Over the last twenty years I have dealt with dozens of relationship managers and I couldn’t tell you the name of one of them. It was clear that they were only interested in selling a product. I couldn’t even tell you what they have done for me following our many ‘snatched’ conversations. Some may think this is not the bank’s role, but I see this as a lost opportunity for the bankers. What better way to safeguard their investment?

The issues arising from the Tomlinson review undoubtedly will change the way the banks interact with SMEs. If they don’t, they will be replaced by alternative lenders who are currently gaining ground with the government, whilst the banks are losing favour. If the perception that banks are not trustworthy institutions persists, the government may divert funds and underwrite to more trusted sources.

One question that almost certainly arises every time I am involved in a banking receivership/administration or liquidation prompted by a bank is the issue of professional insolvency fees. Of course the bank has to protect its interests but why choose from the same insolvency practitioners every time. Some of the fees I have seen are enormous in comparison to the size of the debts and lack complexity. By suggesting local insolvency practitioners, not only would it boost the bank’s credibility, by providing a service from their own community. I believe applying something along the lines of the Insolvency Services rota system would help the banking image on a number of fronts.

These fees are particularly galling to hard pressed directors when the same liquidator and or bank may be pursuing the director for the family home via bankruptcy action. This is particularly the case when there should be more than sufficient funds in the debtor book to clear company debts and consequent personal guarantees.

Unfortunately, the secured nature of the bank lending affords them the right to appoint their own administrator over the director’s choice. This often leads to the debtor book collection being completed in a more casual manner than the director would have done had they been allowed to control it. Clearly they are the ones who have the relationship with the debtors, and they are the ones at risk. So why haven’t they got the right to protect themselves?

I understand the legalities and insolvency rules but we are talking about people’s lives and families and sadly the majority of directors in these circumstances end up divorced. Far too often directors are judged as being ‘guilty’ of something and they are often accused of being evasive and deliberately obtuse.

As Business Rescue Consultants our company’s motto is ‘your protection is our priority’; and I make no apology for that. My own experience is that the majority of company directors are very hard working individuals who are unable to think clearly due to lack of sleep; likely to have contemplated suicide over the previous few weeks; probably suffering from severe depression; family relationships strained; and completely confused by the huge legal juggernaut that has taken all control away from them. In these circumstances, anyone may appear evasive and confused.

Banking should get back to its roots and offer a service via  managers who are trusted business advisers not salespeople. Only then will their reputation be restored and both the banks and business customers will benefit.

Mike Smith is Director of Jameson Smith & Co a business debt specialist. Mike provides business turnaround and insolvency advice and solutions to UK directors and accountants.

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Sunak to raise business tax to pay for COVID-19 support – The Sunday Times

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Sunak to raise business tax to pay for COVID-19 support - The Sunday Times 1

(Reuters) – British finance minister Rishi Sunak is set to increase a tax on business to pay for an extension to COVID-19 support schemes in the budget next month, The Sunday Times reported https://bit.ly/3ujaBcU.

Sunak, in his speech on March 3, will announce he is increasing corporation tax from 19 pence in the pound and will outline a pathway where it rises to 23 pence in the pound by the time of the next general election, the report said. The move will raise an expected 12 billion pounds ($16.8 billion) a year, the report added.

According to the report, at least 1 pence is set to be added to the bill for business from this autumn, at a cost to business of 3 billion pounds, with further rises in subsequent years.

Allies of Sunak clarified he would not increase corporation tax higher than 23%.

These measures will be helpful in paying for an extension to the furlough scheme, VAT cuts and business support loans until at least August.

Unlike the 2010 Conservative-led government, which pursued spending cuts to rebalance the economy after the global financial crisis, Sunak is expected to defer most of the toughest decisions about how to pay for that support in his budget speech.

“The corporation tax hike will be higher than expected and the extension of the support schemes will be longer than most people expect,” the newspaper quoted a source as saying.

Insiders indicated the stamp duty holiday on property purchases would also be extended in line with the other coronavirus support measures, the report said.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

($1 = 0.7136 pounds)

 

(Reporting by Vishal Vivek in Bengaluru; Editing by Lincoln Feast.)

 

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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 2

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 3

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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