Tag: paul richardson


The UK is the best place in Europe to start a business

As the UK economy has gradually recovered from the effects of the pandemic there has been the usual mixture of good and bad news. The glass could be half full, with the UK growing at the fastest rate of G20 countries, or half-empty, with worker shortages threatening to derail the recovery, both being headlines within five minutes of each other. 

But at the end of August there was one piece of undisputed good news. City AM reported that the UK had been named as the best country in Europe to start a business. The study, carried out by e-money platform Tide, also found that the UK had the lowest costs for starting a business. 

The study considered a number of factors, including the jobless rate, the ease of doing business and the number of days required to set up a business, with Ireland coming second in the rankings, ahead of Holland and Denmark. Germany, Italy and Spain didn’t feature in the top ten. 

You may have heard about the record numbers of people who set up their own business during the pandemic. A significant proportion of these will be younger entrepreneurs and another report in City AM, published earlier in the month, gave even more cause for optimism. The headline on the article based on a report published by AXA was very simple. “SMEs with young business owners saw stronger performance in the pandemic.” 

In 2020 companies run by decision makers aged between 55 and 64 saw turnover reduce by 29%. Companies run by 45 to 54 year olds didn’t fare much better. SMEs run by people between 25 and 34 saw turnover fall by just 12%. But for companies run by 18 to 24 year olds the drop in turnover was just 7%. 

For Claudio Gienal, CEO of AXA, the conclusion was obvious. “The report finds that younger entrepreneurs have brought out new services and products, listened to the needs of local clients and been faster to deploy digital solutions.” 

According to statistics from the Federation of Small Business (FSB) there were 5.94m small businesses with up to forty nine employees in the UK at the start of 2020. This made up 99.3% of total businesses in the UK with 13.3m people employed and a turnover of £1.6tn, equal to 36% of the turnover of the private sector. 

As more and more people, especially young people, decide that running their own business will give them the work/life balance they want post-pandemic, any news that is good for small businesses and business start-ups is going to be good for the overall UK economy. 

The UK economy grew at the fastest rate of all the G20 countries in the second quarter of the year, with the OECD reporting growth of 4.8%. Making the UK an attractive place to start and build a business can only consolidate that economic growth which, in the long run, will benefit us all.


Is the US recovery about to stall?

“When the US sneezes the world catches a cold.” Most of us have heard that expression, meaning that the US economy is the principal driver of global trade and economic growth. 

Clearly China in particular and the Far East in general may now dispute that claim, but the fact remains that what happens in the US does impact growth and jobs around much of the world, especially in Europe. 

So as the world recovers from the pandemic, should we be worried about conflicting economic indicators coming out of the US? Is the recovery there about to stall? Or is this just a minor bump in the road ahead? 

To start with the bad news, consumer spending, the most significant component of US Gross Domestic Product (GDP), could be showing signs of slowing down. July retail sales which include both online and offline were down 1.1% on the previous month, led by a decline in car sales. 

Hand in hand with this went a decline in consumer confidence, as US consumer confidence in August dropped to its lowest level since February. One US official commented, “Concerns about the Delta variant [and] rising gas and food prices resulted in a less favourable view of current economic conditions and short term growth prospects.” Or, as most people would say, US consumers were worried…

Most worryingly of all, perhaps, the private sector of the US economy added just 374,000 jobs in August, well below the expected figure of 613,000. There was, though, some good news coming out of the US. The manufacturing sector strengthened, largely driven by an increase in new orders. The Purchasing Managers’ Index rose from 59.5 in July to 59.9 in August. The housing sector remained strong, with one index measuring US house prices showing a 19.1% annual increase in June 2021. 

…And remember those retail sales that fell in July? In August they were up, albeit by only 0.7%. 

The simple fact is that the picture from the US,  like so many countries, is mixed. Some sectors are doing well, some are doing badly and that is quite likely to change on a month-to-month basis. There are also other, external factors at work. Sales of cars and auto parts were down by 4.5% in August, but that was caused as much by a shortage of computer chips as it was by any unwillingness to buy on the part of the American consumer. 

So is the US recovery about to stall? The simple answer is that the recovery from the pandemic will not be smooth. Different countries will recover at different rates and likewise different economic sectors within individual countries. The US is no different although, very clearly, what happens in the US will continue to affect other economies, especially those in the West. 

We should also make one final, important point. All the figures were correct at the time of writing: clearly, in today’s fast-moving, interconnected world, they may have been updated by the time you read the article. Does that make the comments above invalid? Far from it, it simply emphasises that financial planning is a journey.


What does ‘confidence ‘ mean when talking business? And why does it matter?

Confidence: we’re not talking here about standing up to make a speech, rather about business confidence and consumer confidence. Over the last two years we’ve heard the terms a lot, as confidence plunged when the first lockdown was announced and then rose again as the vaccine roll-out began. 

But what is confidence? And why does it matter? 

If we look at business confidence first, a good example, and one that is often quoted on the financial pages, is the Purchasing Managers’ Index (PMI). So what is it? And how does it work? 

The PMI is a measure of business confidence, showing whether business expects the economy and prevailing business conditions to be favourable or unfavourable. 

The PMI is based on a monthly survey sent to senior executives across a broad spread of industries and asks questions about new orders, inventory levels, production, deliveries and employment. The ‘headline’ number, the one you will often see quoted, can be anywhere between 0 and 100. In ‘normal times’ it hovers around 50, with any figure above indicating that business is confident about the future, whilst a figure below 50 suggests the opposite. 

To give you an example of the PMI in action, last April the PMI in the Eurozone crashed to 13.5 as the economic impact of the pandemic became apparent. The UK fared even worse, with the PMI falling to a record low of 12.3 in the services sector. Twelve months later, with the vaccine rollout gathering pace, the PMI for the UK had risen to 61.0. 

As noted in the above example, you may also see PMI figures quoted for different sectors of the economy, such as manufacturing and services. 

Consumer confidence has a similar numerical value, although that is expressed in plus or minus terms. In April the Consumer Confidence Index rose to minus 15, up from minus 16 in March. Although negative, that was the highest figure since March of last year, with the Index having been as low as minus 34 in May 2020. 

Why is confidence important? When consumers feel confident they are more likely to spend and more likely to borrow, both of which are likely to boost the economy. A very simple example is home improvements: we are unlikely to spend the money on a new bathroom, which would benefitting the bathroom supplier and the plumber, unless we feel confident about our future prospects and employment. The search for confidence, or at least, stability, is almost certainly the reason so many people have left the hospitality sector during the last year (with many outlets now struggling to find staff to re-open).

Similarly, when businesses feel confident they will invest in both equipment and new members of staff. 

Clearly any potential new variants of the virus would dent confidence again: that is one of the reasons why the Government is so keen to avoid any further lockdowns. It needs to rebuild not just the economy, but our confidence in the economy. Perhaps then we will start to spend the billions of pounds that we, as consumers, have saved over the past year.


“Flexible” careers will increase the need for financial planning

In days gone by, life was relatively simple. You left school or university, you found a job and barring moving away or your employer going bust you stayed with that employer until you retired. 

Today, and especially after the pandemic, that situation has changed significantly. Employees want flexibility, they want the ability to work from home, they want an employer that understands their work/life balance, and one that shares their ethical values. Job security, and the prospect of thirty or more years with one employer, seems to be low on the list of what employees want. 

It is a well-documented fact that millennials – those people who came of age around the turn of the century – will make up 75% of the global workforce by the middle of this decade. They want to work for employers that foster innovative thinking, develop their skills and make a contribution to society. 

But do they want a career? 

According to a study by Aviva, 47% of employees are now less career-focused following the pandemic, with two in five people claiming “they could never switch off” from work. 

24% of women said the pandemic had had a negative impact on their work/life balance as they tried to juggle work, a home, a family and a relationship – compared to just 16% of men. 

Inevitably the impact of technology means that it will become harder to separate work and home life, especially if you work at home and the “office” is only a roll out of bed away. A few years ago France introduced a “right to disconnect ” – a law stipulating that companies with more than 50 employees establish hours when staff should not send or answer emails in a bid to prevent burnout and set a clear barrier between work and home life. We can suspect it won’t be the last country to take such action. 

While a desire for flexibility, home working and career breaks is understandable it does, however, pose some financial planning questions. People will still need mortgages – which are clearly more difficult to obtain without a consistent employment history. People will still need to plan for their retirement which, again, becomes more difficult with career breaks and frequent changes of employer. 

Throw in savings and investments and it becomes clear that while the workforce of the future may want flexibility and everything that goes with it, what it will most emphatically need is consistent, long-term financial planning from experienced advisers. 


The rise and rise of the subscription economy

You may use it for beer or bread, for razor blades, watching films or even for the simple act of reading books on Amazon. The subscription economy is something that has taken a hold on a large and growing portion of the population. It used to be said that Britain was a nation of shopkeepers. Have we since become a nation of subscribers? 

In case you have not heard the term, what is the subscription economy? Simply put, it is the network of consumers paying a fixed monthly price for a product they know they are going to keep using. If you know you are going to keep shaving, or you know that you are going to keep watching films and reading books, then why not pay a simple monthly subscription that takes care of our needs? It sounds easier than buying the razor blades or the individual films or books as and when you need them.

Unsurprisingly, with so many people stuck at home over the last eighteen months, the subscription economy has boomed. The latest research from Barclaycard showed that it grew by almost 40% in the UK last year, and is now worth a whopping £323m per annum. 

The research throws up some other interesting facts: 

  • Almost two-thirds (65%) of UK homes are currently signed up to a subscription service, with an average of seven subscriptions per household
  • The average spend per individual is £46 per month. Men, averaging at £57 per month, spend more than women, who on average spend £35 per month. 

Clearly statistics like this represent a big potential market, and a challenge, for retailers. In fact, one in ten retailers launched some form of subscription service during lockdown, and one in five say they will continue to develop their subscription service despite the easing of lockdown. 

Amazon boss Jeff Bezos has dubbed the new, subscription focussed consumer the “divinely discontent customer.” Companies and brands now need to do more than just meet demand. According to Bezos, if they are going to keep their subscribers, they need to anticipate and shape demand as much as respond to it. 

Will the subscription economy continue to grow? It seems inevitable, and the UK subscription economy is a fraction of that worldwide, which has grown 435% in just nine years, with some commentators dubbing it “the end of ownership.” 

There appears to be growing consumer preference for subscribing over ownership. 71% of international consumers currently have a subscription service and 75% believe that in the future people will own less physical products.

And why not? The subscription economy is more than just boring old razor blades. You can get cat litter on subscription, Japanese snack boxes and newspapers that only focus on good news. And why settle for Christmas just once a year? One subscription service guarantees that a box of festive goodies will arrive every four weeks, whether it’s December or July. It is worth noting that they do turn up on your doorstep, not down the chimney.


Is there any reason to worry about inflation?

If you’re the sort of person who likes their glass half-empty then there will be plenty of opportunities to find something to worry about at the moment. The recovery from the pandemic, global tensions and all the staff shortages in the news can turn anyone into a pessimist. 

On top of that, some are suggesting that we need to start worrying about a word that has hardly been on anyone’s lips for the last few years – inflation.  There are even fears that the policymakers could “choke off” the economic recovery because of worries about inflation. 

In the recent past, most economies have been worrying not about inflation, but about deflation – which can cause economies to stagnate. Seemingly suddenly, the effects of Covid are causing prices to rise, and we’re hearing more and more about supply chain inflation. Simply put, manufacturers are having to pay more for raw materials because of delays and disruption caused by the pandemic. That cost carries down the line, and inevitably, this will result in higher prices to consumers. 

The Bank of England’s departing chief economist Andy Haldane has warned that inflation is “rising fast” and could reach nearly 4% this year – well above the Bank’s target rate of 2% (which was exceeded in May, when inflation reached 2.1%). 

The Bank’s Monetary Policy Committee is slightly less hawkish, saying that it expects inflation to go above 3% “for a temporary period.” The Resolution Foundation, a well-known think tank, sides with Mr Haldane, arguing that as the economy opens up and consumers start to spend the savings they accumulated during lockdown inflation will be driven up. 

Concerns are also being voiced in Europe – which has suffered from too little inflation for almost the last decade – and in the US, with the Wall Street Journal forcibly making the point that it is supply problems causing the rise in prices, not an increase in consumer demand. 

Whoever is right, inflation is something worth keeping an eye on. Inflation has the potential to impact the value of savings and investments, and interest rates paid on deposit accounts remain at, or very close to, historic lows. If inflation does reach 4% then a deposit account paying less than 1% is going to look remarkably unattractive. 

It’s not all doom and gloom, as with most things, a little planning goes a long way. Regular contact with your financial professionals and regular reviews of portfolios is as important as ever.






Can we avoid being caught by the “Scamdemic?”

There has been a rapid rise in phone and online scams over the past sixteen months as criminals seek to take advantage of people’s insecurities regarding Covid. With many processes moving online and onto our mobile phones, comes new opportunities for people to take advantage. This phenomenon has been dubbed the “scamdemic.

Scams have come a long way from the apocryphal general from a far-away nation who was desperate to share £30m with you. Although some people do fall victim to fraud of that design, the sage advice of grandmothers everywhere;  “if it seems too good to be true then it probably is”  has oftentimes been enough to protect the vast majority of us. 

There is a huge difference, however, between £30m and £2.99. While it is hard to believe that we’ve been chosen to receive a share of a king’s fortune, it is all too easy to believe the text message that appears to come from the Royal Mail. They have been unable to deliver a parcel, there’s £2.99 to pay and all we need to do is click the link to this website. After all, with the rise and rise of online shopping, who isn’t waiting for a parcel? 

According to the credit-reporting agency Credit Karma, more than half the people in the UK have been targeted by text scams since lockdown began. Worryingly, a third of us have fallen for them and, with the average person receiving four scam messages a week, it is easy to wonder if sooner or later we won’t all be a victim. 

Along with the Royal Mail, messages supposedly from PayPal are most likely to have caught us out, but criminals posing as the NHS and HMRC – saying you’ll shortly be in jail if you don’t pay a tax bill immediately – are also high on the list. 

The official term for all this is Bulk Telephony-enabled Fraud (BTF). There are services allowing customers, legitimate and otherwise, to send up to 30,000 messages a minute. Looking on one company’s website, the cost of sending 100,000 messages is just over 2p per message. For the criminals it is purely a numbers game. With so many messages going out, some of them are bound to hit the target. And while the average age for postal scams is 74, the age group most likely to fall victim to text scams are the under-35s. 

It’s unlikely that this problem is going away any time soon. You may ask, well, why doesn’t the Government do something? The problem is that so many of these scams and frauds are based offshore. 

The answer, for now, is in our own hands. Caution and a healthy skepticism can help to protect you. If you’re feeling tired, burnt out or otherwise distracted, ask whether now is the time to be dealing with your messages. Question them when you receive them:  ‘Am I really expecting a parcel?’ ‘My accountant deals with everything, so why are HMRC contacting me?’ Questions like that may not be as straightforward as grandma’s advice, but asking them could save you a lot of money, and an equal amount of heartache. 


Could a shortage of staff de-rail a recovery?

Older readers may remember the TV drama Boys from the Blackstuff and, in particular, the catchphrase uttered by Yosser Hughes. “Gizza job. Go on, gizza job. I can do that.”

Forty years later could we be about to see a complete role reversal? Could employers be standing plaintively outside their shop, office or factory saying, “Want a job? Come on, mate, you can do this.”

As the pandemic unwound we heard plenty of tales of woe from the hospitality sector. Pubs, bars and restaurants were ready to reopen but were unable to do so. They simply couldn’t find enough staff, with widespread reports that up to 20% of workers had left the sector. 

With “Freedom Day” now having arrived there are stories of yet more staff shortages. There are pictures of empty supermarket shelves in all the papers, apparently caused by a shortage of delivery drivers. There are warnings of cancelled operations and missed diagnoses because of a lack of NHS staff. 

The recent culprit was the “pingdemic”, the results of the Government’s test and trace app forcing so many people to self-isolate. That, presumably, will be sorted out, but is there a longer term problem? Could a shortage of staff – and, in particular – skilled staff, de-rail our economic recovery? 

In the manufacturing sector 38% of manufacturers reported problems finding staff with the right skills before the pandemic: that figure has now risen to 65%. Problems also remain in the service sector: while the latest Purchasing Managers’ Index shows a high level of optimism, small firms are struggling to meet demand because of staff shortages.

This seems unlikely to change any time soon. The pandemic has made people increasingly aware of their work/life balance and the long hours, night-time and weekend working that much of the service sector demands is simply no longer seen as attractive. 

Research by Broadbean Technology, the world’s largest network of jobs boards, showed that overall job applications in the UK fell 24% between May and June of this year. This came despite vacancies being up 10% in the same period, illustrating the mismatch between the supply and demand for workers. 

However many incentives, grants or support packages the Chancellor unveils businesses can do nothing without staff. Employers will need to be more creative with remuneration packages and embrace flexible and home working much more than they have previously done. We as consumers may need to modify our behaviour as well, accepting that things we may previously have taken for granted are no longer available. Want to eat out at 10pm? It may mean sitting in the car with a takeaway…






Is Facebook really worth a Trillion Dollars?

You may have seen the film The Social Network. In the film, Jesse Eisenberg, playing Facebook founder Mark Zuckerberg, is musing on wealth. “A million dollars?” he says, and shrugs. “But a billion dollars… that would be cool.”

The film was released in 2010. Eleven years on the scriptwriters may need to add three more zeros.

At the end of June the company won a legal battle against US regulators, the shares rose 4.2% taking Facebook’s valuation past the $1tn mark, making it the last of the big five tech firms, along with Amazon, Google, Netflix and Apple, to reach that milestone.

A trillion dollars is £729bn, but is Facebook really worth that much? It is an interesting question for many investors, with traditional ways of valuing companies increasingly seen as irrelevant.

Go back a few years and investors were concerned about a company’s price/earnings (PE) ratio. A company’s share price relative to its earnings-per-share. A high PE ratio usually indicated a company that was growing quickly: but one that was too high, especially when compared to other, similar companies, often made investors wary.

Then there was the dividend yield, a simple ratio showing how much a company paid each year in dividends, relative to its share price. Investors looking for income went for solid companies with a good dividend yield. Investors looking for growth would accept a lower dividend yield, especially if the company was reinvesting profits, rather than paying them out in dividends to shareholders.

Underlying both these traditional measures was, of course, the belief that a company’s job was to make a profit.

How times change. Uber went public in 2019. At the time the company freely admitted that, while it had 91m users, “it may never make a profit.”

Such a statement would have been incomprehensible to a traditional investor. If a company never makes a profit, how can it pay a dividend? If it never makes a profit, how can it even continue in business?

Facebook, of course, does make a profit. In the first quarter of this year it reported revenue of $26bn (£19bn) which was up 48% on the previous year. The company’s net receipts grew 94% to $9.5bn (£6.9bn) as the average price of its ads increased by 30% and the number of ads it delivered rose 12%.

Many companies with spectacular valuations don’t make a profit, though. They are valued on expectations of future profits, on potential market share and on their perceived ability to disrupt traditional markets.

All this, inevitably, makes the job of the fund manager much more difficult, as they need to look at potential future results rather than what’s happened historically and it is, inevitably, further complicated by the changes the pandemic has brought about. To think of a company in the future being valued at a quadrillion dollars may sound far fetched, but there was a time when the same could be said about a trillion.







Will Amazon finally pay it’s fair share?

“Only two things in life are certain,” as the old saying goes: “Death and taxes.” 

But of late it seems that taxes could be replaced by something else: headlines about Amazon (and other tech giants) not paying enough tax. Every year it seems to be the same: the companies make millions – if not billions – in profits, but pay less tax than a reasonably successful small business. In 2020, for example, Amazon had a sales income of €44bn (£37.7bn) in Europe but declared a loss of €1.2bn (£1.03bn) and therefore paid no corporation tax. 

Could all that be about to change? There has long been talk of an international tax agreement to tackle abuse by the tech companies, and – while months and possibly years of talks are still needed – it moved a significant step closer after the recent G7 summit in Cornwall. 

What did the G7 agree? 

There was agreement on two principal points. First, that countries can tax the companies on revenue generated in that country rather than where the firm is located for tax purposes. So the UK Government could in theory tax Amazon on its UK revenue, despite the company being based in Luxembourg. 

Secondly, the G7 committed to a global minimum tax rate of 15%. This was lower than the 21% suggested by President Biden, but the inclusion of “at least” in the G7 deal means the rate could be negotiated higher. 

Which companies would it apply to? 

The obvious targets are the tech giants but the plans for a global corporation tax rate could capture up to 8,000 multinationals, including oil giants like BP and Shell, and banks such as HSBC, Barclays and Santander. 

How much would the tax raise? 

The OECD estimated last October that tax revenues of $81bn (£58bn) could be raised by the proposals, with the Institute for Public Policy Research suggesting that the UK’s share (albeit from the 21% tax rate favoured by President Biden) could be up to £14.7bn annually. 

Could the tax be avoided? 

The simple answer is ‘yes.’ Countries such as Ireland, Hungary and Cyprus all have corporation taxes lower than 15% – but the G7 are hoping that their combined economic might will bring such countries into line, especially if the minimum rate is agreed with the G20, which includes China, Russia and India. 

In theory, therefore, the deal appears both doable and likely to raise significant revenues. But like all international agreements, there will be a lot of talking and it won’t be done quickly. It will also need to gain regulatory approval in the relevant countries, giving ample time for delay and lobbying. Most experts believe that ultimately there will be some form of agreement – but don’t expect it to happen in the next 12 months.