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The rise of discount retailers

Julie Carlyle, head of retail at EY, commented on the rise of discount retailers: “Consumer spending is very tight after several years of below inflation increases in take home pay. The consequence is that the supermarket sector is undergoing significant changes and we are seeing traditional successful players being hit hard as discount grocers excel in this new reality and achieve stellar results. Discount supermarkets may only account for 10% of the total grocery market, but their growth story is forcing the entire sector to sit up.

“Paradoxically we are seeing high-end stores doing well, based around a strong value and service mix which they have progressively developed over a number of years. Top performers in this market place have a clear positioning, know their customers, innovate constantly and can make quick decisions. Never has the old maxim “be cheaper or better but whatever you do don’t get stuck in the middle” applied quite so clearly to this market.

“For the year ahead we expect a continued improvement in consumer confidence, leading to higher spending, however, the sustainability of recovery for retailers is ensuring they know their customer and pick the right products and channel to suit their needs. Finding the right model to do this, retaining flexibility and deciding where to prioritise spending or invest, is becoming increasingly difficult as the pace of change in this sector accelerates.”

UK trade, February 2014

The deficit of trade in goods and services for February 2014 was £2.1bn, compared with a deficit of £2.2bn in the previous month. The deficit on trade in goods was £9.1bn in February 2014; the trade position reflects exports minus imports.

Exports of goods decreased by 1.6% between January and February 2014 to £23.5bn. Imports for the same period decreased by 2.2% to £32.6bn; roughly three-quarters of this movement is attributed to a fall in the import of erratics, which decreased by 34.5% from the previous month. Erratics are defined as ships, aircraft, precious stones and silver. Removing the impact of erratics, specifically imports of aircraft which decreased by 46.3% from the previous month, imports decreased by 0.6% between January and February 2014.

In February 2014, exports of goods to the European Union (EU) decreased by £0.3bn to £11.7bn; of which £0.3bn was attributed to fuels and in particular, trade in oil. Imports from the EU increased by £0.3bn to £17.8bn, mainly due to imports of finished manufactures which rose £0.2bn from the previous month.

In February 2014, exports of goods to countries outside of the EU decreased by less than £0.1bn to £11.9bn; an increase of £0.2bn from exports of fuels was offset by decreases in all other key commodities. Imports from countries outside of the EU decreased by £1.0bn to £14.8bn. The decrease reflects falls in imports of finished manufactures (specifically aircraft) and imports of fuels (specifically oil).

Trade statistics for any one month can be erratic. For that reason, it is recommended to compare the latest three months against the preceding three months and the same three months of the preceding year.

The deficit on trade in goods narrowed by £3.0bn to £26.2bn in the three months ending February 2014, compared with the previous three months. Exports of goods decreased by 2.5% to £72.7bn in the latest three months. Imports of goods decreased by 4.7% to £99.0bn in the latest three months.

The decrease in imports in the latest three months is split roughly equally between the EU countries and those countries outside the EU. The fall in EU imports reflects a drop in trade in oil over a three month period, whereas outside of the EU, although oil imports have fallen, the most substantial decrease was seen in imports of finished manufactures.

This bulletin also reports on trade in services. However, the information on trade in services is mainly obtained from quarterly surveys, in some cases underpinned by larger annual surveys. That means that the data for the latest months are inevitably uncertain.

Longer term perspective

The value of trade in goods grew steadily from the beginning of 2007 to mid 2008. The onset of the global economic downturn in mid-2008 affected the economic performance of the UK’s major trading partners, and the value of both UK exports and imports fell sharply until Q2 2009. Growth in the value of trade in goods resumed from mid-2009 with improving global economic conditions. However, the value of both UK exports and imports have remained largely flat since mid-2011 with the continuing difficulties in many economies.

In 2013, the deficit on trade in goods narrowed by £0.9bn to £107.8bn (annually). The level of exports increased to a record £304.7bn in 2013, up 1.4% from £300.5bn in 2012.

However, the rise in exports was accompanied by an increase in imports to a record £412.5bn in 2013, up 0.8% from £409.2bn in 2012. Despite these record levels of exports and imports, annual growth in the value of trade in goods has slowed considerably since 2010 and 2011.

Businesses urged to maximise export opportunities

Businesses need to maximise opportunities for growth offered by export markets, says leading trade credit insurer Atradius.

To coincide with the UK Trade and Industry’s Export Week on 7 April, Atradius is urging British businesses to take advantage of the nationwide support available for trade overseas which is central to economic growth.

Marc Jones, head of sales, said: “The Chancellor has made clear that the UK needs to increase activity when it comes to exporting and within the Budget, measures were taken to support businesses to export. With all eyes now on exports to boost the UK economy, there has never been a better time to capitalise on markets.”

Export growth in the UK is forecast at 3.3% according to the IHS Global Insight, helping to drive a predicted increase in GDP of 2.7% by the OBR. To support exports, the UK Government has doubled the amount of lending available to exporters to £3bn as well as cut interest rates to exporters by a third.

Marc continued: “The UK is a strong partner for trade within overseas markets which can provide greater new business opportunities than in the domestic market where demand may be limited. With low-cost communications and improving infrastructure, millions of potential new customers in both large and small markets, in all trade sectors are within reach.

“Export trade is essential for successful business growth as well as to the wider economy but the limiting factor can be the fear of the unknown. Trading within new markets can bring with it new risks, particularly for businesses which are looking to new territories for the first time. Overseas markets often have different trading conditions, unfamiliar practices and unique local customs. Without adequate preparation and protection, exporting can potentially expose businesses to a new world of risks.”

However, support is out there. As UKTI Export Week aims to promote exporting, Atradius has issued its top tips for new exporters:

– Become familiar with political and socio-economic situation as well as local trade customs by developing relationships with foreign embassies, trade bodies and business forums. Your credit insurer is also a huge source of information here.

– Do your groundwork: identify your customers, market size and potential share, and use up-to-date information to do so as market dynamics change frequently.

– Research your customers’ position and credit history in advance and stay alert for warning signs of financial difficulty. Again your credit insurer will be of huge assistance here.

– Set realistic targets and create a contingency plan if you’re not meeting them. Be prepared to alter strategy as things change.

– If you don’t have in-house resource to manage the risks, analyse local trading conditions and collate business intelligence, outsource it.

Atradius sponsors the UK Government’s Export for Prosperity campaign, which profiles markets around the world and unearths opportunities relevant to British businesses right now.

A complete guide to export is available free on the Atradius website, alongside detailed reports on individual countries and sectors, visit www.atradius.co.uk

C2FO digital marketplace has the power to unlock billions of pounds of finance for SMEs in the UK

KPMG in the UK has announced a strategic alliance with C2FO, the online marketplace for working capital. Participants are buyers and their suppliers who use the marketplace to increase profit and accelerate cash transfers between themselves. C2FO is already a huge success with more than one million current global market members.

Founded in 2008 in Kansas City, a well kept secret as a Midwest tech start up hub in the US, C2FO currently delivers more than $1bn in early payment for suppliers each quarter. C2FO is being used by a number of Fortune 1000 companies including industry leaders in retail, transportation, medical, logistics, and manufacturing. In the UK, where many SMEs continue to struggle to access finance in the wake of the credit crunch, the new platform has the power to be a game changer for the industry.

Simon Collins, KPMG UK chairman said: “KPMG and C2FO have formed the alliance to respond to a number of challenges faced by many businesses in the UK today.

“The traditional bank lending model has changed, perhaps forever, as a result of the 2008 crash. We know from some of our smaller and medium-sized clients that they continue to struggle to borrow from the banking high-street. However, myriad alternative sources of finance, such as asset-based lenders and crowd-sourcing platforms, are filling the gap. C2FO will provide a much-needed non-bank source of working capital finance to suppliers and will help many small firms stabilise their supply chains. I believe this will prove a really interesting addition to the increasingly diverse mix of funding available to businesses, particularly SMEs.

“The alliance is also representative of our commitment to developing services which meet the needs of the SME sector – the backbone of the UK economy and its future growth – as well as harnessing the power of transformational technology.”

C2FO is the latest addition to KPMG’s expanding Digital Innovation Network and follows the announcement of the partnership KPMG agreed with Xero (on 31 March) to provide select online accounting and tax services, such as accounts, bookkeeping, payroll, VAT and corporate tax to small and medium sized enterprises using the cloud.

The UK government, which is encouraging UK corporates to play their part in supporting economic growth, is backing the new partnership.

Skills and enterprise minister Matthew Hancock said: “I am very excited by this strategic partnership between KPMG and C2FO.

“Working capital is the lifeblood of all business and supply chain finance is an excellent way of ensuring the UK’s smallest businesses have access to the finance they need. Combining KPMG’s experience with C2FO’s market-leading technology will improve access to working capital for suppliers of all sizes and allow large companies to put their cash piles to work in the economy.

“The collaborative approach at the heart of C2FO’s market-based approach will improve the relationship between buyers and sellers, making the supply chain more efficient and both suppliers and buyers more internationally competitive. This is a clear demonstration of the power of digital technology to disrupt and improve the way UK companies operate and I look forward to following the success of this partnership in the coming months.”

Alwin Magimay, KPMG’s head of data and analytics, said: “The UK economy is undergoing fundamental changes with a record number of small businesses being created every year. Today, companies can attain FTSE 100 status in less than five years. Small businesses are the lifeblood of the UK economy and need a digital platform to help them get access to capital on their terms. I am pleased that KPMG, working with C2FO, is bringing this new and innovative digital capability to the UK. I believe it will transform and optimise the way working capital is deployed and make this process more efficient, thereby creating a win-win situation for small and big business alike.

Dru Shiner, C2FO’s chief sales officer: “C2FO is excited to partner with KPMG as we expand the presence of our dynamic early payment marketplace in the United Kingdom. Companies of all sizes around the world have realised the unique advantages of receiving early payment through C2FO including low cost funding without credit underwriting or paperwork. We are looking forward to improving the working capital health of companies throughout the UK.”

Both parties have signed a three year agreement to work together in the UK. No consideration has been paid and the deal does not include any equity stake.

Aldermore Bank sponsor British GT racing driver Matt Bell

Aldermore Bank, Britain’s leading challenger bank, has announced today that it will sponsor British GT racing driver, Matt Bell.

Matt Bell heads into the first round of the 2014 British GT Championship next week with a great track record having won during every season since his first in 2011. Aldermore will be Matt’s lead sponsor throughout the 2014 season.

Commenting, Rob Lankey, Aldermore managing director of commercial mortgages, said: “Aldermore is delighted to be associated with GT Racing. Britain has a fantastic reputation for motorsport talent and innovation whilst Aldermore is proud to be at the cutting edge of banking innovation. Matt started his career in 2009, the same year that Aldermore was formed, so there’s a genuine sense of shared success and ambition. We’re really pleased to be supporting Matt at this crucial point in his career and look forward to introducing our clients to the exciting world of British GT racing.”

Matt Bell said: “This is an important season for me. I want to show that I can win championships so it is great to go into the year with the backing of Aldermore. I will be battling for the top spot from the word go this season and I know that my partnership with an ambitious company like Aldermore will help keep this momentum going.”

Bridgebank Capital – sponsor of the NACFB Commercial Finance Expo

Bridgebank Capital has announced that they are one of the lead sponsors of the forthcoming NACFB Commercial Finance Expo taking place on Wednesday 25thJune at the NEC, Birmingham.

As a long standing patron of the NACFB, Bridgebank Capital is proud to offer its support to the organisation and this well established event, through sponsorship of the delegate bags.

The Commercial Finance Expo is an industry leading event that attracts a large number of the most prominent commercial finance brokers in the UK, and we look forward to being part of the event this year. As a whole of market lender with an appetite to lend, Bridgebank Capital looks forward to meeting with brokers at the event to discuss how we can assist with their bridging requirements.

Regarding sponsorship of the delegate bags, Claire Pender, Head of Marketing commented: “We are delighted to once again be afforded the opportunity to be part of this fantastic industry event. The NACFB Commercial Finance Expo attracts a significant number of brokers and provides a fantastic opportunity to network with the broker community. We would encourage all broker introducers to register to attend this event”.

For any press enquiries, please contact Claire Pender, Head of Marketing on 0161 4430680.

Early registration is highly recommended as booking go very busy very quickly in 2013.

Anyone wishing to attend should register as soon as possible at www.commercialfinanceexpo.co.uk

European VAT rule changes will mean SME’s and consumers are set to lose out, says KPMG

As reported in the recent March budget, the full effects of the upcoming VAT changes across the EU are becoming apparent, as it’s said the Government could pocket in the region of £300m in revenues whilst SMEs are set to feel the squeeze as costs to comply with the latest set of regulations rise, according to KPMG.

New VAT rules taking effect from the beginning of 2015, but which companies are having to prepare for now, are likely to require larger requirements for data storage, compliance and advisors in order to implement the changes set by the EU.

From 1 January 2015 VAT on telecommunications, broadcasting or electronically supplied services to non-VAT registered or private customers will no longer be charged according to the country from where the supply is made but according to where the customer is resident. Electronically supplied services include electronic books, apps, video downloads, sat-nav maps, games, software and cloud storage services to the extent that they are paid-for services delivered to consumers over the internet or through other electronic media.

Affected businesses, particularly SMEs, will need to carefully consider what impact the changes will have on them. Mike Camburn, tax partner at KPMG in the UK, said: “Many have been discussing the impact of these changes on the large corporations, but people have been failing to realise the effect on SME’s. It is these companies which will feel the pressure of the changes the most and although it seems as though the changes may be easy to implement, it isn’t as straight forward as it appears. There is a huge amount for them to plan for in a relatively short amount of time.

“At the very least, they need to ensure that their billing systems can cope. A full analysis of where the sales are being made, how that will impact the margins in the various countries and how best to handle compliance with the new rules is a good start.”

Businesses will have to charge different rates of VAT according to where their customers are based in the EU rather than a single rate based on the country from which they are making the supply, and therefore face an increased compliance burden and billing becomes more difficult to manage. Both of these are likely to increase their costs, according to KPMG.

Customers are also expected to feel the negative side effects to these changes as VAT charges rise, so too will the price of buying the product.

Mike continued: “Although the UK VAT rate of 20% is actually just below the current EU average, many UK customers will still see the VAT charged on their purchases jump up. This is because many of these e-services are currently supplied from countries such as Luxembourg where the VAT rate is very low: 15% in general and just 3% for downloaded books. The UK Treasury will gain, but someone has to lose; either the suppliers of affected services will see significantly reduced profit or consumers will see increased prices as some of the extra VAT cost is passed on.”

FIMBank consolidates stake in factoring joint ventures

FIMBank has secured a controlling interest in factoring operator India Factoring after acquiring Punjab National Bank’s shareholding in the company. India Factoring is a pan-Indian operation with a head office in Mumbai and eight branches in major cities in India. This transaction follows on the recent announcement that FIMBank acquired the shares of Trans Kapital Bank, thereby achieving a controlling interest in its Russian factoring operator FactorRus. FIMBank now has a controlling interest in both factoring joint ventures, with 79% of the shareholding in India Factoring and 80% of the shareholding in FactorRus.

Commenting on these developments, FIMBank president Margrith Lutschg-Emmenegger explained that: “Our new reference shareholders and the resources made available to us have enabled us to adopt an alternative strategy which has allowed FIMBank to take a controlling interest in these operations. This places us in a better position to drive our international factoring joint venture strategy and control its implementation. It also permits a centralised control of risk management, as now both India Factoring and FactorRus join MENAFactors in Dubai as FIMBank subsidiaries”.

On his part, FIMBank group chairman Dr John C. Grech said: “We understand that profitable revenue growth is the most important driver of long-term value creation. Our aim is to use the capital provided by our shareholders and lenders as efficiently as possible. By securing a controlling interest in these two factoring operations we will be in a position to consolidate our position in these markets and create long-term value”.

For more information about the FIMBank Group, visit www.fimbank.com.

Future of world city real estate markets to be shaped by fame as well as fortune

New York and London have today been named as leading international cities in a new report from international real estate adviser, Savills. The firm classes cities on their prominence and fame, as well as economy and size; factors that will determine the cross-border investability of their real estate and their future as well as their current world class city status.

In 12 cities, the Savills X-Factor world city characterisation looks at a combination of global competitiveness, together with measures such as connectivity, international visitors and web search data, to determine overall world city status. Behind New York and London, using these metrics, Singapore and Paris start to rival the two leaders, while Moscow, Mumbai and Rio de Janeiro are less-established leading global cities in the top tier of twelve in the study.

Yolande Barnes, director of Savills world research said: “Our definition of a world city is not just based on size or economic prosperity, but other less tangible factors. These include fame, prominence, international reach and investability – all factors that are not revealed by population and GDP figures alone.

“These intangibles impact on the appeal of a city to business and wealth generators, which in turn influences the pace of residential and commercial real estate market growth and contraction and levels of market stability.

“The redrawing of the global economic map is having a significant impact on real estate markets. New world economies, notably China and India, have recently seen weakened growth, while older industrialised economies, including the USA, UK and Japan, are now recovering more strongly than many commentators anticipated.

“As a result, the runaway real estate growth of new world cities has abated and in some cases, such as Mumbai and prime Hong Kong, it has reversed. The strength of investment markets in new economies are personified by Dubai’s high-growth real estate centre. Its revival is indicative of a market recovering from very full price corrections after 2008.”

The indicators for real estate investment

The Savills X-Factor overall city characterisation does not necessarily reflect traditional measures of economic or real estate costs and values, it speaks to the longer term stability and attractiveness of a world city destination. The three cities with the highest X-factor also appear in the top four for investors in residential real estate, however, they are also in the top four most expensive destinations for employee live-work costs.

To understand the true appeal of residential and commercial real estate as an asset class in each city, Savills has again compared gross rental income to the income available from 10 year government bonds in each country, creating a net of gilt yield. This, they say, gives a true measure of the performance of real estate compared to the local risk environment.

By this measure, Tokyo provides the highest returns in relation to bonds and has started to be favoured by more adventurous investors who understand the singular character and risks of Japanese real estate markets. New York too provides some compelling gross yield levels which have encourage increasing investor interest.

Taking the market temperature (based on GDP to residential capital values measure)

In 12 cities, Savills identifies Hong Kong, Shanghai and, most notably, Mumbai residential real estate values as looking most vulnerable to correction. New York and Sydney look to be markets with greatest scope for growth, while London and Dubai residential prices appear on the higher side of average, particularly the cities’ prime markets, but are still some way off the hottest cities.

Yolande continued: “Non-prime mainstream housing stock is now an attractive buy for investors. On a world stage, London’s mainstream values look cool, while Dubai and Hong Kong look more fully valued. We now expect that secondary and even tertiary markets in our world cities could offer superior growth compared to prime over the next five years.”

As the tapering and eventual demise of quantitative easing takes effect, the global growth in asset prices will inevitably slow. We expect to see rental growth and capital growth eventually realign.

With bond yields and interest rates likely to rise soonest in Asia, rather than the industrialised West, it is in this region that we expect to see the most stress in overstretched markets in the short-term.

Some second tier cities, not yet in our index of twelve leading world cities, represent good value alternatives and could start to rise in popularity with investors. Yolande names Istanbul, Hanoi, Kuala Lumpur, Jakarta and Bangkok as cities to watch, plus many large, second-tier cities in the same countries (that few in the West will ever have heard of).