Foot off the brake

I was interested to visit the new Business Banking Insight website. This initiative was announced by George Osborne in November 2013 and has just gone live. The site is designed to shine a spotlight on the performance, service and operations of a large number of High Street and Challenger lenders.

This was always going to be quite a moment for many of these much-maligned institutions.

Even in its early iteration there was some interesting insight to be delivered by the simple and effective rating system. Already the big lenders had amassed significantly more “votes” than their smaller rivals and they all seemed to fare about the same.

The early indications to support the popular perception that in fact they are all much of a muchness, seems borne out by the figures and the comments.

To be fair, it is not surprising that business owners relish the opportunity to vent. In the face of recent data (the BBA numbers showing that net business lending fell by an even larger than expected £2.3bn in April) and a continued reluctance of lenders to take on risk, there will be many disgruntled business owners wondering what to do next.

Our own initiative in this area, seeks to throw some light onto this “what to do next” problem by offering a simple and transparent portal that will be of value to business owners faced with rejection from more traditional lenders.

I read a criticism of our approach recently. Someone had questioned the viability of lending to (and I paraphrase) “someone who can’t figure out what their alternatives might be on their own.”

I would argue that this is a complacent point of view, especially as recent research shows us that somewhere around 85% of businesses rejected by their primary lender do not apply again.

This is a dangerous phenomenon and one we seek to address.

If the government decides to encourage banks to refer their rejected businesses into a portal such as then this will go some way to removing a powerful brake that is currently being applied to the UK economy.

Surprise, surprise!

As I noted in my last blog, the Chancellor managed something of a coup in his recent budget when he revealed that he was planning a seismic dislocation of the traditional pensions industry on two fronts.

Firstly, while no one can doubt that there are both individuals and circumstances where the purchase of an annuity is the right and sensible option, this marketplace has been painfully uncompetitive for years.

Recent changes aimed at making the annuity market fairer and more transparent seem to have been largely ineffective, witness the slaughter perpetrated by George Osborne.

It is as if he just lost patience with the relentless moaning about annuities and the poor value they represent and in a fit of pique declared “off with its head”!

The second radical disruption, just as much of a surprise as the first, was even more stunning.

The Chancellor has quite simply re-written how we view pensions going forward. The sense, and a powerful sense it was, from savers was always that their pension was “locked” and “untouchable”. This attitude created powerful emotions that were, in my opinion, often dangerously misplaced.

Savers treated smaller pension pots – £30,000 to £75,000 as if they would someday replace their current income, which in many cases was a similar amount to their total accumulated pension pot. As if by magic a £50,000 pension with a realistic potential annual annuity payment of less than £2,500 per annum was going to replace a £30,000 per annum salary.

Much of our work for the last 20 years has been helping business owners see that their pension funds weren’t dead and buried but could, with careful planning be used to help them finance what they actually considered to be their real pension, their business.

With the changes that George Osborne has introduced (assuming the proposals survive the inevitable consultation period) the fear of building a pension because of the inability to access these funds has, overnight, disappeared.

For a business owner the concept becomes quite straightforward.

Save into a pension, use the pension fund to help provide funds to the business, build the pension with the return from providing funds to the business, and remain in full control with full access to the funds at retirement.

Powerful stuff.

Hold the front page

Well, it’s been quite a hectic couple of weeks.

After months of frenetic activity we (and our six partner funding companies) successfully launched our game-changing alternative funding web portal,

While it is early days yet, the overwhelmingly positive reactions in the press certainly give us cause for optimism that this site will be a real catalyst for change in this marketplace.

An excellent example of this coverage is this article in This is Money. The piece highlights the 250,000 business loan applications that are turned down by the High Street banks each year. If these rejected applicants can be pointed to our portal by the banks, I believe the businesses concerned stand a much better chance of receiving the support that they need.

More on this to come in the future.

Then last week we received a much appreciated boost to our mission when we won the Business Moneyfacts Best Alternative Funding Provider 2014 award.

In a glittering gathering in London we were presented with this prestigious award. The public acknowledgement of our work provided welcome recognition of the tremendous effort of our staff throughout the business, focused on providing the very best outcomes for our clients.

George Osborne rounded off this busy period with an extraordinary feat. His 2014 Budget contained something of a rarity in this modern age. A real surprise!

I’ll save the detail for a later blog, but suffice it to say that in a single stroke the Chancellor has both destroyed and created tremendous opportunities in the pensions’ industry. How it all shakes out is anyone’s guess at the moment, as I foresee the need for some significant changes before his proposals hit the statute books.

But, one thing is for certain, the twin areas where we operate, commercial funding and pensions, are unlikely to be far from the front pages anytime soon.

Osborne’s choice

Only days away from this year’s budget and the press is heaving with lobby groups and special interests calling for a few coins to be cast their way by our beleaguered Chancellor of the Exchequer.

The biggest of the business groups, The Confederation of British Industry (CBI) is making a plea for investment in Britain’s wounded construction industry. House builders have been for many years among the most aggressive investors in the UK, supplying eager buyers with neat housing provided by a neat business model that churned out profits and seemed impervious (or at least weathered) to previous recessions over the last half century. Not now. It is fair to say that the stuffing has been knocked out of the construction industry, big time.

I talk to property developers and builders day in and day out and can vouch for the fact that little in this country is getting built at present.

The CBI has called for a £1bn investment in house building to commence immediately. In the United States this type of project is favoured as it is considered “shovel ready“, meaning that work can commence quickly and the return on the investment recognised early.

At the same time the CBI reiterates that it is not calling for this to be new money. This is categorically not more borrowing. The £1bn is to be scratched from some other budget and is therefore not going to be won without a fight. Cash-starved Government departments are unlikely to let go of £1bn easily.

But it is correct. This should not be from new borrowing, for the CBI is a canny bunch which knows and fears the real “big beast” that stalks us all, an angry bond market. The real danger to growth and to our future prosperity is a massive and uncontrolled rise in interest rates that would occur if the international markets thought, even for just a second, that the Chancellor was getting squishy about deficit reduction.

Just recently the Norwegian Sovereign Wealth Fund dumped almost half its holding of Gilts in what might be seen as an ugly shot across the bows. The message from the international markets is clear. “Don’t even think about printing money.”

George Osborne has no choice. He can tinker around the edges and shift money from one pocket to the other, but let’s not expect too much from this budget, because that is what we will be getting.