From Business

Could low interest rates threaten the UK economy?

Whilst the majority of news outlets, businesses, corporations and government parties are keen to point out our positive economic stance, it seems that overlooking low interest rates could threaten the UK economy in the future.

Stable recovery in 2014

Ahead of the general election on the 7th of May, Chancellor George Osborne may well be able to claim credit for the strongest annual performance since the start of the financial crisis. An interesting thought when looking back at the coalition government.

2014 saw stable recovery; growth in services, construction, manufacturing and production, drops in unemployment and more stable house prices. But are our interest rates threatening to harm these critical economic developments?

Six years of record lows

At a record low of 0.5%, the central bank’s current interest rate is at rock bottom. It has remained at its emergency setting since the MPC voted to keep the Bank’s low rate back in March 2009. And whilst low rates provide a number of benefits, the risks are undeniable.

The ongoing dangers of low interest rates are according to the Telegraph, a possible increase in inequality, reduced productivity, excessive inflation and making it hard to counter future economic crises.

Interest rates

Many predicted a rise in interest rates at the start of 2015, but after a sharp decline in the rate of inflation – falling way below the target of 1pc – forecasts of a rate hike have been pushed back a whole year to the first quarter of 2016.

With volatile loan rates, declines in fixed rate savings and returns for savers, and record mortgage rate lows, the current economic climate is at a turning point. And only time will reveal the true outcomes of our near-zero interest. But we must be weary of the risks and damage that might be caused by raising rates too late.

About the Author

Having worked in financial services for over 36 years, Andrew Darling is a specialist in invoice discounting, factoring and trade finance solutions. He currently manages the development of business with higher turnover companies at Bibby Financial Services, specialising in corporate finance for businesses with turnover of £5 million or more.

Fuel prices and profitability

We’ve all been a little bit more cheerful when filling up our cars recently, but spare a thought for logistics companies, one of which, the Stobart Group, buys around 170m litres of diesel and jet fuel annually. Famous the UK over for their Eddie Stobart lorries the Stobart Group are one of the UK’s largest logistic and infrastructure firms. Surely they must be beside themselves with happiness that the cost of fuel is going down?

Maybe not, Ben Whawell chief financial officer of the group explained to the Telegraph newspaper recently that fuel prices didn’t have too much impact on their profitability. Whawell said. “We pass the savings on to our customers so we don’t necessarily see such a big gain either way.”

The price of everything

Nearly everything we buy in the UK has to be transported, so lower fuel costs should have an impact on the cost of living, and politically speaking Chancellor George Osbourne is being pressured to pass fuel savings onto consumers quickly, and prior to the election.

Economists are predicting that a fall to $40 per barrel could add 0.6 percent onto the UK’s GDP this year. Oil analysts even believe oil could fall below $35 per barrel. If other haulage firms like the Stobart Group all pass savings onto customers the price of our supermarket shop could drop considerably. This will boost spending and help the economy as well as business owners.

28 million cars

According to the RAC there are 28 million cars in the UK and they suggest that car owners collectively will be £4bn better off if prices remain near current levels. That equates to around £140 per year for the average motorist.

Petrol is now ready to drop below the £1 per litre mark for the first time since May 2009. The big four supermarkets Tesco, Morrisons, Sainsbury’s and Asda are already poised to enter a price war as and when prices drop further, and some fuel discounting is already in evidence in the supermarket sector.

Energy bills, airfares and interest rates

The drop in the price of fuel could also help offset the interest rate rise that has been laying in wait for some time. However, the Chancellor needs to remain vigilant and make sure that firms are passing on savings. There’s only benefit to the UK if falling costs are passed on.

The pressure on energy suppliers to pass on any savings to customers is also building. The energy market hasn’t had an easy time since the start of recession, with rising prices coming at the worst time. If power companies choose to pass on savings to customers this will be good news for UK householders and much needed good publicity for the providers.

Help for business

Small and medium sized businesses are also set to benefit from falling oil prices. Money saved on fuel can be used to expand businesses and invest in more staff. Again, like consumers, SME owners are hoping the savings are passed on and the sooner, the better.

About the Author

Having worked in financial services for over 36 years, Andrew Darling is a specialist in invoice discounting, factoring and trade finance solutions. He currently manages the development of business with higher turnover companies at Bibby Financial Services, specialising in corporate finance for businesses with turnover of £5 million or more.

Andrew Darling 2014 Review: Part 1

As we quickly approach Christmas and the New Year, our minds turn to spending time with family and friends, however, it’s hard not to look back at 2014 and reflect on what a great year we’ve had here at Bibby Financial Services.

Part of our role as the UK’s leading independent invoice finance is not only to provide growing businesses with flexible and reliable cashflow solutions, but to raise awareness of alternative forms of funding so that SMEs can make informed decisions about their future. And this year, in 2014, I believe we’ve been able to do just that.

This year I celebrated my 25th year in the invoice finance sector, since joining the industry in 1989. Having spent 10 of those years at Bibby Financial Services, it’s great to see the business perform so well in 2014.

In August, we celebrated what was a record breaking month for Bibby Financial Services. Q3 on the whole was very strong, and we boosted funding to UK PLC from £392m to £415m, representing a 5.8 per cent increase in just three months.

Following on from a more than healthy summer and Q3, our team in the North East were recognised for their hard work at the North East Dealmakers Awards. The team were awarded Asset Based Lender of the Year for the second year running – an amazing achievement for alternative finance in the North of England.

As well as receiving praise from industry professionals, 2014 has provided us with opportunities to give back to the business community. Bibby Financial Services’ series of ‘Fit For The Future’ events were a great success; helping business owners and intermediaries to network and hear from some inspiring speakers.

After a run of dates hosted in Sheffield, Durham, Aberdeen, Glasgow, Brighton and Birmingham, the ‘Fit For The Future’ roadshow came to a close in London earlier this month, with over 100 of the City’s leading business advisors and SME owners in attendance. It was a fitting end to the series of events, and I look forward to seeing what 2015 brings.

About the Author

Having worked in financial services for over 36 years, Andrew Darling is a specialist in invoice discounting, factoring and trade finance solutions. He currently manages the development of business with higher turnover companies at Bibby Financial Services, specialising in corporate finance for businesses with turnover of £5 million or more.

Scottish Castle

Funding SMEs in Scotland

Following the release of Bibby Financial Services’ first quarter Business Factors Index – which highlighted UK SMEs strongest Q1 performance since 2008 and growing business optimism in Scotland – I thought it would be a good time to discuss the increase in lending to Scottish businesses.

As part of the Index’s regional overview, in addition to looking at the value of invoices raised by Bibby Financial Services clients, we conducted a separate in-depth study of  1,000 SMEs. At the top of the SME Tracker results, Scotland led the way in relation to business confidence, with 75% of businesses expecting sales growth in Q2 – way ahead of the next most positive region in the UK, East Anglia (69%).

It seems Scottish SMEs aren’t currently worried about the up-coming referendum on Independence, with their optimism for future sales growth considerably higher than past results.

We’re now looking to expand our funding support for small and medium-sized enterprises in Scotland, which is great news for the wealth of ambitious businesses in Glasgow, Edinburgh and Aberdeen. In fact, from April 2013 to April 2014, we increased our SME funding from £18.3milion to £25.6million – a rise of 40 per cent.

This is a great achievement for the Bibby Financial Services Scotland team and for me – hailing from Edinburgh – I’m proud that as a business, we recognise the innovation and growth potential of businesses in Scotland.

If you are a small or medium sized business owner and interested in finding out more about invoice finance, then visit Bibby Financial Services.

You can also read the BBC’s coverage of our funding boost in Scotland: ‘Funder Bibby Financial Services raises business lending’.