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Why the Government should stimulate the economy through local business groups
Why the Government should stimulate the economy through local business groups TL:DR The downturn in the economy needs drastic measures. At Rangewell we believe that one way for the government to help stimulate the economy is through Chambers of Commerce, Growth Hubs and Local Enterprise Partnerships. They are in the ideal position to support the recovery of small businesses of all sizes - and could be instrumental in helping the economy as a whole get back onto its feet. At Rangewell, we are starting a campaign to provide the funding required - and we will be focussing on these vital local business groups to do it. The Covid crisis is now looking ready to run into its second year and the economic effects across the board remain painful. Many business sectors have found themselves in lockdown once again – and even those businesses which are legally able to open their doors have reported a downturn. However, there is some good news. The UK economy has swerved a double-dip recession. A double-dip recession is when the economy shrinks, briefly recovers and then contracts again. The UK economy would need to shrink again for two consecutive quarters - or six months - to fall into double-dip recession territory. But it has still shrunk at its fastest rate in 300 years in 2020. Gross domestic product (GDP) dropped by 9.9% over the course of the 12 months from January to December due to the Coronavirus pandemic. Last year saw the country plunge into the "worst ever" recession before bouncing back and growing by 15.5% in the three months to September. To understand what this means, the record fall has, in effect, wiped out seven years of economic growth. The contraction in 2020 is the worst in modern records, with GDP first measured in the aftermath of the Second World War. The full impact of the crisis on jobs and businesses is currently being obscured by the government’s crisis funding schemes. CBILS and Bounce Back Loans have helped many businesses stay afloat that would otherwise have gone under, while the furlough scheme, offering 80% of salary to people unable to work because of the crisis, will only become fully apparent once the government starts to withdraw its support. But some observers have said that they expect unemployment to double from 4% to 8%, with the same number of companies likely to go bust. It comes after the Bank of England's chief economist announced his view that the UK economy is set to bounce back "like a coiled spring" after Brits saved up to £250billion during the pandemic lockdown. But experts say there is "still a mountain to climb" for the economy to fully recover from the pandemic. The UK remains under tight lockdown restrictions currently, with schools, pubs, restaurants and non-essential businesses shut and holidays banned, despite the PM having released his exit strategy from lockdown. Some offices which are allowed to stay open have shut with people working from home – those that have soldiered on have adopted social distancing. It means that all sectors of the economy are feeling the pinch in some form or another. The economy is almost 10% smaller than it was before the pandemic hit this time last year. What is the Chancellor doing? Chancellor Rishi Sunak has said that he is worried, and admits that the economy has experienced a serious shock as a result of the pandemic and that the current lockdown continues to have a significant impact on many people and businesses. He remains committed to doing everything he can to protect jobs, businesses and livelihoods. Of course, this has already involved tax concessions and even tax holidays, and huge expense in the form of furlough payments, CBILS lending and Bounce Back Loans. Many observers point out that this largesse will need to be paid for, and are expecting large tax hikes in the budget this spring. In the medium term, the prospects for recovery are actually exciting, with many people having built up a reserve of cash, and many new opportunities in the post-Brexit world. The Chancellor is not alone in suggesting that, in a year’s time, the growth could be in double digits – wiping out all the losses caused by the Coronavirus crisis. But the question remains, what should be down now? At Rangewell we want to offer a suggestion. Helping stimulate the economy – with the help of local business bodies At Rangewell, we believe that one way for the government to help stimulate the economy is through Chambers of Commerce, Growth Hubs and Local Enterprise Partnerships. These bodies cover the whole of the country and have their fingers firmly on the pulse of local businesses - and understand the scale of the opportunities they face in the future as well as the depth of the current challenges. We propose using the network of local business support groups to do two important tasks. The first is to share information - make sure every small business is presented with all the facts they need, from news about local opportunities such as council contracts to the connections they need to help network through the current rough patch. The second is to act as a focus for funding provision - the funding that businesses now so desperately need. We must declare an interest here. At Rangewell, we are leaders in the provision of funding for SME businesses. We can help businesses of all types and sizes - from one-person start-ups to large corporations - secure the funding they need. We work across the entire UK lending market, using a combination of personal contact and our advanced technology to find the most competitive and appropriate funding for each task. As part of our service, we have established close working relationships with Chambers of Commerce, Growth Hubs and Local Enterprise Partnerships across the UK. We intend to use this relationship to allow these vital local business assets to act as a funding focus for the businesses in their area. To help us do this, we are calling on the government to provide their support to these vital business advisors in the form of grants. These will help fund the advice services they provide, allowing them to give struggling businesses expert support - and access to the funding that they need. We will be putting our proposals to the government ministers in the next few days. We hope to be able to update you with his detailed response to our thinking - we hope with the news that our ideas have been accepted In the meantime, if you are a business owner who is still experiencing challenges as a result of Covid - or have already identified ways to turn around your business, we may be able to find the funding you need. To find out more, call Rangewell for an informal discussion on 020 3318 2613 or email [email protected] Talk to Rangewell – the business finance experts
Why the Government should give tax breaks to small MBO / MBIs
Why the Government should give tax breaks to small MBO / MBI TL:DR Funding an MBO is always a challenge and that challenge is made all the more demanding by the fact that there may be a range of taxes to pay when a business changes hands. At Rangewell, we believe that MBOs and MBIs are a vital part of the evolution and development of any business. Not only are we committed to supporting businesses and helping them find the funds they need – and we are lobbying for government support to make MBOs successful by arranging tax breaks to support them. The UK is a good place to do business these days. Many business sectors, from games design to specialist automotive technology, have success stories to tell. But British business needs all the help it can get right now. With Brexit meaning some confusion, as well as new opportunities, and lockdown dragging on and putting the brakes on many businesses that should be forging ahead, the government needs to act. At Rangewell, we believe that one of the key changes that the Chancellor should be making right now is to create tax breaks for small MBO / MBIs. Looking at an MBO/MBI? Contact us today to get the most appropriate funding route for your plans Just what are MBO / MBI – and what taxes do they currently involve? A Management Buyout, or MBO, involves the acquisition of a business by its existing management team. In most cases, this is done with the help of private equity or other external financing. It often occurs as a means of ensuring the continuation of the business on the retirement or departure of the founder and owner, who will naturally be expecting to be rewarded for the years of hard work they have put in. The managers continue to manage their business post-acquisition. Depending on the way the deal is structured, they may finance their buyout by debt or equity. In either case, they are seen as a relatively low-risk investment option. This is because the business is already established and the managers now running it know the business and the market that it operates in very well. Many businesses are given a new lease of life in this way, growing and thriving as energetic new owners contribute hard work and new ideas to make the most of their business. A Management Buy-In or MBI also involves a change of ownership for the business – but in the case of an MBI, the management team will be an external one. Experienced managers from outside the business who can see the potential it offers will provide finance to acquire ownership and control of the business. In some cases, an MBO will be combined with an MBI, bringing in external people to reinforce an existing management team. The costs will be directly comparable to what it would cost to buy the entire company. There are many ways to deal with these costs. Once a price has been agreed, it usually requires a combination of debt and equity that is derived from the buyers, financiers and sometimes even the seller, and can be structured in a number of ways, for example, a conventional purchase or even a Leveraged Buyout. Butt securing the funds may only be part of the challenge. A number of tax issues will arise for each of the parties involved in an MBO. The structure of an MBO in the UK will vary depending on the complexity of the transaction. The most basic structure is for a new company to be incorporated to buy the target business. This company acts as both the investment and the acquisition vehicle. More commonly, however, two or more grouped companies will be incorporated, each of which will have a different function within the acquiring group. One company will be the new group parent company post-acquisition (Newco 1) and another (Newco 2) will acquire Target and borrow money to finance the transaction. There may also be intermediate companies that raise finance. An experienced accountant team will be required to establish the most appropriate structure for the deal. However, even with expert help, a number of tax issues can include income tax on shares issued to management and related PAYE and National Insurance contributions(NIC) liabilities. The precise nature of the tax charges will depend on how the MBO/MBI is structured, but the current position is that there is no tax relief available from capital gains tax (CGT), taper relief or enterprise investment relief (EIS). This can mean that the taxman is, in effect, putting the brakes on MBO/MBI activity. By taking what can be a substantial proportion of the available cash in the business, he may make a potentially viable MBO or similar deal much less attractive, and in some cases actually put what should be a viable business in a position where any kind of buyout is not viable for those concerned. What can be done to help? At Rangewell, we provide funding for all types of business needs – including MBOs and MBIs. We know that problems with tax can spell the end of what would be viable small companies – and we have come to the conclusion that in the current economic climate, the burden of tax is simply too great for some deals to go through. We want to propose to the Chancellor a tax concession. In a nutshell: For MBO/ MBI deals relating to small companies under £15m of value, and where management who have been in place for over 3 years are buying out the current owners, to forgo all tax on the deal. We believe that this will encourage MBO activity, making the companies concerned, and as a result the country, more productive. With a new or at least remotivated management team, smaller businesses are more likely to take on more staff, more likely to export and to innovate – and more likely to succeed in the current climate. We hold that the costs to the exchequer would be minimal – and more than compensated for by the additional economic activity generated. We will be putting our views to the Chancellor in the next few days. We hope to be able to update you with his detailed response to our proposal. If you are a business owner or a member of a management team who is currently considering a management buyout, we may be able to find the funding you need to take your plans further. To find out more, call Rangewell for an informal discussion on 020 3318 2613 or email [email protected] Talk to Rangewell – the business finance experts
Financial support for small builders: another Rangewell initiative
TL:DR With building sites staying open, the construction industry has largely proved a bright spot for the UK economy over the past 12 months. But the future is looking much less positive as orders may be starting to dry up. At Rangewell, we believe that the government needs to focus on the construction sector to ensure that it can continue to thrive – and one of the most effective ways to do this is to provide small and local house builders with subsidised funds. With most building sites staying open, with work carrying on in the fresh air and social distancing to protect against Covid, construction has largely proved a bright spot for the UK economy over the past 12 months. Work has been steady – but just because the industry has kept working through the various lockdowns does not mean that everyone has been unaffected by the pandemic. In fact, it looks as though the good times may be coming to an end. Construction output in Great Britain fell in December 2020 for the first time since the first national lockdown last spring. It may be time for the government to step in. What are the facts? This time last March, the construction industry was moving steadily forward, unaware – like the rest of us – that it was about to step off a cliff. Covid and the first lockdown struck, and many sites were initially shuttered – until a better understanding of the Covid risks prevailed. The construction sector in the main went back to work, sometimes in a mask and, overall, aware of the new working practices necessary with social distancing. It came as a shock to all concerned but the good news was that, after that initial period of uncertainty and a record 41% fall in business almost overnight in April 2020, construction output has not only rebounded, but it has been growing every month – until now. Quarterly construction output for Q4 2020 was initially healthy. It had grown by 4.6% compared with the third quarter. This was driven across the board, with bi-quarterly growth in both new work (4.0%) and repair and maintenance (5.5%). It was starting to look as though the industry was going to be out of the Covid downturn. However, the resurgence in Covid seemed to have triggered a new set of setbacks. Businesses were pulling back on their construction needs. Following the record quarterly growth of 71.8% in Q3, new orders decreased by 8.8% (£962m) in Q4 by comparison. According to the Office for National Statistics (ONS), December 2020’s output was down 2.9% compared to November, falling to £13,516m and its lowest level since last August. The one bright spot was housebuilding. Housebuilders saw new orders for private sector homes jump by 6% compared to the previous quarter. It is more than just a seasonal downturn. The weather has not been so bad that work could not continue, and the holiday season is easily factored into reports. The stark fact is that December saw falls in both new work (3.8%) and in repair and maintenance (1.5%). This is more than just a blip. The December 2020 level of output is 3.5% below the pre-coronavirus February 2020 level, the ONS said. The view from construction purchasing managers The ONS report broadly concurs with the latest survey of construction purchasing managers, which has indicated that the bounce back from the first lockdown has now started to wane. The quarterly index shows Q4 still rising – but the figures for output in December 2020 fell to their lowest level since August 2020. This reflects the sudden closure and equally sudden reopening of sites last spring, and by recovery driven in recent months by the bounce-back in repair and maintenance work. Across 2020 as a whole, output shrank by 12.5% - its worst performance since the collapse of 2009. Of course, these things are relative – the UK economy as a whole shrank by almost 10% in 2020, its largest annual contraction on record. But December’s slowdown means that construction ended 2020 with a monthly output 3.5% smaller than its pre-pandemic level. If you are a construction business owner - whether you are facing a major funding need or want to find a way through the downturn - contact us now. What can be done? Like much of the economy, the construction industry is experiencing exceptional times, and the recovery that it was pinning its hopes on has been proved to be very fragile. With everything but domestic construction looking depressed once again, at Rangewell, we believe that it is time for the government to act. We are experts in all aspects of finance for business, and our team has its finger on the pulse of a wide range of business sectors. They report that the construction sector's good health last year has been replaced with depression as orders dry up and work is becoming harder to find. We have been seeing fewer requests for funding designed to get construction businesses working – Development Loans and Asset Finance – and more requests for funding designed to fend off the Covid crisis, with CBILS and Bounce Back Funding. We believe that the government needs to act to get the construction industry up and running again, and there are many reasons why. It is better to provide real jobs rather than furlough – and the costs of both could ultimately be similar. Stimulating the construction sector with cash injections will provide new jobs now – and by providing new business premises, will pave the way for recovery in the future when it eventually comes. Putting money into construction will actually create revenue in the longer term as more jobs are created and more tax generated. Constructing houses will mean new homes become available – helping to meet the government’s ambitious home building commitments while offering at least some support for those eager for a home of their own. What are we proposing? We want to ask the government to support small and local house builders with subsidised funds. Smaller builders are most at risk in the current climate, but their size can be an important asset in speeding the recovery. Not only are they in greater need than the larger players, but they also tend to employ a lot of local people. They may be more agile as businesses and can work on smaller sites more quickly than the national players. They can, therefore, bring new housing supply on-line quickly, and can also tend to build houses more suitable for local communities. Immediate help with your business funding needs Of course, if you are in the construction sector, we will also provide practical help with your need for funding - whether you need to fund an entire development or fulfil a single contract. We can also provide help with CBILS and Bounce Back applications There is still time to access the government-based funding if you have not done so already. If you are faced with a funding problem, and especially if your bank cannot help provide the funds you need, the answer is always to call us at Rangewell. We are experts in all aspects of business funding and we can use our knowledge to find the most appropriate funding solutions - when going direct to lenders will only mean additional problems. To find out more, call Rangewell for an informal discussion on 020 3318 2613 or email [email protected] Talk to Rangewell – the business finance experts
Case Study: funding an eCommerce business that was growing too fast
TL:DR When a new online business found that they were facing demand that they could not handle, they saw that despite a full order book, they were unable to secure additional funding. They approached us at Rangewell. We looked at the challenges of running an eCommerce business - and found the funding they needed with a line of credit. With stay-at-home orders preventing customers from coming in and lockdown preventing many shops from opening, brick-and-mortar premises have been forced to temporarily close. However, the same factors have given a boost to eCommerce businesses, which use a website as their showroom and point of sale. Instead of a quick run to the store, many consumers are now browsing and placing orders from their computers and smartphones, with both new and experienced online shoppers purchasing greater quantities and varieties of products than ever before. There are plenty of challenges for eCommerce businesses, but with the right combination of products, price and online marketing, they are capable of profitable trading and very rapid growth. At Rangewell, we were recently approached by a new eCommerce business that was enjoying real success - but which needed funding to ensure that success could continue. The challenge Our client was a clothing manufacturer based in the Midlands. They specialised in licensed designs - clothing of all types from t-shirts and polos to sweaters and complete outfits, with characters and images from the world of music, games and movies. “We started off selling band shirts at gigs. Naturally, we had a website, so fans who missed us at the live event could still get the merchandise. When it became impossible to stage live events, we started making the most of our site. We really started in April, when we might take £10,000 a day. Now we are closer to £35,000 per day. We are selling officially Licensed Merchandise ranges with Disney characters and these days that means Star Wars and Marvel characters as well as the mouse and Duck Tales - and there is always demand. So much that we can hardly keep up with it. Making the most of our site meant that we could sell any of our ranges to customers anywhere in the world. We found business was actually getting better as lockdown wore on.” The business had a small UK-based warehousing, packaging and fulfilment centre, but most manufacturing was done in the far east where costs are lower. “These days, distance manufacturing is no problem. I can pick up the phone or get on a zoom conference and talk to our manufacturers at any time. So if we have a sudden rush on something like a Hogwarts Christmas jumper, we can get the stock flown over in a few days.” The only problem with the business was keeping up with the demand from web customers. The order volumes required were getting larger, and with Christmas coming, the partners saw that they needed to bring in considerable quantities of their best-selling lines to cope with the growth of the business. But this would require paying money upfront to the manufacturers and, despite the success of the site, it was money that the business did not have. Funding of £500,000 to £1million would be required to bring in enough stock to see them through. The partners were unable to raise the necessary funds when they turned to their bank. “The bank didn’t understand our business and, because we had been trading in our present form for under a year, they were not prepared to advance us anything - despite the success of our business. We had no advance orders to use as security, and they had no experience of the potential of online businesses.” The partners turned to us at Rangewell for the solutions they needed. Funding for eCommerce businesses As experts in funding for eCommerce businesses, we understand the challenges. With traditional retailers, lenders have years of experience to base their lending decisions on, and bricks and mortar retailers can have physical assets - such as their premises - to offer as security. eCommerce is rather different. Many lenders will not look at applications in the sector because it is outside their experience. Consequently, eCommerce businesses tend to suffer from cash flow shortages and find their growth plans frustrated because they cannot find the finance they need. Fortunately at Rangewell, we have a team of eCommerce experts who understand the challenges you face when it comes to funding - and know the solutions that are available. The most popular of these is a line of credit. A business line of credit is a flexible funding product that enables businesses to draw on funds as and when needed. It’s typically used for immediate expenses rather than long-term investments, and acts very much like an old-style overdraft. A line of credit provides a pre-approved reserve of credit that you can call on as you need to at short notice. It’s a good option for eCommerce businesses that need short-term cash to cover expenses, for example, online advertising costs and new stock. When orders and cash then come into the business you can pay off what you have borrowed - which means that the cash you have taken out and repaid is ready to be taken out and used again. You pay interest only on the amount used, which means you avoid fixed costs and commitments which are unavoidable with a traditional term loan. But this type of funding has another important advantage. It helps keep pace with the growth of your business, because the more business you do, the more cash you generate and the quicker you can repay the amounts you take out. As your business grows, you can apply to extend the line of credit you can call on - ensuring that your further development is supported and that you can bring in stock to meet the demand your online presence generates. The funding Rangewell secured We arranged a line of credit, initially capped at £1million, for the client. It provided the flexibility they needed to stock up for the December demand, and because the amount drawn out could be repaid as soon as customer payments were received, the costs were moderate, compared with the increased revenue that could be generated. Rangewell finds the financial solutions that your business needs Whatever business sector you work in, our Business Funding Experts will be able to discuss your individual options and work out the most cost-effective ways to provide the funding you want - whatever the challenge your business conditions are presenting you with. We are independent, and we know the entire lending market. That means we can take a view that will put your interests first - and if you have not been successful because of your bank’s lending policies, we will work to find one that is more sympathetic. At Rangewell, we can help you arrange all types of business funding - including line of credit arrangements. Call us if your eCommerce business faces a funding challenge - we can help you find the answers you need.
Funding for a hotel industry in crisis
TL:DR The hotel industry is in crisis. Covid and lockdown mean that travellers are not travelling and guest numbers have fallen to almost nothing, and the latest quarantine rules are making summer holidays in 2021 even less likely to happen. At Rangewell, we have solutions which can help - and specialists who can put those solutions to work to provide a lifeline for your hotel business. The world-wide disruption caused by the COVID-19 pandemic has created a very real crisis for the hotel industry. Although there was a glimmer of hope as the first lockdown was gradually eased in the second half of last year, the return of the disease with increased infection rates has meant that there are simply no guests to welcome. A very small number of business travellers may still need rooms, but with no tourists - and no end to the crisis in sight - the future for the hotel industry is looking challenging. According to the latest government regulations to combat the spread of Covid, almost all hotels, hostels, guest houses and campsites must stay closed at least until the current lockdown emergency is over. Of course, there is hope for the future. The vaccines now being administered could spell the end of the coronavirus - but their effect will not be felt for months - and it is already looking as though 2021 will see little in the way of tourist business, even if the recovery has begun. It is clear that the hotel industry is now in crisis and that it will be some time before it returns to business as usual - and during that time, the financial challenges will be growing. What are the challenges? Hotel owners and their financial backers have had to look hard at the impact on the industry, their businesses and their funding arrangements. At Rangewell, as experts in business funding and with a specialist teaming working to find financial solutions for the hospitality industry, we look at exactly what the challenge may be - and what solution can be available. “The simple fact is that we have no guests coming in - and that means we have no income coming in either. Usually, January and February tend to be slow, but we should be looking back on a lucrative Christmas period, with everything from works parties and family get-togethers to people just wanting to get away for a break. This year, we had none of that to look back on, and bookings for the next month are non-existent.” Hotel owners need to come up with new strategies including reaching out to lenders, extending the term of any existing loans and requesting interest payment holidays to ease cashflow concerns. At Rangewell we know that many hotel owners have done what they can to weather the Covid storm. Putting staff on furlough is one way of cutting costs - but dealing with existing finance commitments is a major cost, and together with utility bills and vital maintenance mean that there is still a steady drain on any reserves that they may have. What can you do? Have an extended cash flow forecast for the next six months. Include downside scenarios to understand critical cash points and any breaches of lending covenants. Manage your payments to suppliers. Minimise all discretionary operational and capital expenditure. Postpone maintenance and other capital expenditure where possible. Put in place an advanced revenue management system and pricing models to respond to market developments quickly. Assess the equity or debt funding sources available. Be transparent towards existing lenders and involve them in the mitigating procedures and continuity plans. Apply for the tax refunds and other financial relief measures. Looking for solutions to help your hotel through the crisis? Contact our team today for ways to help your business survive. The biggest problem may be providing working capital. Even where hotels are closed, there will still be substantial costs to cover ensure that security and health and safety standards are maintained. For hotel owners, one of the key questions will be how to fund the key working capital requirements of the business at a time when income has completely dried up. The Coronavirus Business Interruption Loan Scheme (CBILS) may be able to provide some support. It is a government-sponsored scheme which can deliver loans of up to £5million from high street banks which will be interest-free for the first year, and have recently been extended to repayment terms of up to 10 years with nothing to repay for the first 12 months. The UK Government will provide the lenders with a guarantee of 80% of the amount of each CBIL loan. For businesses with a higher turnover the Coronavirus Large Business Interruption Loan Scheme can allow borrowing of up to £25m. The government is committed to supporting businesses through the lockdown, and these loans should be a powerful tool to help businesses survive. However, these are commercial loans and lenders are required to carry out full underwriting process on loan applications and ensure that hotel owners satisfy the requirements of the scheme. In practice, many hotel owners have found the CBILS scheme difficult to access. Initially, at least, those lenders who offer the scheme were inundated with requests for funding and had to process those applications with their entire team working remotely, whilst also having to deal with requests for covenant waivers and hotel closures on their existing loan portfolio. However, although the government is underwriting CBILS, many lenders will not advance funds under the scheme to the hospitality sector. Why will lenders not lend? “Our bank manager wanted to be helpful, but when we saw him, he looked at our figures, and said that his hands were tied, and he was sorry, but he could not help us.” The problem seems to be that the lenders have become reluctant to lend to many sectors because of the uncertainties of Covid. They base their lending decisions on risks, and with no sure end in sight for the crisis, they see that some sectors have a future that is at best unpredictable - and which could be financially unsustainable. Some lenders believe that the hospitality industry - and particularly hotels of all sizes - are particularly vulnerable. Some, we have found, have placed blanket bans on lending to the sector, and even with government support via CBILS and the smaller and more agile Bounce Back Loan scheme, they cannot offer the financial support that is so desperately needed. In fact, there is acceptance in the hotel lending community that hotel owners will breach the financial covenants in loan agreements. Some lenders have already adopted a flexible approach and waived financial covenants and provided repayment holidays for an initial period until hotels re-establish trade. But new lending may be particularly difficult to secure. Despite the doom and gloom from some lenders, business sector analysts, Knight Frank, have estimated that the UK hotel will rebound strongly once the economy recovers. It anticipates a V-shaped, stepped recovery with occupancy growth stronger during the initial phase of recovery and rebound in revenue per available room to fully recover once travel restrictions are eased and long-haul inbound visitors return. It means a growing financial crisis for the hotel industry. Why Rangewell? At Rangewell, we are working to find solutions for hotels that have run into problems because of the lockdown. We have a specialist team with expert knowledge of the sector, and we know lenders that may still be prepared to advance funds. Unlike most business funding services, we can search the entire lending market to find funding for our clients. Our service is personal. We assign a finance expert to work with everyone who approaches us, who can discuss needs, and often, suggest unexpected ways to offer funding solutions. Then, we can use some sophisticated software to identify the most appropriate sources of funding for each case. Our Rapid Algorithmic Matching Platform (RAMP) technology can quickly identify a list of lenders which might be willing to provide finance to the borrower, based on our understanding of the scale of the needs and the amounts required. The size of the loan required, the sector and the credit status of each client all influence which lenders who are most likely to be receptive to an application. By automating the process, we can search the entire lending market in seconds. Our fintech platform system can also generate a digital fact-find, which means we can sense-check proposals quickly and efficiently. Once we have our shortlist of appropriate lenders, we can approach our contacts within those banks and other financial providers. Armed with data and documentation updated in real-time, we can support lenders throughout the underwriting and due diligence process. Because of this, we can accelerate the process of completing and drawing down the loan. It not only means that we can find lenders prepared to advance funds when others cannot, but it also ensures we can streamline the application process - allowing the funds to be available for drawdown in the shortest possible time. Rangewell’s APIs into Companies House and the Credit Agencies, as well as its automated fact-find technology, provides clear insight into each client and their requirements. We are independent and we know the entire lending market. That means we can take a view that will put your interests first - and if you have not been successful because of your bank’s lending policies, we will work to find one that is more sympathetic. Ready to find the answers to your funding needs? To find out more call the Rangewell Covid crisis funding helpline on 020 3318 2613 or email [email protected] Talk to Rangewell – the business finance experts
BREXIT: what it means for SMEs
The United Kingdom voted to leave the European Union on 23rd June 2016 and left on 1st February 2020. Between February and December 2020 the UK was in a transition period under the terms of the Withdrawal Agreement. This transition period ends on 1st January 2021 and the future relationship between the United Kingdom and the European Union will be conducted under the terms of a new deal -The Trade and Cooperation Agreement. This is your overview of what is in this Brexit deal. Rangewell are business finance experts who work with UK SMEs and their advisors to help them find, compare and apply for business finance. We have comprehensively and independently mapped over 300 business finance lenders and 23,000 business finance products in the UK. And just like with business finance, we hope to bring all of the information in the Trade and Cooperation Agreement into one helpful overview with insight into how the two sides compromised to reach this agreement. TRADE IN GOODS Summary Zero-for-zero tariff argument. This means if you buy or sell goods to the EU, there won’t be a new, additional charge added in January. A number of situations in the agreement to turn off zero tariffs and a few clues which will see them progressively introduced. New ‘Rules of Origin’ for exporters on the components and/or materials in products - could be an extra charge if a component is made outside the UK or EU. The UK and EU will become two separate regulatory and legal areas. This means that all there will be different regulations and rules on products. Be prepared for paperwork when exporting to the EU which may ask for details of the origins on all of the components used in a product. All goods imported into the EU from the UK will be subject to regulatory checks. Prepare for slight delays on goods being shipped when the system is first introduced. If you already export to the EU, you may be eligible for “trusted trader” status. If a bottleneck emerges in trade (delays at Dover for instance), then the UK and the EU are able to quickly amend rules for customs processes. Product standards and technical regulations based on the same international references. This includes the continued use of self-certification of conformity by the manufacturer where it is currently applied in both the EU and the UK. In 2019, the EU was responsible for 52% of total imports into the UK, and exports from the UK to the EU tallied at 43%. With that being said, services accounted for 42% of the UK’s total exports to the EU. We will detail the overview of services further down the article. Wales, followed by Northern Ireland and the North East of England had the highest percentage of goods being exported to the EU. Northern Ireland, followed by the East of England, had the highest proportion of goods imported from the EU. The Trade and Cooperation Agreement sets out that the UK and the EU will be in a free trade agreement with a zero-for-zero tariff argument. This means if you buy or sell goods into the EU, there won’t be a new, additional charge added in January. The EU stated that this is the most ambitious commitment towards liberalising market access for goods ever to feature in an EU free trade agreement. So this means there will be zero-tariffs and zero-quotas on all goods from day one. If the UK did not have this agreement and left on World Trade Organization terms (No Deal), products like Welsh lamb would have been subject to a 50% tariff, Somerset beef an 87% tariff, Sunderland cars 10% tariffs and Leicester’s textiles would have been subject to tariffs of up to 12%. However, be warned, this agreement is not a straightforward wholesale end of tariffs. It is important to know there are a number of situations in the agreement to turn off zero tariffs and a few clues which will see them progressively introduced. To help to understand why and how new charges might emerge, it is useful to understand the positions taken during the negotiations and how they came to the remedies in the reached compromises. On one side of negotiations, you had the UK who wanted to use this agreement to maximise the benefits of being outside of the EU. While on the other side of the table you had the EU, who did not want to grant the UK any special access to their market as that would mean putting members of the EU at a disadvantage. For example, being outside of the UK means the UK is free to strike a free trade agreement with an East Asian nation like South Korea; who produces electric car batteries cheaper than they do in the EU. The UK could then build an electric car with these Korean batteries in the UK. The UK would then hope to sell the cars inside of the EU in places like Poland or Cyprus. The EU is concerned with the UK doing this, as it would undercut and put EU car manufacturers at a disadvantage due to the fact the UK would be able to build cars cheaper. To remedy this in the agreement, the EU pushed for tariffs on cars. The compromise resulted in a zero tariff on cars made in the UK from January 2021 but tariffs will be phased in over six years on those cars which are built with parts from outside of the EU. This agreement is full of caveats like this. The story of the negotiations is one of the UK trying to take advantage of their global position and the EU ensuring this does not undercut goods made in the EU zone. The outcome is zero tariffs for British goods but protection for the EU if the UK gets too much of an advantage over what can be done from within the EU itself. If you sell goods to the EU, you will have to understand this ‘Rules of Origin’ of all the components or materials in your products, as there could be an extra charge if a component is made outside the UK or EU. Importantly, this doesn’t just mean the origin of materials used but also which country the processing of the components took place. Be prepared for paperwork when exporting to the EU which may ask for details of the origins on all of the components used in a product. The other area in which the UK sought to take advantage and the EU wanted to mitigate this is on the goods which the UK might import from those nations the EU does not have a free trade arrangement with, like Australia or South Africa. The EU are worried that the UK would become a back door for these goods to come into the EU. This could mean cheaper goods or goods which undermine a protected industry, or goods which don’t meet EU standards. This means that, from January, all goods imported into the EU from the UK will be subject to regulatory checks. This is to ensure that goods - like Australia or South Africa wine for example - do not sneak into the EU without the necessary tariffs which currently protect French wine producers. So even with zero-tariffs and customs and regulatory cooperation, all products traded between the UK and the EU will be subject to regulatory compliance checks from the 1st of January. Remember, the UK and EU will become two separate regulatory and legal areas. This means that all there will be different regulations and rules on products. What could this mean to UK businesses? Simply put, this could mean slight delays on goods as the system is first introduced. This does not concern trade in goods between the EU and Northern Ireland, as goods entering Northern Ireland from the rest of the UK will need to comply with EU product rules and will be subject to customs checks. If you already export to the EU, you may be eligible for “trusted trader” status. In the treaty, they have agreed to recognise each other's ‘Authorised Economic Operators' programmes, enabling trusted traders that benefit from this status to enjoy certain simplifications with customs authorities. If you are worried about an increase of paperwork and delays in the delivery of goods, you might be pleased to learn that a number of mechanisms were negotiated to reduce administrative burdens for businesses. The deal does not have any specific agreement but if a bottleneck emerges and we see delays at Dover for instance, then the UK and the EU are able to quickly amend rules on ships carrying lorries or how the UK/EU exchange customs information. Both sides have agreed a definition of international standards that identifies the relevant international standard-setting bodies. This included the continued use of self-certification of conformity by the manufacturer where it is currently applied in both the EU and the UK. This will ensure that product standards and technical regulations are based on the same international references and will make compliance rules easier and less costly. DIGITAL TRADE Summary Agreement to stop any unjustified barriers to trade. Commitment to continue an open, secure and trustworthy online environment for businesses. Maintain high standards of personal data protection. No requirement for UK data to be stored or processed within the EU. UK/EU will continue to cooperate alongside other nations at multiple levels to ensure the highest possible protection. The Agreement aims to facilitate digital trade. It wants to stop unjustified barriers and to maintain an open, secure and trustworthy online environment for businesses and consumers alike. The forefront of the agreement is to maintain high standards of personal data protection and, notably, prohibits requirement for UK data to be stored or processed within the EU. Faced with increasing cybersecurity challenges, the UK and the EU will continue to cooperate alongside other nations at multiple levels to ensure the highest possible protection. TRADE IN SERVICES Summary There is a deal for services in the agreement including for financial services. The agreement provides a significant level of cooperation on the trade in services, going far beyond the baseline of the WTO's rules. As of 1st January, UK service suppliers will lose their automatic right to offer services across the EU. Service businesses that operate in the EU may need to establish an entity in the EU to continue to operate. Firms will no longer be able to operate the ‘passporting' concept. In the deal, a non-discrimination clause was agreed in order to ensure that service suppliers or investors from the UK will be treated no less favourably than EU firms within the EU. There is a review clause encouraging the EU and UK to consider whether there are possibilities to improve trade of non-financial services in the future. The actual level of market access for UK firms will depend on the way the service is supplied and whether it is supplied on a cross-border basis. United Kingdom professionals will need to have their qualifications recognised by the relevant Member State to supply those services in the relevant Nations. The agreement foresees a mechanism whereby the UK and the EU may later agree on specific professions to have mutual recognition of certain professional qualifications. Negotiations continue for financial services, with the aim to be finalised by March 2021. They will mainly cover the question over equivalence on financial services. Until the new agreement, the UK's equivalence decisions will be adopted in the UK's interest and the EU will consider equivalence when they are in the EU's interest. Services accounted for 42% of the UK’s exports to the EU. This includes financial services and professional services such as legal, accounting, advertising and engineering. The UK had an overall trade deficit of -£79 billion with the EU but a surplus of £18 billion on trade in services. It is important to note that there is a deal for services in the agreement, which is in contrast to the fake news being shared by some. The agreement provides a significant level of cooperation on the trade in services, going far beyond the baseline of the WTO's rules. All UK service providers to the EU must be aware that as of 1st January, UK service suppliers will lose their automatic right to offer services across the EU. Service businesses that operate in the EU may need to establish an entity in the EU to continue to operate. Firms will no longer be able to operate the ‘passporting' concept, which is that if you are authorised to practice in one member state it enables you to operate throughout the EU. That said, in the deal, a non-discrimination clause was agreed in order to ensure that service suppliers or investors from the UK will be treated no less favourably than EU firms within the EU. This entitles UK practices to receive more favourable treatment than is granted to service suppliers or investors from outside the EU who do not have similar provisions in place. There is a review clause encouraging the EU and UK to consider whether there are possibilities to improve trade in services in the future (financial services are excluded in this clause). The actual level of market access for UK firms will depend on the way the service is supplied and whether it is supplied on a cross-border basis. For example, if the service is purchased over the internet or by a tourist travelling abroad and purchasing services. United Kingdom professionals including doctors, nurses, dental practitioners, pharmacists, veterinary surgeons, lawyers, architects and engineers will need to have their qualifications recognised by the relevant Member State to supply that services in the relevant Nations. This will happen, and in many cases has already happened, between the UK regulators and their European counterparts. The agreement foresees a mechanism whereby the UK and the EU may later agree on specific professions to have mutual recognition of certain professional qualifications. UK lawyers will be allowed to provide legal services relating specifically to the practice of international law and the law of the country where they are authorised under their “home” title in the EU. The Trade and Cooperation Agreement does cover financial services but it is important to note that negotiations continue and that most areas for financial services are covered by WTO rules. The Agreement commits both the UK and the EU to maintain their markets open for each other seeking to supply services. It was also agreed to commit to current standards in the financial services sector and they are applied throughout the UK and EU. The Agreement does not include any elements pertaining to equivalence frameworks for financial services, that is the recognition of each other’s legal requirements for regulating financial services. It is important to note that negotiations for financial services are ongoing. The UK and EU have stated that they aim to have an agreement on the framework for regulatory cooperation on financial services by March 2021. The negotiations will mainly cover the question over equivalence on financial services. This is in regards to how the UK will diverge from EU frameworks and how it will use its supervisory discretion regarding EU firms. Until then, the UK's equivalence decisions will be adopted in the UK's interest and similarly, the EU will consider equivalence when they are in the EU's interest. This is mainly as the UK hopes to secure provisions that would add more stability to the equivalence system. The UK wanted to at least replicate provisions in the EU’s deal with Japan, which foresee consultations and advance warning before equivalence is withdrawn but the EU rejected this out of concern that the UK would make it as hard as possible for the EU to revoke equivalence. PUBLIC SECTOR CONTRACTS Summary UK & EU companies will be able to participate on an equal footing in bids for procurement tenders covered by the agreement. The Agreement further provides for non-discrimination of UK/EU companies for small-value procurement. The agreement contains what the EU describes as some of the most ambitious provisions on public procurement ever entered into by the EU and goes well beyond commitments under the WTO agreement. UK & EU companies will be able to participate on an equal footing in bids for procurement tenders covered by the agreement. The Agreement further provides for non-discrimination of UK/EU companies for small-value procurement. INTELLECTUAL PROPERTY RIGHTS Summary The agreement enhanced standards in copyright. Collective management of rights and rights such as the resale right for visual works, which are not covered by international conventions, are covered. Trade marks, design rights, patents, the protection of trade secrets, plant variety rights and the enforcement of intellectual property rights have enhanced standards. All EU geographical indications already registered in the EU by the end of December 2020 will be protected in the United Kingdom. Future geographical indications the EU may want to protect will have to be agreed with the UK at the time and won’t be automatically applied. The Trade and Cooperation Agreement complements the existing international legal framework on intellectual property rights. In particular, it enhanced standards in copyright. Notably the collective management of rights, and rights such as the resale right for visual works, which are not covered by international conventions and which are particularly important for international artists. Trade marks, design rights, patents (supplementary protection certificates), the protection of trade secrets, plant variety rights and the enforcement of intellectual property rights (including border enforcement) have enhanced standards. All EU geographical indications already registered in the EU by the end of December 2020, such as Champagne, will be protected in the United Kingdom. Future geographical indications the EU may want to protect will have to be agreed with the UK at the time and won’t be automatically applied. NEW RULES FOR EU WORKERS AND TRAVELLING TO THE EU FOR WORK Summary EU/UK nationals will still have short-term visa-free access of up to 90 days within a 180-day period. For longer stays in the EU, you have to follow individual nations’ immigration rules. The UK created the EU Settlement Scheme to continue living in the UK after 30 June 2021. The deadline for applying is 30th June 2021. You must have started living in the UK by 31 December 2020. Intra-corporate transferees who need to work in the EU can continue to do so but the maximum duration of such transfers is now capped at three years. In short, there is nothing new in terms of ‘freedom of movement’. It’s actually not covered in the treaty. It was already agreed though that from 1st January 2021, EU/UK nationals will still have short-term visa-free access of up to 90 days within a 180-day period. If you want to stay in the EU for longer than 90 days, then you have to follow individual nations’ immigration rules. One of the first things to happen after the vote to leave the EU in 2016 by then-Prime Minister, Theresa May, was to say that EU nationals in the UK are welcome. This was repeated by Boris Johnson when he became Prime Minister in 2019. As a result, the UK created the EU Settlement Scheme. EU, EEA or Swiss citizens and their families can apply to the EU Settlement Scheme to continue living in the UK after 30 June 2021. The deadline for applying is 30 June 2021. You must have started living in the UK by 31 December 2020. Theresa May pushed hard for the EU to make a declaration in line with the UK’s Settled Status Scheme. Unfortunately, the EU has not reciprocated. This means that, for UK nationals living in the EU, they will have to apply through their respective countries for residence. If you are going to temporarily live in the EU for business purposes, the UK and the EU have agreed on a broad range of reciprocal commitments. For example, intra-corporate transferees who need to work in the EU can continue to do so but the maximum duration of such transfers is now capped at three years before the transferee has to apply for a more permanent visa. THE LEVEL PLAYING FIELD, STATE AID AND SUBSIDIES Summary Rules on State Aid so British firms do not have an advantage over those in the EU. The EU offered zero tariffs in exchange that the UK did not offer overly-generous subsidies. The level playing field is an EU concept which means, for example, a Belgian steel plant is not at a disadvantage to one in the Netherlands. That is to say, the Dutch government can not grant subsidies to a Dutch steel plant as that would give them an advantage over the Belgian plant. During the negotiations, the EU was very keen that British firms were not given an advantage of UK State Aid which could see industry leave the EU for the UK. The EU offered zero tariffs in exchange that the UK did not offer overly-generous subsidies. -- Nic Conner is Rangewell’s Research Consultant. Nic worked for Vote Leave during the referendum. Of the six-person UK negotiation team, Nic has known and worked closely with four of them over the past decade. Prior and after the referendum, Nic has worked in business finance alongside SMEs and their advisors.