For the last couple of years, SMEs and contractor accountants have had difficulties accessing finance and the problem still isn’t going away, says Ed Moss from the Manufacturing Institute.

Despite the banks assuring us that they are open for business and ready to help, people still don’t trust them.

Could that situation be about to change? The European Commission recently announced the introduction of a European Union Small Business Act. Included in the policies is an action plan intended to improve access to finance for SMEs’, help them enter the venture capital markets and raise awareness of SMEs potential amongst investors.

One measure that might help small business cash flow is the requirement for public sector organisations to settle their debts within 30 days. The public sector has been criticised for a long time for its tardiness in paying suppliers; many of whom are small enterprises who have been struggling to keep afloat since the start of the recession.

Ed Moss also pointed out that banks could help SMEs if they speed up the cheque clearing system. If you pay a cheque into the bank on Monday, you have to wait until Thursday before it clears. In Sweden and Greece, you pay the cheque in at 10:00 and it’s cleared by 12:00 the same day or the bank is fined.

Moss made his comments after the FPB revealed that over 200 entrepreneurs are supporting the Get Britain Trading campaign designed to promote the contribution small enterprises make to the country’s economy.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Pequeño tributo a las increíbles fotos de Toni V by Viernest

UK contractors will be pleased to learn that the government has committed to overhauling the process by which SMEs compete for public sector contracts.

This will be achieved by cutting bureaucracy and becoming more open and transparent in its dealings.

The national chairman of the FSB, John Walker, says this is a victory for small businesses in the UK. The FSB has been campaigning for SMEs to have the same opportunities to public sector contracts as large organisations do. The new measures to get rid of red tape and open up transparent communications channels, which were outlined on Monday, are most welcome, he said.

There also needs to be a genuine change in culture within government procurement when it comes to dealing with SMEs, Walker added.

According to the Federation’s statistics, 70% of smaller businesses rarely bid for public sector contracts because of lack of awareness.

The situation is so bad that the UK ranks 24th out of 27 member EU states as far as access to public procurement markets goes. Only 24% of public sector contracts are awarded to small businesses in the UK, compared to 44% in France.

The REC has also been campaigning for a change in procurement practices for several years. Kevin Green, the chief executive of the REC, said that at last we are seeing action instead of mere words. The REC wants to see a competitive, dynamic market where recruiters can compete based on their capabilities and competences. He added that the REC will monitor the implementation of the new measures and will continue its constructive work with the Cabinet Office and OGC.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Playing cards polyhedron : following the edges of a cuboctahedron by fdecomite

Public sector tax fraud costs the Treasury an estimated £15 billion every year according to the National Fraud Authority.

This estimated public sector fraud figure is made up on £7 billion lost due to tax evasion, £5 billion by criminal activity and a further £3 billion that is stashed away in the hidden economy.

The Fraud authority’s figures also show that the total amount of fraud in the UK tops £38 billion and £21 billion of that is down to the public sector. In the private sector, the financial services sector has the highest amount of fraud at £3.6 billion whilst the fraud losses attributed to SMEs were £780 million.

The data proves that tax evasion is definitely the largest problem area, far overshadowing the £1.5 billion lost each year in benefit and tax credits fraud.

Last week, Ricards Virokaitis, a Lithuanian living in south-east London, was jailed for five years for his part in a £3 million tax credit theft. An HMRC investigation found that he was a central member of a gang who paid more than 100 women from Eastern Europe to enter the UK solely with the intention of registering for tax credits and benefits. The women were escorted by Virokaitis and his criminal gang while they claimed the benefits. The women then returned home and Virokaitis withdrew up to £90,000 each month through bogus bank accounts. Women with children were deliberately recruited in order to obtain the maximum benefits, an HMRC spokesman said.

The assistant director of criminal investigations at the Revenue, Simon Grunwell, said the HMRC is cracking down on benefit fraud and has received an additional £900 million from the government to tackle tax avoidance, evasion and criminal attacks. Criminal gangs such as Virokaitis’s are a menace and their activities are hurting honest taxpayers.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Hello There by josh-n

Following on from last week’s musings on middle management and their approach to hiring people, I’ve been following a conversation in another place about how to go about outsourcing and/or building shared service centres. This was being led by a group of senior managers, mostly freelance ones as it happens, and mostly working in the public sector. And what really worried me was the lack of awareness of the issues they are facing.

Firstly there seemed to be a blind assumption that outsourcing saves money. Unless it’s done very carefully indeed, it doesn’t. What you make up in bottom line savings you lose out in increased supervisory time and generally reduced levels of service. There will still be a saving, but it won’t be anywhere near what you think if you cost in all the factors.

For example, I remember a public body close to a previous client of mine who outsourced a whole department. They claimed they would make a significant cut in routine expenditure by doing so. Except they not only outsourced the service, they handed over all the staff they used to employ as well. Under TUPE rules, which prevent any loss of terms and conditions, and an existing agreement about future pay rises, I couldn’t quite see where the savings came from. Plus they had to employ a few extra senior guys of their own to oversee the outsourced service.

Bonkers, isn’t it.

Anyway, getting back to the point, this discussion evolved to the point where the members though they should lobby HMG to be allowed to provide an expert outsourcing consultancy. That, on the face of it, is an excellent idea. It is, after all, pretty much what I was saying last week, that you need real expertise to get these things to work as advertised.

But hang on a minute: if these guys have held senior positions in the public sector as they claim, they can’t have failed to notice the presence of the OGC procurement guidelines (for which read “hard and fast rules”) about how high value contracts should be let. These are so esoteric, they’re almost worth a whole book to themselves. For example, there has to be an open tendering process. Fair enough but the way that works is that you are not allowed to discuss the requirement with potential suppliers because that gives them an unfair advantage when bidding for the work…

Say what? You are required to formulate an ITT for a potentially multi-million pound piece of work without doing any market research to find out what questions you need to ask? Surely not, but that’s what the rules say. Of course there are ways around this – employ an external consultant to ask for you perhaps – but it does add a whole new layer of complexity to an already difficult task. And complexity, as we all know, equates to costs. So even smaller savings than were hoped for.

So for them to get this work they have to go into open competition with a few other minor players, small companies like Accenture and IBM.

Or, of course, they go for the consultancy role and take over the management of the outsourcing procurement and execution programme. But tarry, you, the law hath one more hold over you.

To get an HMG contract you have to go complete a Pre-Qualification Questionnaire or PQQ for short. This is meant to show you are able to take on the work. The only problem is that the PQQ has certain parameters and rules of its own. You have to demonstrate previous deliveries of the same piece of work or something damned close to it (although, interestingly, it doesn’t stipulate that these should be successful deliveries…). You have to have cash reserves equal to three times the total value of the contract. You can’t join up with a like-minded group in a formal or informal collaboration and aggregate your assets to meet this one either. There are many more similar constraints.

All in all, you can see why the otherwise excellent idea of these guys is going to bump into some pretty insurmountable obstacles. And what really worries me is that they haven’t realised it yet…

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited<

Image: Salesman by petesimon

Is not to lose weight (a lost cause, I fear) or cut down on booze (shudder), but something that’s far better for the heart rate: to stop being get annoyed with Recruitment Agencies any more. I will try to see them as being more like my dog; smart by the standard of his peers, keen to do well but not really sure how to achieve it. The reason being that having cunningly avoided the worst of the snow by being terminated three weeks before Christmas – serve me right for delivering the project early! – I start the New Year looking for the next challenge.

This means I’m back in the commoditised world of modern agencies, where speed is of the essence and box ticking is the required skill. And that is why most of the time my 30-odd year career is being assessed by someone with a job history measured in months and that has successfully managed to avoid any contact with IT at all. Still it’s not their fault, so no point getting worked up about it, is there?

One positive thing I have done is to get my CV reviewed by a couple of people who know about such things. I thought it wasn’t too bad, to be honest, and followed all the usual recommendations, but clearly not. Nobody said so explicitly but I got the feeling they all thought it a bit clumsy, a bit wordy and just a little unfocussed. Come to think of it, that describes me pretty well so what’s the problem…

Anyway, it’s had a revamp and it’s being rewritten to suit each role I’m applying for to ensure I’m highlighting the relevant bits of my skills. And it seems to be working. I’ve even had agents call me back on receipt, which is almost unheard of.

It’s also encouraging that there seem to be a lot more jobs out there right now. Mind you, every single one is demanding that you have a million year history in their business and nobody else need apply. That’s fair enough in finance, which is a world of its own, and some of the regulated industries, but quite often it is a terribly blinkered way of looking at it.

The worse culprits are the Public Sector. These are organisations that are looking at having to make savage savings, they need to get the best value from every penny they spend, and they need to explore all sorts of alternatives to survive the year.

So what do they do?

Firstly, they outsource their recruitment to people like Commensura, who are very good at supplying standardised bulk skills like cleaners at minimum effort (and usually minimum rate), but hardly appropriate for finding a specialist. Then they offer some frankly mad rates, either way under market rate or well above it. Then worst of all they exclude everyone who isn’t already in a Public Sector role. Which I think is unforgivable.

Think about it. One of the key things they can do is to share services, consolidate common functions and infrastructures and even outsource some areas so as to minimise overheads and maximise economies of scale. That is not a trivial exercise, and it’s not something that most public bodies have really tried (there are some notable exceptions, of course). So why do they think they have to disregard people with extensive business knowledge in this area and that have made it work, simply for doing it in industry. Apart from having to understand the dead hand of OGC procurement policy – which is easily learned in a day or so – those people are exactly what they need. But will they hire them? Nope, let’s stick with people who know all about how we work now and nothing about how we can work better.

And going back to the professionalism of the average agency. I just got an email from one of the big ones. Do I fancy applying for a Help Desk role paying £15 an hour on a three shift system in North Yorkshire? I may have to think about that one….

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited<

Image: Just the Grocery List by KTVee

There are nearly 11 million workers aged between 35 and 49 in the UK and yet they have missed out on the 350,000 new job opportunities created in 2010.

There are now 2.9% fewer Britons in this age bracket who are in work compared to the start of the credit crisis in the spring of 2008, according to recently published figures from the CIPD.

Dr John Philpott, who authored the report, said it was unclear why this group has been bypassed and it could simply be that they have received less support from the people who make the policies. However, this demographic group still has reasonably high employment rates and therefore is not a cause for social concern. Another possibility is that this middle age group is at the pinnacle of their career earnings and therefore employers may find their salary expectations less appealing than workers who expect less salary.

The Work Audit from the CIPD also found that, out of the 350,000 new jobs created between quarter one and quarter three, 63% went to employees, 30% were created by the self-employed and freelancers, 6% were accounted for by unpaid workers in family businesses and 1% by government job schemes.

However, 95% of those additional workers in employment are working in part-time roles and around 33% of roles are on a temporary basis only. Permanent full-time jobs for employees have not experienced a recovery this year. Women have not really benefited from the additional jobs as 289,000 of all the newly created jobs went to men! This could be because more women than men work in the public sector and it increased in size slightly during the recession whilst the private sector was making redundancies.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Grumpy WTS by 11950mike

My research has revealed a record breaking increase in the number of new contractors / limited company formations, which supports the theory of a new entrepreneurial culture developing to partly replace the traditional employment culture, as a result of the economic crisis.

Many jobs are being shed by the civil service and local government, with quangos being particularly hit hard. The government have stated their expectation that the private sector will replace a lot of the jobs and functions hitherto carried out by the public sector.

According to the Management Consultancies Association which represents 70% of the industry in the UK, member organisations have already seen a significant fall in public sector work, with most expecting to drop further in the remaining part of the year.

An increasing number of consultants are setting themselves up with their own business to position themselves to take advantage of the new way of doing business in the UK. Their client organisations are increasingly looking to become more flexible, preferring to outsource and sub-contract rather than employ permanent staff, with all of the financial and legal risk that traditional employment involves.

An increasing number of agencies are in the marketplace to provide an important link between the client organisations and the contractors and consultants who can fill the required roles.

In my experience, the hourly rates achievable by independent contractors are nearly always significantly higher than what the consultant would be likely to expect if they were employed by the same business.

In nearly every case, it is best to form a limited company and take a small salary and high dividends to maximise take-home remuneration. It is now possible to set up a limited company in a matter of hours and set up a business bank account within a week. Also, with the advent of online VAT registration, it is now possible to register within a few weeks.

By registering for the VAT Flat Rate Scheme (FRS) and maximising claims from their company for allowable business expenses, consultants can optimise their take home remuneration by operating through their own limited company.

All good accountants will be able to explain in simple terms the benefits and the ease of working through your own company. For more information visit our website or please don’t hesitate to call 0800 8 40 40 14 or email me.

Graeme Bennett is a Director at Forbes Young Accountants
© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: Transhumance sur le Causse by Pierre Roudier

In what seems to be a contradiction of other recent reports, the latest quarterly job survey from the CIPD and KPMG claims that public sector redundancies will be more than offset by new private sector jobs.

The latest Labour Market Outlook recorded a figure of +11. This figure is a based on the number of employers planning to increase their workforce compared to those who plan a decrease. Whilst the public sector recorded a negative figure of -44, the private sector registered +39. In the summer the balance was +2 and we have now seen three consecutive quarters with a positive balance.

The chief economic adviser for the CIPD, Dr John Philpott, said there are now encouraging signs of increased buoyancy in the private sector job market. However, he did point out that it remains to be seen whether this will continue after the pre-festive season jobs surge and he didn’t go as far as to rule out a rise in unemployment next year.

Sectors that expect to increase recruitment levels during the final quarter of the year include manufacturing (+51), IT private sector services (+71) and consultancy (+44). Decreases are expected in central and local government (-95 and -65 respectively) and transport and communications (-39).

41% of public sector bodies will be making redundancies before the end of 2010 and these are expected to affect 14% of their employees. Whilst the average cost of making an employee redundant is £12,000, in the public sector it is £19,600 as opposed to £9,350 in the private sector.

Obviously everybody hopes that the latest LMO data is concrete evidence that we are witnessing a sustained improvement that will enable the private sector to absorb the public sector fallout.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: run from the red flower by badjonni

Vince Cable confirmed this week that 24 local enterprise partnerships have been given the go-ahead, a move welcomed by the Federation of Small Businesses.

Whilst the FPB is pleased by the announcement, it has called on the LEPs to make sure SMEs are put at the heart of local communities. The policy chairman at the FSB, Mike Cherry, said the Federation has always encouraged local businesses and local authorities to work in partnership and therefore the setting up of these LEPs is a logical step.

Cherry believes that small businesses must have a genuine involvement in decision making and business activity if the partnerships are going to be successful. LEPs will not work if civic leaders simply pay lip service to the SME sector, he added.

The Regional Growth Fund, which is designed to support private sector job creation in areas that currently depend on the public sector, was also declared open for business this week. The fund has a pot of £1.4bn and Vince Cable said he was delighted to see so many imaginative proposals to help drive economic growth in local communities.

David Frost from the BCC thinks these moves are a good start but explained that LEPs must concentrate on getting the basics right in order to give businesses greater confidence to invest and create new jobs.

However, not everybody is confident that the new initiatives will be successful. Mark Prisk, the business minister, believes that many LEPs lack focus and will fail to help economic growth. In a leaked letter to Vince Cable, Prisk said that the business community felt many LEPs do not have the ambition necessary to make an economic impact.

Shadow business secretary, John Denham, is also critical of the government’s plans saying that almost 800,000 businesses have been excluded. 60 local partnerships applied to become LEPs and because only 24 have been approved in the first wave, 21 million people will not be covered. Denham said the plan for growth is a shambles and leaves massive areas with no organisation to support economic development. He thinks that this proves the coalition has given up on growth.

More than 75% of inhabitants in the North-west and Yorkshire and Humberside will be covered by an LEP whilst only 26% of people in already depressed areas like the North-east will be in an LEP area.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Pucker up! by ucamari

Amid all the usual and totally predictable debate over the Spending Review, it is perhaps interesting to consider things from the perspective of the freelance contractor. In the long term, any benefits that arise from the review, if it meets its aims, are much the same for everyone. In the short term, the contractor is in a different position to everyone else.

For a start, will he still be in work? That probably doesn’t depend on where he works as much as you might think. While anyone in the Public Sector is rightly feeling nervous, some of the big banks are also shedding jobs at a fair rate, so nothing is guaranteed. The freeze on big contracts by HMG will obviously limit the opportunities within HMG, but also with the prime suppliers and the smaller companies that feed them.

However, it must not be forgotten that work still needs to be done, and if you have to lose a permanent post, you may still be able to fund a short term temporary resource for the duration. So contractors will still be in demand to a greater extent than people looking for permanence.

Equally, perhaps we will see an increase in the number of smaller contracts that avoid the cap altogether. That would almost certainly push up the demand for good contractors. It would also be a good target for the government’s stated aim of giving 25% of work to SMEs, something which so far really has failed to materialize.

Of course, contractors would be a lot more attractive if the clients would only understand that they are not actually more expensive than a permie doing the same job. I’ve had the same argument at my last three clients, where I’ve demonstrated that a contractor getting 350 quid day is actually a lot better value than a permie – or a fixed term contractor – on 35 grand. And since you can send him away at no cost the minute the job is done, he’s probably quite a lot cheaper overall. That also assumes that his work doesn’t actually result in a saving that’s considerably bigger than his fees for doing the work: the old cost vs. value argument is more valid than ever before.

If we could also take out the daisy chain of intermediaries between contractor and end client, there is a lot more to be saved. In my case, the total markup between my day rate and what the ultimate end client is paying for me is around 500%. Agreed a big business will want some confidence that their supplier is capable of delivering what’s needed and covering the risks that arise, but does that assurance really have to carry that level of margin? Is it time that clients started to be made more aware of who actually does a lot of the work on the ground these days, and how much they could save by trimming the middlemen?

At the personal level the tax and allowance changes being made probably won’t affect the average contractor all that much. We have much greater flexibility over how much salary we take, if only to ensure we have funds available to keep on taking an income when the work is drying up. As a result, assuming you’re working at a reasonable level, the tax and benefits changes won’t really do much damage.

So lots of changes, lots of belt tightening for everyone. We may all be in it together, it’s just that some of us aren’t in it quite so deeply.

Alan Watts can found at LinkedIn.
© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: A rubber boat + 2 marines by ponc?opengu?n

The Reed Job Index reached its highest level in six months in September; which will come as welcome news to contractor accountants and anybody else who is seeking a new position.

Across the UK recruitment activity rose by 2%, raising the Index to 104, the second highest level since Reed began compiling these statistics last December.

Salaries have not yet recovered to the same level as they were at the end of last year when Reed set the Salary Index at 100, although they recorded a 1% increase to 96 last month.

The Reed Job Index is compiled from data from reed.co.uk, the largest job board in the UK, which lists more than 90,000 job vacancies on a daily basis.

Customer service, digital and creative, leisure and tourism and IT and telecoms were amongst the sectors showing the greatest demand whilst public sector opportunities understandably declined.

On a regional front, the East Midlands, Scotland and Yorkshire and Humberside all experienced accelerated growth in vacancies, with the Index in those areas reaching its highest ever level.

Whilst this is obviously good news for job seekers, the Institute for Public Policy Research has released data that shows prospects for the long-term unemployed have not improved. In fact the amount of people classed as long-term unemployed has doubled over the past 2 years to 797,000.

The ippr data notes that there is a jobs deficit of 330,000, which threatens the capability of the coalition’s Work Programme to help people get back into work.

Under the scheme, contracts worth £3bn are to be awarded to voluntary and private sector providers. However, more than 5 people are currently chasing every one of the UK’s job vacancies.

Nick Pearce from the ippr said that one solution could be a localised and flexible system offering a highly personal service to the long-term unemployed.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Everyone has layers….. by Nina Matthews Photography

95% of British business leaders and contractor accountants have a clear conscience about making staff cuts in the next few months according to statistics from Abbey Legal Protection.

While that leaves just 5% of bosses stressing about downsizing, 31% of employees are concerned that their job might be in jeopardy.

Andrew Hawes, one of the co-founders of manufacturing consultancy Newton, said that most CEOs recognise that cuts are inevitable and tough measures need to be taken to ensure their firm survives.

We are still waiting to hear the results of the government’s Comprehensive Spending Review but almost three quarters of SMEs and contractors agree that public spending cuts are essential.

The FSB intends to inform the Conservative party conference that the coalition should reduce the budget for ‘direct’ business support to £500m from the current £1.9bn and concentrate on micro business spending.

The lobby group thinks that business support receives too much funding and of that, micro firms only receive 5% of the money. It would also like to see the NICs holiday for new businesses extended to all firms, an increase in the VAT threshold to £90,000 and the privatisation of the Capital for Enterprise finance initiative.

Meanwhile, leading players in British industry have differing views of the upcoming spending cuts.

Babcock, the defence group, believes the clampdown in the public sector will lead to more projects being outsourced. It says it has a healthy pipeline of bids both at home and abroad and an order book currently standing at £12 billion.

Smiths, on the other hand, said it will be increasing investment in new products with a higher margin as it warned of the short to medium term challenges of achieving sales growth.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: 065/365: Show us your smile! by dotbenjamin