Tag Archive | "economic recovery"

Finance sector grows confident, leads to more opportunities

The finance and accountancy sector has grown so strong that industry experts say the opportunities for contractors and freelancers for work are off the charts.

Optimism has begun to run higher than ever when it comes to the finance industry, according to recruitment specialists. The first half of 2013 has seen not just permanent vacancies increase by 26 per cent, but contractor opportunities have gone up by a remarkable 46 per cent.

Not only have things over the last six months been positive, but growth has been increasing almost exponentially. Looking back at the growth to just permanent vacancies from June to July, there was an 8.5 per cent rise, and this could indicate that employers have become confident enough to not rely upon interim workers exclusively, like they tend to do in times of economic uncertainty.

But just because employers are hiring on accountants and financial planners on a permanent basis doesn’t mean that all you contractor accountants out there aren’t going to be in high demand any more. As a matter of fact there always seems to be shedloads of demand for interim workers, thanks to one simple fact: they’re much more cost-effective than permanent employees.

Even if confidence is coming up once more, there’s still plenty of uncertainty out there when it comes to whether the economy is truly going to turn itself around. Sure, the prospect of another bank failure might seem rather far-off, but there’s loads of uncertainty in the eurozone right now and there’s really no telling when countries like Greece will get their finances sorted, so there’s more than just a few reasons to maximise incomes whilst minimising outgoings.

Freelancers and contractors can provide fantastic savings to employers when it comes to payroll costs. Finance and accountancy firms – or any firms worth their salt, at any rate – would be incredibly tuned in to these savings opportunities, and that means good news for any contractor accountant or freelance financial adviser that’s looking to increase their client base.

So I wouldn’t worry too much about the economy recovering and ironically making it harder for freelance workers to hold down a job. The best firms out there know the value of interim workers and will want to keep us all employed for years to come, despite the state of the economy here in the UK or how things are abroad.

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Which sectors will be successful in the recovery stakes?

BDO LLP, the global accountancy and business services firm, believes that we will see a clear division this year between companies that take up opportunities to grow and those that are left struggling behind in difficult markets.

BDO’s latest Industry Watch report forecasts a slight rise in business failures in 2012-13. At the same time, it says all sectors will see growth prospects increasing as the economic recovery gets underway. However, it will be a two-speed recovery with firms that are prepared to exploit new markets and increase online sales leading the way, whilst those that depend on cautious consumers and high street sales lagging behind.

Shay Bannon, a business restructuring partner at BDO, explained that companies with innovative products and new distribution channels will have a significant advantage over their competitors, regardless of the sector they operate in. Those who fail to respond run a much greater risk of finding themselves in difficulties.

Firms in the technology, media and telecoms sector are best placed to outperform the wider economy as all industries realise the need for innovative technology if they want to be successful and grow.

On the other hand, companies dealing in property and construction, business services and the leisure industry are still experiencing difficult market conditions. The retail sector also has both challenges and opportunities with the winners being those with a strong on-line presence. Retailers who are prepared to adopt new mobile shopping technology could well be set to reap the rewards.

UK businesses that are prepared to break into Far Eastern markets are also expected to do well. Manufacturers have benefited from the weak pound. Falling inflation and low interest rates and those companies that can adapt their products for new overseas markets should continue to flourish.

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Small businesses lose faith in the UK’s banks

Britain’s sole traders and contractor accountants have lost faith in the country’s banking system, according to the Forum of Private Business.

The FPB is now calling on the government to introduce new measures to restore smaller enterprises’ trust in banks.

The British Bankers’ Association recently published research showing that about 670,000 UK firms have needed funding in the past 12 months but did not submit an application for it. 18% of companies believe they will require finance within the next three months but say they will not be able to apply unless there is a significant improvement in the country’s economic conditions.

The FPB’s senior policy adviser, Alex Jackman, pointed out that the report showed that small businesses have a crisis of confidence when it comes to the banking system in the UK. As well as practical measures to restore confidence, innovative funders must also be allowed to compete in the current bank dominated finance market.

The Bank of England published its Trends in Lending report for May recently and it showed a record decline in the number of approved loans for smaller enterprises. It also stated that the average interest rate payable on small business loans is 4.66%. Two years ago, the rate was 4.29%.

John Walker, the national chairman of the FSB, said that entrepreneurs and limited company contractors should be able to take advantage of healthy competition from the UK’s banks. He pointed out that the 4.8 million small businesses in the UK are the ones that will create jobs and drive the economic recovery, and yet they are getting a worse deal than their larger counterparts.

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Banks must do more to help small businesses get finance

A new report claims that the UK’s financial sector is not doing enough to support SMEs and this is damaging the economy.

Will Hutton, The Work Foundation’s executive vice chair, has submitted the report to the Independent Banking Commission, and says that despite bank assets growing to four times GDP, lending to corporates represents only 5% of all lending.

The report goes on to say that the lack of support for SMEs has discouraged borrowers from applying for loans. This lack of investment reduces innovation levels, which in turn creates a cycle of less dynamism, less investment and less innovation.

The authors of the report want to see rigorous ring-fencing, or separation, of commercial and retail banking operations from investment banking, as well as additional capital being made available. By doing this, internal frameworks would be changed and the financial sector would find it more attractive to lend to smaller firms.

Furthermore, the banks must stop concentrating on balance sheets and start to look on small businesses as positive investments which will strengthen the economic recovery.

The FSB also agrees that lending to small businesses must improve. The banks say small businesses are not applying for credit and yet a recent survey from the FSB shows that around 960,000 of its members asked the banks for a loan in the past 12 months and a third were refused. 16% of those refused were not told why their application was turned down.

34% of those who applied needed the funding to cover cash-flow, but 21% wanted finance to buy new machinery and equipment and a further 17% wanted to expand their business.

John Walker, the FSB’s national chairman, pointed out that the OBR forecasts that business investment will help to drive the recovery but this cannot happen until banks work with companies to make sure they get much needed finance.

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Flexible working and parental leave reforms could harm SMEs

The UK government has pledged to reduce red tape and yet its latest proposals to change parental leave and flexible working will increase bureaucracy, according to the FSB.

The Federation of Small Businesses has expressed its concern that the coalition’s plans to introduce changes to parental leave and extend flexible working will damage small businesses.

Although the FSB has been calling for reform of the parental leave regulations, the government’s proposed solution of allowing parents to take chunks of leave, instead of one block, would make it far more complicated to administer.

The government has launched a consultation on the proposals and the FSB will be contributing by expressing the opinion of small businesses.

The FSB’s national chairman, John Walker, said that despite promising to ease the burden of red tape, the government plans to introduce additional complexity which will make things even more time confusing and complicated for small businesses.

It will be extremely onerous for small firms and limited company contractors to organise workloads and cover for an employee who decides to take parental leave in chunks rather than a continuous block of time. The majority of small businesses already allow flexible working and the FSB urges the government not to make it mandatory for employers to consider requests for flexible working after a 26 week qualifying period as it would pile yet more red tape on them.

David Cameron wants the private sector to drive the economic recovery but changes to these regulations could further deter small businesses from hiring more staff, Walker concluded.

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Banks must treat small businesses fairly says Oakeshott

Accountants for contractors and other small business owners might be interested to hear that Lord Oakeshott has accused the banks of treating them unfairly.

The former Lib Dem Treasury spokesman pointed out that there are large discrepancies between the interest rates charged on loans to large organisations and those levied on small businesses. Figures from the Bank of England show that big firms pay an average rate of 1.78% on a £20 million loan and yet a smaller loan of £1 million would attract a rate of around 3.69%.

Lord Oakeshott would like to see the government put immediate pressure on the banks to rectify this situation and show that it is serious about helping small businesses lead the economic recovery.

One bank that it trying to do its bit is Spanish based Santander. Last week, the bank announced that it had secured £150 million from the European Investment Bank so that it can provide loans at discounted rates to firms with less than 250 employees. Funds are available immediately for companies requiring a loan of up to 12.5 million Euros over a minimum period of two years.

Santander has already pledged to increase lending to SMEs by 25% this year. The bank is increasing overall lending by £6.7 billion and £4 billion has been set aside for small and medium sized enterprises.

115,000 SMEs in Europe benefited from funding from the EIB last year and 30 billion Euros have been lent to European SMEs over the last three years, of which 2 billion Euros went to small businesses in the UK.

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Would contractor accountants give up £11,000 a year to work a four day week?

Latest research from Marks Sattin shows that professionals in the accountancy and financial services sector would be prepared to give up £11,000 a year if they could work a four day week and have a better work/life balance.

The firm surveyed almost 3,000 finance professionals and discovered that two thirds of them would accept a salary cut of 20% in order to enjoy a three day weekend.

Marks Sattin’s MD, Dave Way, pointed out that now the economy is recovering, employers are under less pressure to make redundancies and employees are prioritising a better work-life balance. Employers should now be considering whether their employment terms have the flexibility to satisfy this demand.

Modern technology has fuelled this desire for a shorter working week as more and more employees find it difficult to escape from work. People with phones such as BlackBerries say they spend two and a half times longer checking emails than those without smart phones.

Smart phones enable online accountants to work remotely and this has increased users appetite for a longer weekend because of the amount of work they do outside normal office working hours.

However, the government probably wouldn’t be so keen on the idea of a four-day week. Marks Sattin also claims £24 million a day would be lost in income tax, costing the treasury £1.2 billion a year!

Meanwhile, workers in the UK take an average ten days unauthorised leave every year, twice as much as their counterparts in the US, according to a recent study from PwC. The firm has calculated that these unscheduled absences cost British businesses about £32bn every year.

Technology companies have the lowest rate of unauthorised absences at 7.6 days followed closely by banking and finance at 7.8 days.

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Could contractor accountants try out flexible working?

The CIPD has backed the coalition’s plans to hold an early consultation into extending the right to request flexible working to cover all employees.

The Institute expressed disappointment that parents of older children were not to be given the right to request flexible working but said it was a positive sign that the issue is to stay on the political agenda.

The government has scrapped its plans to allow a wider range of employees to request flexible working for fear that it would lead to increased costs for businesses which in turn could hamper the economic recovery.

Ben Willmott, the senior policy adviser at the Institute, said he was heartened that the coalition has committed to an early consultation on the issue. However, the CIPD will continue to urge government to extend the flexible working right to all employees at the earliest possible opportunity.

He added that flexible working should not be seen as a regulatory burden and additional cost as many employers have already discovered that it actually makes sound business sense.

Millions of UK workers already enjoy flexible working because their employers recognise that a flexible workforce is more diverse, engaged and effective. This is likely to become even more salient as the economic recovery progresses and competition for top talent increases.

Regardless of government legislation, many companies will continue to build a flexible, family-friendly culture in their organisation and will be in a better place to attract and retain the skilled, experienced workers they need.

Willmott ended by saying that it was a sensible motivation and retention strategy to accommodate the wishes of employees wherever possible as it boosts organisational performance.

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Businesses are reasonably confident but consumers are not

New research from KPMG shows that whilst the majority of UK companies are optimistic about the prospects for the future, the complexity of rules and regulations are still a barrier to growth.

YouGov conducted the survey of more than 500 firms and discovered that 72% of companies think there is an opportunity for their business to grow despite the government’s austerity measures.

56% of businesses are still confident about the general outlook for their company and 47% said overseas opportunities are helping UK firms compete better globally. 26% of the survey’s respondents also reported an increased production capacity.

60% of businesses and limited company contractors said they were concerned how the budget would impact their firm and 52% highlighted the fact that complicated rules and regulations restricted their ability to grow. 43% of business owners are also still concerned that it is hard to access funding from the banks.

KPMG’s head of UK markets, Malcolm Edge, said businesses agree that the government needs to do more to encourage growth. Companies need the assurance that something will be done to reduce bureaucracy and provide support to help companies achieve sustainable growth.

Whilst businesses are generally optimistic, the opposite is true of consumers. The most recent report from Nationwide shows a significant fall on consumer confidence last month.

The chief economist at Nationwide, Robert Gardner, said consumer confidence has now fallen to its lowest level since the institution started its regular survey.

There are many factors that could be contributing to this, he continued. We still have a fragile labour market, high unemployment and a weak growth in salaries. There is little sign of inflation easing and disposable incomes have been hit by rising fuel costs and the increase in VAT. The economic recovery is still sluggish and there was not much positive news last month to boost consumer’s confidence, he concluded.

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Are contractor accountants held back by employment legislation?

Contractor accountants should be aware that the government is planning to overhaul the UK’s employment laws in order to help the economic recovery.

One of the proposals, which has already provoked fury, is to allow firms to fire employees who are underperforming during their first two years of employment, without the threat of facing an unfair dismissal tribunal. Under the current regulations, an employee can seek redress from an employment tribunal if they are sacked after 12 months.

The coalition is also looking into the system of tribunals at present. Business groups, such as the BCC are urging for immediate reform but the TUC suggested that workers could be discouraged from seeking justice if major changes are implemented.

Union leaders are also concerned that increasing the qualifying period to two years could give a green light to unscrupulous employers to break the law.

The coalition is likely to launch a consultation into the future of tribunals after business groups complained that there was a 56% increase in the number of cases in 2010.

One possible solution would be to charge claimants a deposit of up to £500 which would be refunded if the case was successful. But the TUC argues that this will deter low-paid workers from seeking justice.

Meanwhile, Vince Cable, the business secretary, has been asked to look into whether small businesses could be exempted from some employment regulations but any such changes could see the government in hot water from the EU.

David Cameron wants to see new jobs created this year in order to boost the economic recovery and whilst large companies have promised to do exactly that, smaller firms need more encouragement. Reforming the employment tribunal system and reducing the red tape for small businesses could go a long way towards providing it said David Frost from the BCC.

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What does 2011 hold for contractor accountants?

The Autumn Statement from the government showed a revised prediction for economic growth next year. Previously the coalition has predicted growth of 2.3%, but this figure has now been lowered to 2.1%.

However, the IoD disagrees with this, claiming that economic growth in 2011 will be much lower. It likened the recovery cycle to a square root sign which has witnessed a temporary spurt in 2010 but will level off next year.

The IoD commented that the Comprehensive Spending Review has caused too much doom and gloom and the UK needs to realise that there are also other weaknesses in the economy. Lower than expected growth could cause George Osborne to increase taxes, a move which would affect contractor accountants and other freelancers. In fact, if the government’s predictions for GDP are accurate, the chancellor will have to choose between tax increases or further spending cuts if the coalition is to meet its budget deficit targets.

In other related news – although the government has committed to reducing corporation tax, the IoD claims that the new moves still do not go far enough towards attracting more foreign invest in the UK.

The IoD’s head of taxation, Richard Baron, said that whilst the Institute welcomed the fact corporation tax is set to reduce to 24% that still leaves the UK in the bottom half of the list of countries with an attractive rate.

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Vince Cable celebrates Global Entrepreneurs Week

The government is determined to get rid of quangos and yet advisory groups are already popping up around the small business regulations and tax issues that affect contractor accountants and their clients.

On Monday, Vince Cable, the business secretary, created the Entrepreneurs’ Forum to advise the coalition on business and enterprise policies. The group, which is made up of high profile entrepreneurs, will meet four times a year to give informal and personal advice. 16 entrepreneurs have already been appointed to the forum, including Jan Fletcher and Sarah Tremellen, and there may be up to 10 more members.

Setting up the Entrepreneurs Forum was one of the ways Vince Cable marked the start of Global Entrepreneurship Week. He also created a new business mentoring network. The network consists of around 40,000 business mentors who will help start-up enterprises across the country access information and advice on running a successful business.

The business secretary called on firms around the country to join the mentoring network. People who have started up their own successful company have to be the best mentors for new start-ups, he commented.

Cable also remarked that start-up businesses and limited company contractors are going to be important to the country’s overall economic recovery. He said that not only do start-ups create jobs, they stimulate innovation and provide competition for existing businesses which encourages them to increase productivity.

Recently, the government confirmed that the Enterprise Finance Guarantee scheme will continue for the next four years. About £2 billion will be made available to firms through the scheme.

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Contractor accountants could benefit from skills shortages

Over 50% of people working in accounting and finance departments think the economic outlook is good at the moment and staff growth has gone up by 30%.

However, on the downside, many are warning that another wave of redundancies is inevitable.

Poolia, a specialist recruiter, conducted a survey that found financial departments are more positive about the economic outlook for next year although they do still have concerns over staffing levels.

57% expect to see revenue growth next year, 40% predict an increase in projects and more than 30% anticipate increasing recruitment.

The general manager at Poolia’s finance and accounting practice said that there will a race for talent next year but the long term outlook will remain challenging. Companies cut back on vital trainees during the recession and now find themselves in need of experienced workers. However, there is currently a shortage of people with the right skills to meet this demand. 38% of firms are struggling to recruit skilled employees at managerial level and 40% reported problems finding transactional clerks. This lack of supply could lead to more opportunities for contractor accountants.

George Osborne is reasonably confident that the government has taken the correct measures to secure a sustainable economic recovery. While speaking to reporters at the G20 summit in Seoul he said that economic data had been on the optimistic side for the past few weeks and that gave him cause for confidence.

The Bank of England on the other hand is erring on the side of caution saying the outlook remains uncertain. Mervyn King expects the recovery will continue but its strength will depend on developments in the world economy.

Inflation will remain high next year due to the VAT rise, rising energy bills and an increase in the cost of raw materials, but should fall below the 2% target in a couple of years.

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Online accountants in for a rocky ride

Contractor accountants should take note that the CBI warned recently that although the economy has been showing signs of improvement, challenges and uncertainty still lie ahead.

The comment came after the Bank of England decided to maintain the historically low interest rates at 0.5% last week.

The head of economic analysis at the CBI, Lai Wah Co, said that although the move was widely expected, there is growing disparity amongst members of the Monetary Policy Committee over the strength of the economic recovery.

GDP has increased by 1.1% in the past three months according to government figures but this is expected to slow down during the second half of 2010. The recovery is being supported by an exceptionally loose monetary policy and it may be sensible to move towards gradually withdrawing this monetary stimulus, the CBI expert remarked.

Meanwhile, the majority of the UK’s small businesses and limited company contractors have still not returned to pre-recession levels of profitability. 70% of British entrepreneurs have not seen their profits return to normal after the credit crisis, according to RSM Tenon’s Business Barometer.

9% of entrepreneurs believe they will have to wait for at least another 3 years before their business returns to normal, 20% think between 2 and 3 years and 27% say 1 to 2 years.

Over 40% of entrepreneurs have had to review their business through fears of a double dip recession and 22% think that a lack of cash flow could seriously threaten their operation in the coming 12 months.

The head of recovery at RSM Tenon said that they are expecting to see corporate insolvency levels remaining the same as over the past two years as business owners still struggle to secure additional funding.

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