Business Confidence Ticks Up

After seemingly weeks of dull weather, the warm sunshine of the last week in Devon and Cornwall reminds us that Summer is on its way. Unlike many commentators I view this week’s new lending figures from the Bank of England with guarded optimism. The good news is that money is starting to flow more freely, with an increase in lending to individuals and an improving trend in corporate lending, particularly by Barclays and Nationwide, which have together lent an additional £11b over the last year.

Hopefully, over the coming months it will become easier for companies to access finance as banks draw on the £70b available at the Bank of England under the Funding for Lending Scheme.

If we are to avoid a decade of austerity, it is vitally important for the five million UK businesses to pick up the baton as they employ some 24 million people, of which about a tenth are situated in the West country. Confidence remains key to the recovery, which is reflected in some companies hoarding cash; the British Bankers Association estimates that corporate cash balances now stand at around £126b.

From my discussions with small business owners locally, there are some clear themes. The first is a focus on tax mitigation to ensure that hard earned profits are not dissipated but are applied to legitimate strategies for reducing both corporation tax and personal income tax. On the basis that capital allowances and pension contributions have been considered, advice in this area may focus on tax-efficient investments for both the company and business owner. Furthermore, where there is surplus cash this can be put to work rather than lying idle at a low rate of interest.

The second key area is implementing an investment plan to drive both business growth and personal wealth creation. Many people have old-fashioned poorly performing personal pensions, which can often be beneficially moved to new flexible pension arrangements financing the purchase of business premises or future expansion plans. Where appropriate, pension funds can borrow to buy commercial property, or where a larger property is considered, the ownership can be shared with the company, other individuals or their respective pension funds. A strategy such as this avoids the pitfall that many business people face, which is to focus solely on their business to the detriment of their own personal financial planning.

The third area of advice is generally centred on pension auto-enrolment for staff. This offers employers the opportunity to reward and retain staff by offering good retirement benefits, as well as stay within the law.

Finally, with low interest rates, now is a good time for companies and directors to review any debt finance and potentially restructure. In addition, as confidence improves, I am seeing increasing enquiries for new borrowing to fund both commercial and residential property across the region.

[Matthew Clark, Western Morning News, 6 June 2013]

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