< Previous East Midlands Business Link www.eastmidlandsbusinesslink.co.uk END OF YEAR SUCCESS STORIES W ith a year of continued geopolitical uncertainty, economic stagnation, a cost of doing business crisis, skills shortages, a tough budget for business after a landslide general election, further trade challenges thanks to Brexit red tape, the collapse of household names, and increases in insolvency-related activity, these are just a handful of the headline issues that have made 2024 another concerning year for businesses. Positively, the country managed to emerge from a short recession, saw slight improvements to stubborn inflation (though expectations remain for this to rise again), and high interest rates finally started their slow decline. Fortunately, 2024 has not been all doom and gloom for the East Midlands, with businesses working hard to find their own success, make more out of less, and bolstering their resilience. According to the East Midlands Chamber’s Quarterly Economic Survey for Q3, businesses in the region continue to project to make profit over the next year but are currently hesitant to spend, investing less in machinery and training, and are showing less confidence in turnover, painting a picture of what East Midlands Chamber Director of Policy and Insight Richard Blackmore describes as “cautious optimism.” Meanwhile the latest research (at time of writing) from the Midlands branch of national insolvency and restructuring trade body R3, based on an analysis of Bright spots in the gloom Bright spots in the gloom 2024 has been another bumpy year for our region and its businesses, but there have also been bright spots. www.eastmidlandsbusinesslink.co.uk East Midlands Business Link END OF YEAR SUCCESS STORIES © stock.adobe.com/ Андрей Нелупов data from business intelligence provider Creditsafe, claims East Midlands entrepreneurs are fighting back against current economic challenges with an uptick in start-ups in the region and a decrease in the amount of businesses in liquidation with outstanding debts. R3’s figures show a month-on-month increase of 16.6% in the number of companies set up in the East Midlands in October, rising from 2,145 to 2,500, while the number of businesses in liquidation in the region who owe money to their creditors has fallen by 29.1%. R3 reports, however, that insolvency-related activity in the East Midlands – which includes liquidator and administrator appointments as well as creditors’ meetings – has risen by 29.2% over the same period, but this increase should be taken in context. R3 Midlands Chair Stephen Rome, a partner at Penningtons Manches Cooper in the region, said: “The increase in insolvency activity, coupled with latest national statistics from the Insolvency Service, suggest directors are seeking early professional advice – a key campaign focus for R3. The indications are that there are more companies that have the potential to be rescued via a sale out of Administration, which is the preferred outcome for members of the profession.” 2024 has seen many bright spots for the East Midlands, providing hope amidst a nationwide air of pessimism. Following the green light for Derbyshire, Nottinghamshire, Derby and 22 Á East Midlands Business Link www.eastmidlandsbusinesslink.co.uk END OF YEAR SUCCESS STORIES Nottingham’s devolution deal, creating the East Midlands Combined County Authority (EMCCA), the area’s first Mayor, Claire Ward was appointed to lead the EMCCA, which has access to more than £4bn of new investment in the region for skills, transport, housing and regeneration and net zero. It is hoped the historic moment in the region can turn around decades of underinvestment and ensure decisions about issues affecting the future of people, places and businesses across the East Midlands will now be taken here in the region rather than in Westminster. Following the Mayor’s appointment the EMCCA saw a number of milestones this year, such as the launch of EMCCA’s Business Advisory Board, seeking representatives to help strengthen the connection between EMCCA and local businesses, a cash boost from the EMCCA to facilitate the build of nearly 1,500 homes on brownfield sites across the region, and the launch of an £8m Early Stage Angel Investment Fund, to stimulate investment and growth in ‘early stage’ companies. The EMCCA is also launching a high- powered Inclusive Growth Commission which will identify how the region can harness major opportunities and tackle its challenges over the next decade and beyond. Its work will guide how the EMCCA invests its £4bn funding pot, with the RSA (Royal Society of Arts) to run the Commission, chaired by the RSA’s Chief Executive, Andy Haldane – the former Chief Economist of the Bank of England – who will be joined by a team of national and regional experts including Sir John Peace, Chairman of the Midlands Engine and one of the founders of the Nottingham-based global business, Experian, and Gillian Sewell, the CEO of YMCA Derbyshire. While the East Midlands Combined County Authority starts to progress, elsewhere in the region, devolution is being eyed and moving forward. North and West Northamptonshire Councils have partnered with four other authorities in the South Midlands on an expression of interest to Government toward devolution, whereas devolution for Greater Lincolnshire is to go ahead, bringing together North East Lincolnshire, North Lincolnshire, and Lincolnshire County Council as the Greater Lincolnshire Combined County Authority, with a mayoral election scheduled for May 2025. The deal involves a total investment fund of £720m over the next 30 years for priority areas of jobs and skills, housing and highways, transport, the environment and nature, net zero, digital improvements, www.eastmidlandsbusinesslink.co.uk East Midlands Business Link END OF YEAR SUCCESS STORIES and innovation and trade. There is also an initial capital funding pot of £28m. Considering other exciting future prospects for the region, East Midlands Freeport revealed in July that it is actively talking to a number of potential national and international investors as it accelerates plans to unlock the potential for tens of thousands of new jobs in the region. Launched last year, the Freeport has set up three ‘tax sites’ where there are lower tax rates aimed at speeding up business investment, job creation and economic growth. The three sites cover around 1,300 acres of land and include East Midlands Airport Gateway & Industrial Cluster, East Midlands Intermodal Park, next to the Toyota manufacturing plant just outside Derby, and the Ratcliffe-on-Soar Power Station site, which was in the spotlight this year following its closure, marking the end of coal power in the UK and where owner Uniper has a vision to transform the site into a destination for zero carbon technology and energy. Ratcliffe-on-Soar represents one of many sites in the East Midlands to lead in clean energy, with the West Burton power station, for example, set to be transformed into the home of the UK’s first STEP fusion energy plant. In September East Midlands Freeport further announced that it would invest more than £2m to allow a new generation of students to be skilled up for careers in advanced manufacturing and clean energy. More support to the region’s advanced manufacturing and green industries came in the budget, with confirmation by the Chancellor of the £160m East Midlands Investment Zone scheme. The funding for the sites at Infinity Park Derby, Hartington in Staveley, and The Explore Park in Worksop will be spread over 10 years. The East Midlands Investment Zone will offer a range of incentives to firms within its boundaries, such as business rates retention and tax benefits, to help boost economic growth. It is anticipated that the Investment Zone could encourage £383m of private investment and help to create 4,300 jobs in the region. The £160m will also provide funding and grants for investment proposals and business cases, for developing new technologies, skills and training, and for research, innovation roadmaps and pilot projects. These instances represent just a few of the major milestones for the East Midlands in 2024, with more success stories to be found in each city, town, and businesses across the region. Though challenges remain as we look to 2025, our region is an innovative and resilient one, with the past year’s highlights offering hope for the future. © stock.adobe.com/Neil© stock.adobe.com/Ian East Midlands Business Link www.eastmidlandsbusinesslink.co.uk INVOICE AND FINANCE SOLUTIONS L ate payments are a longstanding problem, particularly for small businesses, hitting firms’ cashflow, reducing their ability to invest, and wasting valuable time chasing unpaid invoices. The scourge of late payments is costing SMEs £22,000 a year on average, according to the Smart Data Foundry, and as noted by FSB research, leads to 50,000 business closures a year. New research published by the Department for Business and Trade further shows that payment problems multiply the further down the supply chain you go; as delays to payments increase with each business along a supply chain, this sees smaller businesses generally experience more issues with late invoices than larger firms. The research found that there is a clear imbalance between big and small businesses, and that administrative errors are a major factor in creating slow payments with 24% of firms saying that invoices being incorrectly handled added to delays. Leaving many businesses struggling to survive, the issue is only getting worse, with small businesses facing the longest late payments times since the pandemic, according to the latest Xero Small Business Insights (XSBI) data from Xero. To help crack down on late payments, in September the government unveiled new measures to support small businesses and the self-employed, revealing it would consult on tough new laws holding larger firms to account and get cash flowing back into businesses. The package of measures includes replacing the current Prompt Payment Code with the Fair Payment Code, launching in the autumn, with businesses looking for official recognition under the code needing to prove they have met good payment standards before being awarded official code status. This is designed to push businesses to pay faster more often, to be awarded either gold, silver, or bronze status. The measures also involve legislation The late payment plague While the government considers how it can interject, businesses are left on the brink of closure as a result of late payments. www.eastmidlandsbusinesslink.co.uk East Midlands Business Link INVOICE AND FINANCE SOLUTIONS © stock.adobe.com/dizain requiring all large businesses to include payment reporting in their annual reports — putting the onus on them to provide clarity about how they treat small firms, allowing company boards and international investors to see how they are operating. Enforcement is also to be stepped up on the existing late payment performance reporting regulations. Under current laws, responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records. By cracking down on late payments the government hopes to unlock growth for 5.5 million small firms by enabling them to invest their time hiring more employees, boosting wages, and exporting around the world, rather than chasing down late payments. As we wait to see how effective the government’s measures will be, businesses are left to put in place structures to mitigate late payments, ensuring they use invoicing best practices. While on a basic level this can involve making and agreeing on clear payment terms with clients before work 26 Á East Midlands Business Link www.eastmidlandsbusinesslink.co.uk INVOICE AND FINANCE SOLUTIONS begins, completing credit checks on customers to flag potential problems, using professional invoicing software, automating invoicing and follow up, offering multiple payment options, and introducing late payment charges, there is only so much a business can do to encourage a client to pay on time. For some businesses, then, invoice finance becomes a necessary lifeline. Invoice finance helps businesses bridge the gaps in between providing goods and services and being paid. It involves lenders using unpaid invoices as collateral for funding, giving businesses rapid access to a percentage of the value of those invoices, usually within 24 hours. Upon taking out an invoice finance facility, businesses can assign some or all customer invoices that are currently outstanding to the finance provider. They will then have access to up to 80 or 90 per cent of the value of those invoices, with the remaining 10 or 20 per cent (minus the finance provider’s fees) made available upon payment of the invoices by the business’s customer. Invoice finance is a good way of unlocking working capital quickly and improving cashflow, which can be critical to daily operations, payroll, amongst other costs. There are two main types of invoice finance to consider. With invoice factoring, a finance provider will advance up to 90% of the value of invoices almost instantly (determined by the quality of the businesses owing money and the likelihood of invoices being paid), overcoming the 30 day, 60 day, or longer wait for payment by customers. It will also manage your sales ledger and be involved in collecting payment for invoices direct from customers. In this case customers will likely know that a business is using a factoring provider, which could impact relationships (especially if the provider you use employs aggressive collection methods), and the service fee percentage will generally be higher due to the sales ledger management support. Invoice discounting works in a similar manner to factoring, with the finance provider lending up to 90% of the value of www.eastmidlandsbusinesslink.co.uk East Midlands Business Link INVOICE AND FINANCE SOLUTIONS © stock.adobe.com/Andrey Popov invoices almost instantly. However, invoice discounting (more often used by established businesses with larger turnovers) is finance-only, without the additional sales ledger management and collection activity, and the service fee percentage will generally be lower. Other types of invoice finance are also available, with selective invoice financing for example presenting the flexibility to finance selected customer accounts, while spot factoring provides the option to finance distinct invoices. In difference from factoring and invoice discounting these options do not necessarily provide ongoing finance, instead offering the choice of deciding which invoices to finance while managing the remaining ones as normal, making them helpful for firms with occasional working capital needs. Which form of invoice financing to choose will depend on a business’s size, situation, requirements, and preferences. By using invoice finance, with unpaid invoices as collateral, businesses can capitalise on an often-unused asset on a balance sheet and rely less on other forms of security, protecting assets. There is also usually flexibility to how you spend the money in your business, so long as it is used to run it, whether it is utilised for inventory, staff, or other activities. Invoice finance is additionally a scalable option, with more funds available as business turnover grows, and can work well next to other lending facilities, whether they be term loans or asset finance. Of course, invoice finance has its disadvantages too, such as being held responsible if customers fail to settle invoices, loss of control and an altered view of your business by clients where invoice factoring is concerned, typically strict eligibility criteria, and potentially costly interest rates and processing fees. With late payments harming businesses across the country, firms are left burdened with the need to find a method of overcoming this ever-present challenge, before becoming one of the tens of thousands of businesses forced to close a year as a result of the problem. East Midlands Business Link www.eastmidlandsbusinesslink.co.uk TAX You might think that your payroll is high now, but it is going to get even higher next April Michael Ball, tax partner at Streets Chartered Accountants, considers the impact of upcoming changes to National Insurance contributions and minimum wage. T he first Labour Budget in 14 years was supposedly billed as being one to drive growth, though it is hard to see how this will come about as from next April, businesses face increased costs of employing people with the rise in the national minimum wage to £12.21 an hour and employers’ National Insurance from 13.8% to 15%. Furthermore, the threshold at which employees’ earnings are liable for employers’ NIC will drop from £9,100 to £5,000. Whilst employers are set to benefit from the change in the amount of employers’ allowance that they can deduct from their bill from £5,000 to £10,000, the overall cost for most is set to rise significantly. By way of an illustration, a business employing 100 workers working 40-hour weeks at minimum wage, from next year will face an extra £103,000 in NI and an extra £160,000 in salary. So, a total extra cost of £263,000, though if you are a company the corporation tax relief available brings it down to £197,000. It is widely reported and acknowledged that whilst the changes to NIC will affect all businesses it will be especially hard hitting for those in the hospitality and care sectors and all of those for which staff costs are the greatest cost. Measures to manage the impact of the hike in employers NIC are likely to include: * consideration to reducing head count * reducing hours and the staffing mix * replacing labour with technology * holding off recruitment and even a freeze on pay or reduced pay awards in 2025. Perhaps one of the more common approaches to soften the blow is offering a salary sacrifice scheme, whereby employees agree to reduce their gross salary in exchange for a non-cash benefit, such as additional pension contributions, tech schemes, electric vehicle schemes or bike-to-work schemes. However, care must be taken to ensure the overall package remains attractive to employees. For those employees who are company directors, it may be worth considering looking at alternative remuneration and paying a portion of their income as dividends instead of salary, as dividends are not subject to NICs. However, this approach requires the business to be profitable to make such payments. For others it might be a good time to look at taking on an apprentice, as employers who employ apprentices under the age of 25 pay a lower rate of National Insurance contributions. Under certain conditions, they may be eligible to pay no employer NICs on apprentices’ earnings up to a certain threshold. Whilst April may seem some time off, all employers and especially those with a larger number of employees and/or those for whom their payroll is the greatest cost, will need to assess and consider the impact of the pending changes. Assessing the potential increase in both your wage and NIC bills is paramount, as is talking to your accountants and their tax teams about any strategy to manage the situation. It is vital that any steps or actions taken do not fall foul of HMRC’s rules and regulations. Non compliance can lead to penalties, fines, and even reputational damage. There could also be a risk that any action taken, whilst seeming to save on tax, could lead to another unintended tax liability.Next >