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roundtable: supporting growth


Lord reported that John Lewis was using retrospective payment discounting on contracted work – reducing its payment by 5% if the supplier’s business with them had increased by 50%.


Forder felt this was a reasonable scheme for a supplier. “In my industry that is fairly common. The press has made a lot of it, but it only comes into operation if the company has actually bought a lot more from me, which can only be a good thing.”


Transparent relationships and knowledgeable advocacy


Toby Steele


Frettingham stressed that, although national lobbying might in time help resolve matters of funding supply and payment terms, in the short- term, businesses needed to resolve their cashflow and working capital issues through closer consultation with their banks or business advisers.


Plainly, finding solutions was much easier if relationships were transparent and could discuss matters in an open, honest and frank manner. It was also essential that everyone fully understood the business and had enough experience and knowledge of the industry to provide workable solutions. Such relationships, that provided informed support and allowed clients to control their own destiny, were the constant aim of his HSBC team, he added.


Lord reported that his company now shared every detail of contract deals with its bank (HSBC).


David Murray ... continued from previous page


days. We will be able to negotiate better terms than that, but for smaller subcontractors, that’s their baseline.


“Such subcontractors can, of course, draw-down on that 120 day invoice earlier, but they will no longer be negotiating with their client, they’ll be negotiating with the bank and ultimately it will cost them more.”


Lord: “Using invoice discounting with 60 days was a good debt. But if you are signing up for 90 or 120 days, then you’ll need fresh approval and that will probably affect your draw-down ability.”


Forder and Crook agreed that the extended payment trend would ripple through the economy from the top down, and ultimately affect all levels.


Frettingham accepted that a lot of corporates are ‘sitting on cash’, but explained: “The recession has brought different disciplines into these businesses, and many are using the trade cycle to help fund their businesses, and are also reducing their costs.”


Steele agreed that there was a new pragmatic mood within the economy, which was being reflected in people pushing the boundaries where possible to improve their financial situation.


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McKenzie noted the upskilling of bank teams since the recession. “Your guys are increasingly being trained to understand what a company does. That wasn’t the case pre-crash, and it’s a definite positive change.”


Rothery suggested there had been a change on both sides: “Previously meetings might have been slightly fractious, people didn’t want to share information with us.”


Crook praised HSBC for its continuity of advisory managers (just three in 26 years). “We recently had a review meeting and we had more than 100 years of commercial experience in the room. That’s what you bring to the table; people who understand and bring added value of relevant interest to our business.”


Frettingham: “It’s not just about the direct relationship with the bank that matters, but also the people we know, the business contacts we can bring to the management table.”


Murray agreed that banks had now dropped their blinkered approach and were trying to broaden client relationships to take in a full network of potential commercial links.


Crook: “We have had direct business gains as a result of our relationship with HSBC.”


Quantitative easing? Has it helped?


Frettingham said the general consensus appeared to be that “it has helped, but we can’t


really say by how much, and things would have been a lot worse without it.”


QE has helped keep interest rates down which in itself has been a bonus for small businesses, he explained, because their real cost of borrowing has been much lower than it could have been.


Forder: “My take is that the gilts owned by banks, insurance companies and pension funds have been bought by the Bank of England and that cash has gone back into those institutions and generally they have bought equity. Has QE actually filtered down to small business lending? In my view it has not.


“QE has also created competitive devaluation, which worries me because US dollars are a big part of my cost-base. Every time sterling goes up, the Bank does some more QE and devalues the currency.”


He also believed those on pension annuities and savings plans would not be happy about the low interest rates, and worryingly may even be spending less ‘grey pounds’ within the overall UK economy.


According to the Bank of England, Rothery pointed out, the UK economy increased by 1.5-2% when QE was first used in 2009. Also, QE seems to be producing positive results in the USA – after a $2.3 trillion input. “Car and mortgage finance is increasing, deals are going through, but the jury is still out. Japan has been using QE since the 1990s and there’s no proven evidence there either.”


Austin agreed things would probably have been worse without QE. He still feared any interest rate increase would hit people who are just about managing. The reduction in consumer spending would “…tip the economy over the edge. And that would hit us hard and fast.”


He also highlighted that the full impact of austerity cuts would be felt in the next 12-18 months.


Steele felt QE had helped his business by keeping interest rates down and putting extra cash in family households. “We all like to go on holiday, and that means airline passenger numbers have increased, which means more need for pilots.”


Austin: “I like the idea of small measures that keep us going in the right direction.”


Forder: “I think the government has lost the plot, doesn’t know what is going on and is detached from helping us in business.”


Growth is firmly on Solent


business agendas Following the Roundtable, HSBC host Frettingham thanked attendees for their valuable input and said it was heartening to hear that the spirit for growth is alive in the Solent, and overcoming business hurdles and negativity about the state of the economy. “It’s been interesting to learn how that spirit is driving different ways of achieving growth, encouraging an increased breadth and depth to the solutions you can use to support the growth of your business.”


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – MAY 2013


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