News in brief: freelancers, alternative finance, APR, innovation,

News in brief
News in brief

Growing confidence among freelancers

Around 35% of freelancers felt confident about their work prospects in the third quarter of 2015, compared to 28% in the previous quarter, according to a study by the Association of Independent Professionals and the Self Employed (IPSE).

This follows the government’s decision to get rid of the IR35 small business tax, which would have seen freelancers, contractors and small businesses lose out on tax relief on travel and subsistence.

Commenting on the study, Intuit QuickBooks Europe VP and MD Rich Preece said: “The number of self-employed individuals in the UK is at a 40-year high according to the ONS, so it is great to see that confidence is also on the up following the Government’s decision to abandon plans to change the IR35 small business tax. These individuals will no longer lose out on tax relief and subsistence, which could make a big difference to those going it alone.”

Alternative finance on the rise

Despite bank lending to small businesses falling significantly in December, the popularity of alternative lending platforms is booming, according to both the Bank of England and the Peer-to-Peer Finance Association.

Commenting on the Bank of England’s Money and Credit statistics for December, Funding Circle UK managing director James Meekings said: “Marketplaces like Funding Circle are stepping in to help businesses access the finance they need to grow. Peer-to-Peer Finance Association figures, released today, show that more than £2.2bn was lent in 2015, with borrower numbers doubling, and since launching in 2010, an estimated 46,000 new jobs have been created by borrowing through Funding Circle alone."

Campaign calls for APR for SME finance products

SME overdraft provider Growth Street has launched the APR4SMEs campaign, which demands the introduction of an annual percentage rate (APR) on SME finance products. The firm has submitted its proposals to HM Treasury in advance of the Chancellor’s 2016 Budget announcement.

At present, commercial finance offered to limited companies falls outside the scope of the Financial Conduct Authority (FCA) and is unregulated. There is therefore no requirement for commercial finance providers to disclose the APR of their products. This allows providers to employ opaque tariff charges, hide fees in complex terms and conditions, and make it difficult for firms to compare the cost of finance. As a result, SMEs are often misled and end up paying far more than they should, with a detrimental impact on profitability, growth and local employment.

Ian Cass, Managing Director of the Forum of Private Business, which is supporting the campaign, says: "Business owners want to focus on developing their business not wading through terms and conditions to try to work out what financial product is right for their business. Although it is limited, APR is widely understood and will help businesses to make informed decisions. That is why the Forum, along with many other employers, supports this measure."

Digital innovation benefits mid-sized businesses

Mid-sized businesses – those with between 50-249 employees – have seen greater savings in their business from investing in digital innovation than smaller firms, according to a survey conducted by ICM on behalf of the Business Banking Insight (BBI), an initiative supported by the British Chambers of Commerce (BCC) and the Federation of Small Businesses (FSB).

Two fifths of mid-sized firms (39%) believe digital innovation has led to real cost savings, compared with just a quarter (25%) of sole traders.

Companies working internationally tend to be more positive about digital innovation. Well over a third (36%) of international companies said it has resulted in cost savings, compared to just a quarter (25%) of firms who do not trade across borders.

On average, only one in 10 SMEs invest over 10% of their turnover in their digital capabilities. However, information and communication companies, perhaps by the very nature of their specialism, invest the most – with 30% of firms investing in excess of this.

At the other end of the spectrum sit mining, energy, water and waste firms. In this sector fewer than 5% of firms invest over 10% of their turnover in their digital capabilities.

Investors eye UK SMEs in 2016

Investor appetite for UK based SMEs is at its highest level for five years, according to research from Lyceum Capital and Cass Business School.

Analysing private equity investments in 2015 with an enterprise value between £10m and £100m, the Lyceum Capital and Cass Business School UK Growth Buyout Dashboard reveals that the volume of transactions increased by 12% over the year, with 87 investments totalling £3.43bn.

Total deal volumes remain 30%-40% below the highs seen before the financial crisis, but the recent increase appetite for deals is expected to continue in 2016 with investors focussing on companies’ earnings quality and growth potential.

The majority of investment activity took place in the second half of the year, as the uncertainty leading up to the General Election subsided. The value of acquisitions in the £25-75m range grew 52% to £2bn year-on-year, an indication of improved investor confidence in established businesses that want to accelerate growth.