Further Troubles For the Energy Sector Following Brexit Vote

As the surprise result of the EU Referendum in favour of Leave was announced, the financial markets illustrated rapidly the turbulence that could lie ahead for the world’s fifth biggest economy.

The pound immediately collapsed spectacularly to its lowest level against the dollar since 1985. As British financial leaders sought to reassure nervous financial markets, the pound did start slowly to bounce back, an ongoing trend which continued after the weekend. Amidst the economic (and political) change sweeping the Continent, International Monetary Fund Director Christine Lagarde called upon both Britain and Europe to work together in cooperation to ensure that any withdrawal will occur smoothly.

Intentionally for the British no negotiations will start immediately – much to the anger of EU and European leaders. This allows for a ‘breathing space’ for both the economic and political arenas. The very many political uncertainties linked to any withdrawal process are also set to impact Britain’s upon economy (and indeed the greater European economy) in the medium to long-term, according to many economic experts. Prior to the Referendum, and his subsequent resignation as Prime Minister, David Cameron had warned that it could take over a decade to completely withdraw from the trading bloc, and to negotiate any new international trade deals.In addition to that, the World Trade Organisation has warned and predicted that British exporters risk an extra £5.6bn ($8.2bn, €7.2bn) in additional annual customs duties after leaving the reading bloc.

With all parties stressing that it is currently ”business as usual”, it is unlikely that these tariffs and duties will be implemented any time soon. Both the British and European banking and manufacturing sectors (noteably the car manufacturing industry in Germany) have made it quite clear that many jobs would have to be relocated from Britain to Europe as a result of the vote. Indeed, American investment banking giant JPMorgan Chase was the first financial institution to directly warn that it could very likely relocate British jobs abroad in reaction to the Leave vote. JPMorgan currently employs 16,000 people in Britain; Chairman & Chief Executive Jamie Dimon has previously said that nearly 4,000 jobs could move out of Britain.

It is not just finance and manufacturing that will be negatively impacted upon – the energy sector, amidst other areas, will suffer in the short term as well. With oil prices already troubled, the Leave vote will not improve the energy sector.

Both the Petrol Retailers Association (PRA) and the AA initially warned motorists to expect a 2p to 3p increase in fuel prices fairly soon. The first weekend saw only a very slight rise in petrol prices overall. On the oil markets, oil prices fell on the Friday. Brent crude ended up falling, to trade at $48.30 a barrel. The U.S. counterpart, West Texas Intermediate, also dropped 5% to $47.57 a barrel. Many oil analysts and traders were in agreement, though, that the decline in oil prices was likely to be mostly short term. With the Pound Sterling falling against the U.S. Dollar, most oil prices were expected to fall slightly in any event, with a strong dollar tending to suppress oil prices. This is because oil is traditionally priced in dollars, and a stronger dollar makes oil that more expensive for holders of foreign currencies.

In the more longer term, great uncertainty hangs over the British oil and gas sector, which was already seeing market challenges. There is no clear indication as of yet of what sort of trade deals the UK will now be able to establish with the EU. One unattractive possibility is the loss of free movement of people between the EU and the UK. Without that free movement of labour, companies could see increasing labour costs, and more bureaucracy – this at a time when the sector overall is trying to minimise expenses and reduce operating costs.

Similar uncertainty is at work for the nuclear power industry – specifically Hinckley Point. French energy giant EDF has yet to finalise proposals to develop and build, with foreign and domestic assistance, the next generation of nuclear power plants. however, following the Leave vote, the two planned power plants could be put on hold by EDF, or even cancelled.

The £18bn project, now that it involves the French giant dealing with a non-profit EU nation, is now considered by EDF to be a risky long term project and investment. Whilst publicly asserting their existing commitment to Hinkley Point, all evidence points to a feel in EDF to phase or even cancel the project amidst domestic and European political and economic uncertainty.

What will happen regarding Hinckley Point remains to be seen – just as the long term result of the Out vote on the fortunes of the troubled oil and gas sector also remain to be seen.

Rest assured, following the Leave vote there will be great change economically, both good and bad – and not just for the energy sector.



06 2016

Businesses Losing £1 Billion to Energy Practices

Light BulbResearch from major energy company Npower has suggested that the UK’s businesses could be saving up to £1 billion collectively on their energy bills by changing their energy usage practices. The Big Six supplier said that many energy-conscious companies tend to rely on technical solutions in an effort to drive down usage, but that changing their “energy behaviours” could ultimately prove more effective.

Npower is one of the UK’s major domestic energy suppliers. The business market, however, is quite far removed from the domestic market, and is highly competitive. According to a study by Energy UK, there are currently a total of 24 energy suppliers serving the UK’s businesses, of which more than 20% only became active in the market for the first time last year.

Almost a year ago, Npower purchased energy consultancy RUMM to support its efforts to increase its presence and prominence in the business energy supply market. It is from RUMM that this behaviour-focussed approach to reducing energy usage is derived and, according to a spokesperson for the company, it aims to use this approach to help its business customers make savings of £1 billion on their energy bills.

There are plans for Npower’s “carbon psychologists,” as the company calls its energy behaviour analysts, to help businesses to help companies cut their energy bills through better usage practices. The experts will create programmes, the supplier says, which are designed to encourage more energy-efficient habits amongst a business’ employees and encourage them to carry out their work in a more energy-efficient way.

Npower believes that this could result in savings ranging from 3% up to as much as 15% on the energy bills of each business that it serves. The average saving as a result of changing energy behaviours, it believes, would be 9%.

According to the company’s Phil Griffiths: “It often surprises businesses to find out that non-technical savings are usually greater than technical savings. Through learning about your energy habits, it is easy to make subtle, low-cost and effective changes to help keep down your energy bills.”

Griffiths went on to say that Npower has already begun working with some business customers to help them cut their energy bills through behavioural means, and that this has “already produced clear and proven benefits for firms, big and small.” So far, he said, Npower has helped its business customers to save more than £26 million through changes in energy usage habits.


03 2016

Oil, China & the US: The Economic Forecast for 2016

As the New Year starts, following last year’s economic developments, what does 2016 have in store for global economic issues and recovery?

Following a generally positive 2015, the outlook is not as good as to be expected. The International Monetary Fund (IMF) is to give its predictions by the end of January. However, in an article for a German newspaper, French IMF Chief Christine Lagarde warned against anything overly optimistic. Looking at the data, and the evidence from last year, she is optimistic about the global economy in 2016- but does advocate caution. Other evidence and analysts support her view, and the expected IMF statement, with two key nations dominating such predictions: the US & China.

Regarding the US, last year saw developments and improvements in their economy overall what with more consumer spending, government spending, and rising employment. However a strong dollar, along with currency exchanges and increased regulation, together with the US Federal Reserve’s policy with interest rates, could all combine with international economic forces and markets to put a debt in that recovery. Also, the upcoming Presidential Election will doubtless impact upon economic matters and polices.

With China, recent months saw an unexpected and nasty shock hit the Chinese stock markets and trading. Value of shares and companies fell. The beginning of 2016 saw a fall of 7% on the Shanghai indexes, and trading suspended. Coming as it does amidst a gradual but increasingly evident Chinese slowdown, the outlook here is not good.

The Chinese manufacturing sector has seen a recent dramatic decline, just one of many signs of an economy shifting down a gear. Further to that, economists predict that the gradual Chinese slowdown will become more evident, and have effects elsewhere. With a slowing Chinese economy, trading partners will be affected. Similarly, the price of commodities such as metals and foods have been seen to fall. A slowdown in manufacturing and exports will have a negative impact on the Chinese economy – which will be felt globally.

Others economic matters concern cheaper oil. Following on from the ‘oil shock’ of early 2015, when prices tumbled, the oil and gas markets and trading has still not totally rebounded and recovered. Although beneficial for importing nations, and beneficial for end users, either personal, industrial or national – it is bad news for exporters. Particularly for those nations who are dependent on oil sales for their national wealth and economy stability.

Despite such concerns, and problems to come, 2015 was the global economy vastly improve, particularly in emerging economies. There is greater confidence in trade, investment and the markets. Although there are extremely serious concerns to come in the months ahead in 2016, with a lot more recovery needed, 2016 is building on a strong 2015.


01 2016

Employment Law Could be Harming Small Businesses

According to a recent study, current UK employment law could be holding back smaller businesses. Research by citrusHR, an HR support specialist, has suggested that the current state of the law is acting as a barrier to businesses that would otherwise employ more people.

This could therefore be harming the UK economy as a whole. By keeping businesses from employing more people, employment law could be harming the expansion of small businesses and the creation of new jobs.

Of the businesses surveyed, only a quarter described the present state of the UK’s employment legislation as acceptable. 39%, by contrast, said that they would be willing to consider employing more people if only the laws surrounding the employment process were not so complicated.

One of the most common complaints raised by the survey was that employment laws are complex and hard to properly understand. Larger businesses can employ professional specialists and even whole departments to make sure that employment laws are properly followed, but for most small businesses and many medium-sized ones this is simply not an option. Misinterpreting and therefore failing to understand employment law can bring about severe penalties.

Roughly 30% of businesses surveyed did not know the current National Minimum Wage. Failure to comply with this aspect of the law can command hefty fines, potentially as high as £20,000.

The fines for employing somebody who is not entitled to work in the UK can also be heavy, and in many cases this comes down to whether an individual’s home country is a member of the European Union or not. 18% of businesses responding to the survey admitted they were not sure which countries were EU members and which were not, putting them at further risk of financial penalties.

However, the biggest problem areas were much more complex aspects of employment law. One notable example was the complicated process used to calculate holiday entitlements of casual workers. Doing so requires that employers look at the number of hours they have worked over the past 12 weeks, or in some cases 13. Any commission the worker has earned must also be included in calculations, and all of this must be kept track of on an ongoing basis in order to have an accurate and up-to-date picture of that employee’s entitlement to paid leave.

Just as problematic as the complexity of current employment law was the frequency with which changes are introduced. The fact that the law is changed so regularly makes it difficult for small businesses to keep track. Roughly 75% of respondents said that keeping up with reforms was a significant drain on their time.


09 2015

Is There Any Reason to Register for VAT Voluntarily?

HMRCWhen your business turnover exceeds a certain amount, you must register for VAT. After registration, your business will have to start charging VAT to customers on top of the purchase price of its goods or services, and pass that money on to the taxman. Your business will also gain the right to reclaim VAT made on purchases.

Currently, the VAT threshold is £82,000 and usually this is set on a yearly basis as part of the budget. However, even if your turnover isn’t even close to this level, you do have the option to register voluntarily. But is there ever a good reason to do so, or is it just pointless?

The Potential Benefits

Obviously a business might only register for VAT voluntarily if there is some benefit to doing so, and this could potentially be the case. There is essentially just one benefit, but it could potentially be a significant one, and this is the ability to reclaim VAT paid on business purchases. When it comes to buying stock, equipment, and just about anything else your business might have to buy, the chances are that VAT accounts for a decent chunk of the cost. Claiming this back could represent a significant cost saving for your business.

The Drawbacks

Unfortunately things aren’t that simple. If they were, then every business no matter how small would probably register voluntarily in order to claim back the VAT they pay. The problem is, as well as reclaiming the VAT you pay, you have to start charging it to your customers and paying it to HMRC. On paper, this isn’t supposed to cost you any more; you charge it to customers over and above the purchase price and simply pass it on. However, your customers obviously won’t be happy just handing over an extra 20%. In real terms, you have to either put your prices up 20% or lower them and take a hit to your profits in order to keep things competitively after adding VAT. Either way can have a significant impact on your business.

There’s also costs – both directly financial and in terms of workload – involved with administering VAT. You have to keep track of it alongside your regular bookkeeping and accounting responsibilities and fill out an annual VAT return.

For most businesses, the pricing problem and the added administrative burden will most likely cancel out the benefits of voluntary VAT registration. However, this is not necessarily the case, and if you think your business might be an exception then a thorough look over your accounts – perhaps with professional help – and a review of how your current prices compare to your competitors can help you work out whether you will be left better or worse off as a result of registration.


07 2015

German Businesses Give Warning to UK Over EU Exit

The German Chambers of Commerce and Industry have warned the UK about the potential negative consequences of leaving the EU, saying that this could be a very bad move indeed. The warning comes ahead of a planned referendum on the UK’s membership of the European Union, which represented one of the victorious Conservative Party’s promises ahead of the recent general election.

The organisation, representing German businesses, said that if the UK did decide to pull out of the European Union it could prove “disastrous” for both Britain and Germany. The organisation’s deputy chief executive, Volker Treier, also said that many German businesses were “astonished” that the UK was considering stepping out of the EU and was going to hold a referendum on the matter.

This is a view which many British businesses may agree with based on previous polls. A few months ago a survey showed that manufacturing businesses, for example, felt that they were better off with Britain in the EU than they would be without and that they were happy with the UK’s membership of the Union. A more recent poll, carried out in the first quarter of this year by Britain’s own Chambers of Commerce, revealed that a majority of the 3,800 businesses surveyed (63%), feeling that a British exit from the union would have negative consequences.

Prime Minister David Cameron is currently in Berlin where he will meet with the German Chancellor Angela Merkel this Friday. Though concerned about the possible consequences for both the UK and Germany if the British public votes to leave the EU, Mr Treier has said that he feels it would be a mistake for the Chancellor to offer concessions in an effort try and encourage the UK to remain. If the UK begins receiving such concessions, he worries, then this might encourage other nations to demand negotiations about their place in the EU in an effort to obtain similar privileges.

At present, it is estimated that nearly 400,000 people in the UK are currently employed by German businesses. Should the UK leave the EU, the consequences could be felt particularly keenly by these people and companies. A significant percentage of German-based international firms, Treier believes, could consider markedly reducing their investment in the UK in the event of the country leaving the union.

Many of these companies, he reports, are both worried and surprised by the very fact the referendum is to take place, saying that they “are really astonished.”


05 2015

What the Budget Means for Businesses

Budget 2015George Osborne’s recent announcement of the budget introduced some pretty big changes. Some of these were largely targeted at individuals, and others have massive impact for businesses.

The Death of the Tax Return

Probably the biggest news for businesses is the planned death (or at least near-death) of the notorious tax return. By 2020, the Chancellor said, the annual rush to get your accounts in order and the form filled out by the end of January will be no more. Instead, businesses will be able to upload their accounting information live and spread the cost of paying their tax throughout the year. This system, it is hoped, will be able to integrate with accounting software packages so that businesses will effectively update their tax information simply by keeping their accounts up-to-date in-house.

Supposedly, HMRC will automatically update the system with any information they have on other income streams, such as employment or bank account interest. The scheme is to pilot as early as next year with the first few businesses and individuals, with the switch planned to fully take effect within five years. Those who prefer, however, will be able to continue to fill out the tax return every year.

National Insurance

Those who are self-employed could receive a boost in the area of Class 2 National Insurance Contributions, which the Chancellor says he would scrap in the next parliament. Currently, sole traders pay Class 2 National Insurance if they make profits of over £5,885 per year at a rate of £2.75 per week, as well as Class 4 National Insurance which would still be paid under the plan. It seems that Class 2 NICs generate little revenue for the government and are a lot of work to administer, leading to the decision that it would be simpler all-round to simply abolish it in favour of focussing solely on Class 4 NICs. The latter, however, would be due for an overhaul. According to Osborne, these reforms would aim to “introduce a contributory benefit test.”

Employer National Insurance Contributions paid on employing workers under the age of 21 are also set to be scrapped. This will lighten the burden of taking on employees within this age range, making it easier for businesses to take on extra staff as well as potentially boosting the number of opportunities available to young people. The benefits of this move are most likely to be felt by smaller businesses.


03 2015

Do Sole Traders Really Need a Business Bank Account?

Limited companies and partnerships are required to have a separate bank account for the business. However, for sole traders the matter is optional, and so a lot of small business owners operating as sole traders simply don’t bother. Many just use their own current account, having money paid in directly to the same account they use for everyday transactions. But is this the really a good idea, or would they be better keeping their business activity to a separate account?

What Are Business Bank Accounts?

For sole traders, there are effectively two options when it comes to business bank accounts, so before discussing advantages and drawbacks it is worth clarifying what those options are. Most banks offer accounts designed for businesses. These have certain advantages in some situations, but are functionally similar to personal accounts. One key difference, however, is that business accounts carry a range of charges, either ongoing or for each transaction. As sole traders are not required to use business accounts by law, many choose to open a second personal account instead. This is used as a dedicated account for their business, but avoids the charges associated with a business account.

Keeping Things Separate

One of the biggest advantages of using a separate account for your business is that it makes sure all your business transactions are kept separate from your personal ones. This can be a huge boon when you come around to submitting your tax return, and an even bigger one if you are ever investigated by HMRC. If all your business activity is taking place in your personal bank account, distilling the bank statements down to the relevant transactions can be a long and tedious process. Sometimes, it can be unclear whether something was a business or personal transaction. Keeping your business activity separate eliminates this problem, and makes everything much clearer and easier. This benefit will apply whether you choose a dedicated business account or a separate personal account.

Is There any Advantage to Dedicated Business Accounts?

For the majority of small-scale sole traders, opening a dedicated business account will be a mistake. Functionally, there is very little to differentiate these from personal accounts apart from the addition of charges. Since there is no law to prevent sole traders from using a free personal account, this often means they would effectively pay for basic services that they could get for free. However, there are a few circumstances where a dedicated business account may be preferable. For instance, if you want to obtain business credit you may benefit from a specialist business account. Some also carry useful benefits, such as access to business advice lines or in-branch advisors.



12 2014

How to Keep More of Your Money and Pay Less Tax

Tax Freedom Day is the day you stop working for the taxman, but rather for yourself.

In other words, this means that until today every penny you have earned will be used to pay for government spending through your taxes. This can include income tax on your earnings, VAT, stamp duty, inheritance tax, car tax, fuel tax, etc. Here are a few tips on tax-breaking that might be helpful to you.

1Make the most of your personal tax allowance

Tax allowance is the amount you can earn during the tax year without being required to pay any income tax. Everyone is entitled to a personal tax allowance. This tax year the allowance is £10,000 if you are aged under 65, while people over 65 have a higher allowance. If you are married and have savings accounts, consider transferring your money to your spouse if they pay tax at lower rate than you or do not pay at all.  In that way, you can save tax or reduce your bill to zero. Also, if you are a non-taxpayers, make sure you claim back any tax you paid on your savings.

Use your ISA allowance

If you save or invest into an ISA, you can pay no income or capital gains tax. Each tax year you receive a new ISA allowance which at the moment is £15,00. You can invest the full amount in either stocks or shares ISA or in a Cash ISA, or some in each to a total of £15,000, and thus earn interest tax-free. Keep in mind that the allowance cannot be carried over to the next tax year, so make sure you use it on time. These new ISAs are called NISA.

Use National Savings & Investments (NS&I) accounts

There are other options that will let you earn tax-free interest on your cash, such as the Treasury-backed savings bank which offers Premium Bonds, to a maximum of £30,000, Cash ISAs, index-linked savings certificates and fixed interest savings certificates.

Invest in a pension

If you invest in a pension scheme, you will receive tax back on your money because you are a pension contributor, entitled to tax relief. Speaking in numbers, you will get tax relief at 20% if you are a non-taxpayer or a basic-rate taxpayer which means you will need to invest £80 for £100 to go into your pension, with the tax relief of £20.


10 2014

Why Receipts are Great Tools for Saving Businesses Money

ReceiptsReceipts are frequently neglected.  When you’ve finished at the supermarket checkout, you probably crumple your receipt up and chuck it in your pocket or one of your bags. Perhaps you just tell the assistant to throw it away. For day-to-day purchases this is fair enough, but a lot of business owners don’t realise how much they lose by doing the same with purchases that could be eligible for tax relief.

According to research, businesses in the UK are missing out on large amounts of tax relief. There are various estimates of just how much an individual business loses out on, but some estimates say SMEs can put themselves out of pocket by over £1000 every year. No small part of this is down to neglected receipts.

Types of Missed Allowance

Most of the tax allowances that are missed through neglected receipts are small transactions that happen in large numbers. On its own, each purchase looks like it isn’t worth the trouble of claiming, but together they make for a big boost on your annual tax bill. The most commonly missed expenses are:

  • Subsistence: Any subsistence expense that is incurred by business travel and would not have been necessary otherwise (excluding travel to and from your workplace) should be tax-deductible. But because these purchases are individually small and often made in a hurry, they get forgotten and the receipts thrown away. All those sandwiches and on-the-go coffees can add up.
  • Travel: Like subsistence, rushing is often the reason that we don’t think to put aside our receipts for travel expenses. But when travelling on business, taxi fares, public transport, fuel allowances and parking charges can all be claimed against tax. Once again, travel between your workplace and your home is excluded.
  • One-off Charges: Even if you are in the habit of keeping a record of regular costs, one-off or unusual charges are easy to overlook. Postage fees, subscription fees for trade publications, and items purchased for the business online can all be eligible for tax relief.

Solving the Problem

The key method of making sure that your expenses get claimed is to get into good habits with receipts. Whenever you spend any money on the business, keep the receipt and put it away carefully for passing on to your accountant or entering into your books. This simple step can drastically cut the number of allowances you miss out on.

Sometimes, however, entering receipts into your bookkeeping system can seem too difficult or simply be too time-consuming. However, the fact remains that the potential savings can be large and well worthwhile. If it is not practical to process your receipts internally, consider using an external receipt processing service to ensure that all your eligible expenses are claimed.



08 2014