It's Berlin Time....

This week sees MPs (well those who can be bothered to turn up on a Friday) debate the idea of the UK moving to “Berlin Time”. Tory MP Rebecca Harris will be introducing a private members bill which is aimed at moving the UK permanently one hour ahead i.e. on the same time zone as most of continental Europe. This could, according to each side of the argument, either provide the UK, particularly the south east, with lighter, safer more enjoyable evenings, or plunge Scotland and all points west into a spiral of gloom and depression as mornings stay darker for longer.

Berlin of course is the capital city of the country which is currently Europe’s strongest economy. News emerged last week that German economic confidence has reached the highest levels since records began post unification in 1990. Indeed Germany’s economics minister Rainer Bruederle has gone on record as saying that “full employment will soon be possible”. This is a remarkable turnaround for an economy where unemployment has been stubbornly high for much of the past decade, and that fell off the end of a cliff at the end of 2008. Much of Germany’s current economic success is attributed to strong export performance, although domestic demand has also played its part.

The German economy has always run on a strange mixture of entrepreneurship and regulation. The typically family run "mittelstand" companies, enterprising SME businesses which focus on innovative and exportable products based on a strong commitment to research and development and long term planning, sit alongside some of the most fearsome employment protection systems in the world. And yet at the moment it seems to be working extremely well.

The situation in Germany is not perfect, and clouds exist in terms of the euro crises, public spending cuts and domestic banking risks. It would also help if they were to borrow and spend more as consumers. However, as the UK looks to rebalance itself as an economy which is weighted towards export and investment, rather that the consumption and borrowing model that we have grown used to, marrying Germany’s longer term approach to developing and making high value products that people want with the UK’s strengths of flexibility and dynamism looks like a winning combination. 

Something to consider maybe as we prepare for our usual pre Christmas splurge prior to embarking on an uncertain 2011? We don't have to be on the same time zone.....

The monthly employment burden…..

Salaries are great aren’t they? You turn up to work every day and at some point near the end of the month a sum of money arrives in your bank account. The cycle then repeats itself next month and so on.

At the start of my career at a well known plc I remember being summoned to an internal seminar where the Group Corporate Treasurer boldly stated that he had a dream. His dream was that instead of that regular dollop of money landing in your bank account one month we would just receive an IOU.

“Dear colleagues. I am afraid we don’t have enough cash to pay you this month. Please accept this IOU and hopefully we will be able to make payment shortly. Yours, Mr Treasurer.”

Slightly less inspiring than Martin Luther King you will agree. And yet quite alarming to a young impressionable employee. Mind you we never seriously considered that such a situation would arise in a major company. 

The fact is that when you work in a big organisation, particularly those in the public sector, the money just hits your bank account. You have no thought as to how it gets there. Indeed there is no question that it will ever not be there. Obviously there is magic or something at work to ensure that it happens. The cash situation of the company has nothing to do with anything.

It is only when entering SME land that I really started to appreciate the skills and fears surrounding cash management and in particular that time of the month (or week) when wages and salaries had to be paid. You can play around with supplier payments to a certain degree but employee wages are a last resort. Waking up in a sweat over that big payment that takes forever to arrive, and on which you are relying to pay those all important people who work for you, becomes a regular occurrence.

SMEs are viewed as the engine of growth and the most likely source of the new jobs that are going to be needed to keep unemployment under control. However a recent survey revealed that 85% of small and medium sized companies are not looking to take on new people any time soon and may indeed be about to cut back again. The usual excuses of red tape were trotted out but I think there something more basic at work here.

Forget excessive regulation and laws that provide a high level of protection to employees that is a barrier to recruitment. The feeling in the pit of the stomach when the time of the month comes to pay the salaries is the real employment burden SME owners and managers have to bear, and is probably a major reason as to why unemployment figures will remain higher in the short term that the Government would like.

Time to remember….

 11am Sunday in a little town in the north west part of Surrey that used to be known as Middlesex . Hundreds of people of all ages huddled around our local war memorial. Maybe it’s me but there seem to be many more people there than last year. All gathered in silence to remember those who gave their lives in the service of their country.

To my shame I never used to make that short trip up to the high street. Oh I would buy my annual poppy and pay lip service to Remembrance Sunday but that was it. It took the involvement of my daughters in the Remembrance Day parades, through their guiding activities, to finally get me to show proper respect. The irony of the next generation leading me to this rather than the previous generation is not lost on me.

Maybe it was because as a sixties child I was the last generation that was still living in the shadow of the Second World War. We all had grandparents who had fought in it and parents who had experienced it through bombing raids, evacuation and rationing. War films were commonplace on TV. Our Action Men fought the Germans. We enjoyed living off of our victories in 1945 (and 1966).We even laughed when Basil Fawlty told us not to mention “it”. It was still real to us even if we hadn’t experienced it directly. We were constantly being pushed to remember “the War”, and as a result that day in November was perhaps not special enough.

Then we had our first real experience of our own war through the Falklands conflict. It may have happened on the other side of the world and not really affected us at all, but it was a reminder to us that we had an army that could be sent off to fight (as opposed to their deployment on home soil in Northern Ireland). Subsequent involvement in Kuwait, Kosovo, Iraq and Afghanistan has shown us that sadly our soldiers continue to die on active service.

65 years after the last truly global conflict the importance of remembering is probably stronger than ever. My daughter is currently part of a project to ensure the horrors of Auschwitz are not forgotten. Every new generation needs to take on board the lessons of the past so that they do not end up experiencing it for themselves.

I am not going to make any fatuous attempt to draw any parallels with Enterprise Britain. Sometimes we all have to put aside our daily challenges, problems and grumbles and just take some time to remember. For their tomorrows, if not today….

You’ve been Serco-ed…..

Ha Ha Ha. I have to admit to being extremely amused by the recent Serco fiasco. Having told the Government that, yes of course it would work with them to cut costs, their FD, Andrew Jenner, then turned around to their suppliers and told them that, er  they were going to be the people to be providing those cost cuts. Job done or so they thought.

However they reckoned without a robust government response to their shameless bullying of suppliers. Cabinet Office Minister Francis Maude intervened and the public services provider were forced to issue an unreserved apology. To cap it all the share price tanked as a result. No less than they deserved you might think and you would be right. Definitely something to cheer people up on a Monday morning.

But there is a serious side to all of this. To a certain extent big corporate Britain has been let off lightly so far. Profits are recovering, due to cost cutting it has to be said, rather than imaginative revenue growth. Balance sheets which weren’t that stretched anyway are being strengthened by a hungry bond market providing cheap money. As a result executive pay packets are soaring.

Yet, as the Serco episode above shows, they are still squeezing their suppliers, not only in terms of asking for retrospective “rebates”, but also extending payment terms by up to 90 days. This takes its toll on already cash strapped SME businesses, and is doing as much damage to their chances of survival as the current lack of available finance.

As Part Time FDs we see this frequently when working with our SME clients. If these businesses were able to just claw back a month’s worth of working capital, the cash injection into the SME sector would surely be significantly more than the government and banks have been able to manage so far.    

Big corporates more than ever have their part to play in Britain’s recovery, particularly in light of the austerity measures that the government is having to put in place to reduce its debt. A 30 day reduction in the working capital cycle will do more for enterprise Britain that any amounts of Government exhortations on banks to lend. Come on corporate Britain, it is now time for you to do your bit….

Because we’re worth it….

Wayne Rooney negotiates a contract that could earn him in excess of £200,000 a week. FTSE executive pay has increased by 55% in the past year. Eric Pickles berates the local government “gravy train” and is demanding top Public Sector bosses take a pay cut of up to 10%. Throw in the regular comments concerning bankers pay and bonuses and we are once again playing one of Britain’s favourite pastimes, namely a fascination with top people’s pay.

The British have an interesting attitude to high levels of remuneration. We revel in the glamour of high earning superstars and yet frown on anything that smacks of “fat cattery”. This approach tends to glorify celebrities and demonise business people.

The riches that Cheryl Cole, who is moderately attractive and talented, has accumulated do not provoke outrage. The pay and perks of individuals who are responsible for billions of pounds and thousands of jobs seemingly do. And yet it is well run businesses that create the wealth that enables us to indulge these celebrities.

The BA results are a timely reminder of this. Willie Walsh has had to cope with recession, strikes and natural disasters, yet has managed to deliver profits that were double expectations, and negotiate a major merger with Iberia to boot. To do all that has required prodigious talent and deft footwork, which is more than equal to that of Mr Rooney, yet Mr Walsh will be pulling in considerably less than footballer’s salary, and will no doubt get more negative headlines for doing so (Rooney’s negative headlines have been more to do with his negotiating tactics than the final deal).

Maybe it is because people look at the likes of Cole and Rooney and say, yes, with a little more talent and luck that could be me. They can identify with these superstars in way that they cannot with a talented business person.

What does this mean for Enterprise Britain? Entrepreneurs rarely tend to enjoy high salaries. They prefer to make their money on exiting their business, which is arguably a more realistic measure of wealth created. Indeed as the recent IOD report on director pay shows many directors of small and medium sized businesses are sharing their employees’ pain regarding pay freezes and cuts. However they too are tarnished by the anti business feeling that accompanies stories of high executive pay.

Some top executives packages are clearly excessive, unrelated to performance or ability and deserving of criticism. And yet unless we start to really appreciate top business people and stop begrudging them their rewards we are going to struggle to develop the enterprise economy that will provide the jobs and wealth of the future. Particularly those for footballers and pop stars……