How are FMCG Leaders Preparing for Brexit?

How are FMCG Leaders Preparing for Brexit?
With difficulty is the simple answer. Because the only thing that appears certain at the moment about Brexit is that it is causing a great deal of uncertainty…across all industry sectors. Speaking regularly as I do with commercial leaders in FMCG, it is the subject that is unsurprisingly raised every time we meet.

How are FMCG Leaders Preparing for Brexit?

The actual Brexit deal (or no deal) the UK will end up with remains unclear with just six months to go. But key concerns about the impact on the bottom line centre on how restrictions on freedom of movement of both people and goods will affect supply chains, and how new import duties will alter the share of wallet.

Short term impact will include losses from currency fluctuation, and increased costs from arranging work visas (or whatever system replaces free movement of people) and changing packaging and labelling.

Longer term effects include delays in new product development and investment in UK factories, as companies wait for clarity on the UK’s future relationship with the EU.

Industry areas such as farm to fork are already suffering negative effects. A survey published by the Food & Drink Federation found nearly a third of the EU workforce had left the UK within a year of the referendum while 47% of the remainder were considering joining them.

Earlier this month, in response to the impending staffing crisis, the Government announced a post-Brexit migrant farm workers’ visa scheme for up to 2,500 EU nationals for 2019 and 2020.

There is an expectation that the post-Brexit import duties could radically change consumer spending habits, with many likely to reduce expenditure on premium items which will become more expensive, as UK wage restraint continues.

These are not only restricted to ranges like high end skincare products; a recent report by the LSE found that food shortages and price rises could mean even dairy products we import from the EU like butter and speciality cheeses could become occasional luxuries, with milk products attracting tariffs of up to 74%.

In response, increased investment is being made in data analytics to make sure the right product is available to the right consumer at the right time. An example is the personalised online targeting of luxury items to those less likely to be impacted by price increases.

At the same time discussions are underway with retail partners about product placement on the shop floor, simplifying ranges and doubling down on the everyday essentials for the average consumer.

Unlocking further value from the supply chain is another key area being explored, with import duties and potential restrictions on the movement of goods leading firms to seek new UK based suppliers where feasible.

An executive at a global FMCG firm told me: “Brexit, like political turmoil, is not new for multinational FMCG giants as they face similar changes every year across the globe. However, the UK economy has always been a lucrative market for higher value per capita sales and Brexit will undoubtedly throw more caution in the spending power of the shopper.

“We need clarity on overall government policy and other rules to trade across the European region. For the UK to continue being the spearhead for business investment, any dynamic FMCG firm needs immediate clarity and stability on future government policy.”

With just over two months until the last European Council of 2018 – widely seen as the last possible date for an Article 50 divorce deal to be agreed – the clock is ticking. FMCG leaders needing certainty to plan a path to steady growth in a new post-Brexit economy wait in hope.

Stuart Richards is a Senior Consultant in the Global Consumer Practice at HW Global Talent Partner. Contact him at stuartr@hwglobalpartner.com or +44 (0) 161 249 5170 or +44 (0) 7787 254 600.

Revolt Grows Over ‘Outrageous & Unfair’ Rate Change

Business Revolt Grows Over ‘Outrageous & Unfair’ Rate Change
Some of the UK’s biggest employers’ groups have united in condemning the government’s “outrageous” changes to business rates in England. They are most vexed about a clause they say could prevent firms appealing against rate rises, even if firms can prove they are wrong. Thirteen of them, including the British Retail Consortium and CBI, have written a letter calling for it to be dropped.

But a government spokesman said the “claims are simply false”. And Treasury Minister, David Gauke, told the BBC three in four businesses would not see an increase in their bill.

Other signatories to the letter include the Federation of Small Businesses, Revo, the Association of Convenience Stores, and the British Property Federation.

The next business rates revaluation comes into effect on 1 April – the first for seven years – but the lobby groups said that tens of thousands of firms still face uncertainty over bills. Earlier this week, pubs and restaurants called for Chancellor Philip Hammond to dilute the impact of the business rate rises in his March Budget.

What is the rates row about?
Business rates are in effect the commercial version of council tax, and are paid on the rental value of the space that businesses occupy. The amount depends of the size of the property and what it’s used for. The last time properties were valued, in 2010, almost half of businesses appealed against how much they were due to pay. The government wants to cut down on the number of these appeals.

The trade groups say the government wants the right to dismiss appeals against incorrect valuations that are deemed to be within the bounds of “reasonable professional judgement”, or margin of error. This allowable margin of error has not been disclosed, but experts say it could be as much as 15%.

John Webber, head of ratings at property company Colliers International, said the problem was that the “margin for error” allowed by the government was simply too wide.

He told the BBC: “Every rateable value is an opinion, so there will be a boundary of judgement there. The problem you’re going to have is if you have a property with a rateable value of £100,000 and you think it should be £90,000, then that 10% tolerance is arguably still within the bounds of reasonable professional judgement. Therefore, the list will not be altered and as the rating list lasts for five years potentially you will be paying, over a five year period, at least 10% more than you should do,” Mr Webber adds.

Helen Dickinson, director-general of the British Retail Consortium, told the BBC that the tax was “no longer fit for purpose in the 21st Century”.

She says that although technically, under new government rules, business owners will be able to appeal against a higher valuation, a clause states that even if rates are found to be unfair they can still stand if they lie within the bounds of “reasonable professional judgement”. This somewhat vague wording is, she says, “what everyone is upset about”.

Jerry Schurder, head of business rates at property consultancy Gerald Eve and a supporter of the protest, said: “The government’s outrageous proposals… would force hard-pressed businesses to cough up an extra £1.9bn to pay for the Valuation Office Agency’s (VOA) mistakes. “The way that trade bodies from a wide spectrum of industries have been motivated to unite against this clause shows the strength of feeling against what is a punitive and deeply unfair proposal,” Mr Schurder said.

But the government issued a strong rejection of the claims. A spokesman said: “These claims are simply false. We are not preventing anyone from appealing their bills, or setting any margin of error for appeals being heard.

“We’re reforming the appeals process to make it easier for businesses to check, challenge and appeal their bills, while at the same time generous business rate reliefs mean thousands more businesses are seeing a reduction.” He added that, once the changes come in to effect, 600,000 businesses will pay not rates at all.

BA Crew Christmas Strikes Suspended

BA Crew Christmas Strikes Suspended
Planned strikes by British Airways cabin crew on Christmas Day and Boxing Day have been suspended, the Unite union has said. Employees were due to walk out in a row over pay and conditions.

The union said 4,500 workers employed on so-called “Mixed Fleet” contracts – who have joined since 2010 – were on lower pay than other staff. Talks at conciliation service Acas have led to a revised offer which will be put to a ballot of union members. The airline said it welcomed the move. Unite general secretary Len McCluskey said: “We now have a new offer from the company which we will put to our members.

The two day strike over Christmas and Boxing Day is now suspended. It will be for our members now to decide if British Airways has done enough to meet their concerns.”

Mr McCluskey told the BBC that “Innocent members of the public always suffer when there’s a dispute. Any dispute is only brought about because there is a failure between management and the industrial relations within that company.”

The union had said earnings for Mixed Fleet staff were advertised between £21,000 and £25,000 but, in reality, started at just over £12,000 plus £3 an hour flying pay.

Unite had earlier said that half of Mixed Fleet staff had taken second jobs to make ends meet. Some had even said they had to sleep in cars between flights, because they could not afford the petrol to get home.

Software Solutions for Vehicle Rental Companies

Software Solutions for Vehicle Rental Companies
Every industry, no matter how large or small, has industry-specific software for maintaining accounts and for other day-to-day operations. Whereas large organisations often have the resources with which to have software for accounting and other systems developed in-house, smaller ones typically rely on different software applications purchased separately – and then must become experts in their use if they want their business to run smoothly, since tech support is not generally included in the package.

ivech

Since car and van hire companies have large vehicle fleets to keep track of and customers to invoice, it makes sense to have one system that does it all. For most of the larger vehicle rental companies currently in operation in the UK, the ideal car hire software for keeping track of both vehicles and clients includes the following features:

Shortcuts for repeat customers
Most rental companies recognise that repeat customers are their primary source of revenue. Since it would make little sense to have to enter a repeat hirer’s personal information for every single transaction, the ideal software system will prefill it automatically the next time the hirer comes in. In the case of corporate clients with multiple employees involved in vehicle rental transactions, a truly ideal software solution would link such clients to an inbuilt accounting system for ease of billing and other types of recordkeeping.

Damage and loss tracking
On the flipside, the number one source of financial loss for a car hire company is damage to hired vehicles. Where there are damages, there are also drivers, insurance and other means of compensating damages and losses. This means that a comprehensive, user-friendly means of tracking damage to vehicles, maintenance repairs and other losses is essential for keeping accurate accounts of inflows and outflows and protecting the company against preventable losses in the future.

Cloud-based
Any vehicle rental company that has been the victim of a security breach can appreciate the importance of cloud-based solutions; your company need only be targeted once in order for thousands upon thousands of client records and other sensitive information to be compromised. By using encrypted connections and cloud-based updates, the records your company keeps on both vehicles and clients is a great deal safer than when software programs are installed and maintained on a local network with inherently limited security.

Simple pricing
Price is usually the driving factor behind a company’s decision either to buy one system with all the necessary bells and whistles or, in the case of smaller companies for which this option has been prohibitively expensive in the past, maintain “granular controls” by purchasing different software products for different purposes. For vehicle rental companies, the ideal software system allows users to manage their fleets and carry out all accounting and invoicing functions in one place – and at one reasonable price.

iVech Rental Control System
iVech Rental Control System offers all these features and many more. Our vehicle rental software allows you to keep all the information you need about your vehicles, drivers and accounts to ensure smooth client transactions, timely billing and loss prevention – all at your fingertips, all in one secure environment.

For more information on our introductory 3-month offer, call us today on 0191 460 3263 or visit the iVech Vehicle Rental Control System website today.

Mortgage Approvals at 19 Month Low, Consumer Credit Soars

Mortgage Approvals at 19 Month Low, Consumer Credit Soars
The number of people taking out mortgages fell to its lowest level for 19 months in August, according to Britain’s High Street banks. A total of 36,997 homeowners had their mortgages approved, the British Bankers’ Association (BBA) said. That is the lowest figure since January 2015, and a 21% drop on August 2015.

The number of people borrowing to buy a house or flat has been falling since April, when there was a rush to buy property ahead of stamp duty changes.

“Mortgage borrowing is growing at a slower pace than it has for the last few months reflecting both the slowdown in housing market growth after the April spike and broader trends in the sector,” said Rebecca Harding, chief economist at the BBA.

The figures do not include lending by UK building societies, which account for about a third of mortgage borrowing.

However, UK consumers are continuing to borrow more through loans and overdrafts. The total amount of consumer credit grew by 6.4% in the year to August, the fastest rate of growth for nearly 10 years. “Given the low interest rate environment and high levels of confidence during the summer, the strong credit growth can be interpreted as strong consumer sentiment,” said Ms Harding.

Economists said consumer confidence had recovered since the vote to leave the European Union.

“Consumers were clearly prepared to continue borrowing and spending in August, and it is notable that confidence recovered to a significant extent after slumping in July in the immediate aftermath of the Brexit vote,” said Howard Archer, chief European and UK economist at IHS Global Insight.

However, he predicted that such confidence could run out of steam in the months ahead. “Consumers are likely to face diminishing purchasing power over the coming months as inflation rises and earnings growth is limited by companies striving to limit their costs.” He said unemployment was likely to rise, and predicted that inflation could hit 3% by the end of next year.

Andrew Tyrie: Government Should Set Out Brexit Aims

Andrew Tyrie: Government Should Set Out Brexit Aims
The government must set out in detail what it hopes to achieve from Brexit talks in order to restore public trust in politics, a senior Tory MP says. Andrew Tyrie called for an “early, full and detailed explanation” of the government’s negotiating position. The Treasury Select Committee chairman also said “sky-high” public expectations about the financial savings from Brexit had to be managed. Mr Tyrie backed Remain in June’s poll which resulted in a Leave victory. He urged ministers to “cast aside the damaging claim and counter-claim” of the referendum period.

ukeconomy
Mr Tyrie’s remarks come as Foreign Secretary Boris Johnson, one of the leading Leave campaigners in the cabinet, prepares to attend his first meeting of European foreign ministers in the Slovakian capital Bratislava, following talks with his Austrian counterpart in Vienna.

Speaking in Austria, Mr Johnson reiterated the point that the UK was leaving the European Union not Europe and was seeking a “new European partnership” with the EU’s remaining 27 members. In a pamphlet written for the Open Europe think tank, Mr Tyrie said the referendum’s “pernicious legacy” was to add to a “deep distrust in politics”.

“Politicians cannot afford to allow this to get any worse,” he said, saying the government had to be frank about the “trade-offs” involved with Brexit – and the fact that many of the promises made by the Leave side are manifestly unfulfillable”. He added: “Equally unfulfillable are the hopes of many Remainers, that the UK can carry on pretty much as now, and that a renegotiation can achieve continued membership through the back door.”

Parliament should get the opportunity to approve the UK’s negotiating position before Article 50 of the Lisbon Treaty – which begins a two-year exit process – is triggered, Mr Tyrie said.

Prime Minister Theresa May has rejected this option. Mrs May has said she will not trigger Article 50 until the start of next year at the earliest, while some Brexit campaigners have called for it to be done immediately.

According to Mr Tyrie, the government should wait for “clarity” from other EU partners on what they will be able to offer before triggering formal talks, which could mean delaying Article 50 until German elections in September 2017. Mr Tyrie, who based his article on evidence given to his Commons committee, said the negotiations over Brexit could secure “meaningful economic and political gains” but risked “early and possibly severe damage” if not approached properly. He said Britain should aim to negotiate “extensive access to the single market, some degree of influence over its rules, withdrawal from the customs union, and the restoration of control over free movement”, entrenched in a treaty with the EU.

Alongside access to the EU’s markets, Mr Tyrie also said “far-reaching” change was needed to the free movement of people. Curbs to migration have been the key demand of many Brexit campaigners since the Leave vote.

EU leaders have stressed that single market access is dependent on accepting free movement.

But Mr Tyrie said: “The idea that ultimate UK control over migration can be restored without fatally compromising the UK’s trade relationship with the EU is not unreasonable. Purism by EU negotiators on this point would not only be inconsistent with reality; it would also clash with other member states’ economic interests.”

The government needs to be clear that curbing immigration could carry an economic cost for the UK, “controversial though saying this remains”, he added. Both the UK and the EU will “need to shed an instinct to grandstand” he said, warning that “exemplary punishment” for the UK over the Brexit vote could “backfire disastrously” on the rest of the EU.

In other Brexit news, a new campaign group is being launched to succeed the Britain Stronger in Europe group, which led the unsuccessful Remain campaign. The cross-party Open Britain group said it would push for continued membership of the single market while making a positive case about the benefits of immigration – “mending not ending” the free movement of EU citizens into the UK.

The organisation says it already has the backing of 500,000 registered supporters across the UK and the endorsement of senior Conservatives, Labour and Lib Dem politicians.

“Getting the best deal for Britain means starting the negotiations with ambitious goals,” said Tory MP and ex-business minister Anna Soubry, one of the group’s spokespeople. “The campaign will marry a commitment to Britain’s membership of the single market with making a positive case about the benefits of immigration. The present system needs further reform. It’s particularly important people know the facts about immigration, we tackle their concerns and ensure the system works fairly for everyone.”

EU Referendum: Vote Leave Wants Power to Axe Fuel VAT

EU Referendum: Vote Leave Wants Power to Axe Fuel VAT
Tories Michael Gove and Boris Johnson and Labour’s Gisela Stuart wrote in the Sun that the tax on energy bills cannot be scrapped because of EU rules.
Chancellor George Osborne said this was “fantasy land” economics. Remain campaigners accused Vote Leave of promising a “make-believe land of milk and honey” if the UK left the EU.
There is one week left to register to vote in the EU referendum on 23 June.
The Electoral Commission says that, even after recent surges in registrations, many people are still not signed up to vote.
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In their article, the Vote Leave politicians said they would seek to spend some of the cash saved by quitting the EU on cutting VAT from household gas and electricity bills, a tax imposed by a Conservative government in 1993.
“The least wealthy are hit particularly hard,” they wrote. “The poorest households spend three times more of their income on household energy bills than the richest households spend. As long as we are in the EU, we are not allowed to cut this tax. When we Vote Leave, we will be able to scrap this unfair and damaging tax. It isn’t right that unelected bureaucrats in Brussels impose taxes on the poorest and elected British politicians can do nothing.”
Mr Osborne tweeted his attack on Vote Leave’s claim, saying leaving the EU would lead to a smaller economy, “a hole in public finances” and higher taxes including VAT.
Remain campaigners also released a report which they said detailed Leave’s “unaffordable” spending commitments. They said more than 20 commitments, totalling £110bn, had been made – eclipsing the potential saving from leaving the EU.
Vote Leave said the Remain report contained “made-up” figures and that they had simply illustrated how money could be spent outside the EU.
Meanwhile, Business Secretary Sajid Javid will warn of the impact of leaving the EU on small and medium-sized enterprises. He will cite Department for Business, Innovation and Skills analysis, estimating that 8% export to the EU and a further 15% are in the supply chains of other businesses that export to the EU.
Britain Stronger in Europe said that amounted to about 1.2m firms.
Mr Javid said: “Britain’s small businesses are stronger, safer and better off in Europe. “If we leave the EU, small firms are on the front line and that’s a gamble with people’s livelihoods I’m not willing to take.”
But Vote Leave’s John Longworth said the government’s figures were “extremely questionable”.
He said: “I agree with what Sajid Javid used to say about the EU – before he changed his mind for reasons we can only guess at. EU rules damage all British businesses, and smaller businesses in particular – and hold us back from trading freely with the rest of the world.”

US Hits Chinese Steel Imports with Tax Increase

US Hits Chinese Steel Imports with Tax Increase
The US has raised its import duties on Chinese steelmakers by more than fivefold after accusing them of selling their products below market prices. The taxes of 522% specifically apply to Chinese-made cold-rolled flat steel, which is used in car manufacturing, shipping containers and construction.

The US Commerce Department ruling comes amid heightened trade tensions between the two sides over several products, including chicken parts.
Steel is an especially sensitive issue.

US and European steel producers claim China is distorting the global market and undercutting them by dumping its excess supply abroad. The Commerce Department also levied anti-dumping duties of 71% on Japanese-made cold-rolled steel.

The ruling itself is only directed at what is a small amount of steel from China and Japan and won’t have much of an impact – but it is the politics of the ruling that’s worth noting. It is an election year, and US presidential candidates have been ramping up the rhetoric on what they say are unfair trade practices by China.

US steel makers say that the Chinese government unfairly subsidises its steel exports. Meanwhile China has been under pressure to save its steel sector, which is suffering from over-capacity issues because of slowing demand at home.

China’s Ministry of Finance has not directly responded to the US ruling but on its website this morning it has said that China will maintain its tax rebate policy for steel exports as part of its efforts to help the bloated steel sector recover.

These tax rebates are seen as favourable policies to shore up ailing steel companies in China, and to avoid massive job losses. Expect more fiery rhetoric from the US on China’s unfair trading practices soon.

A separate filing by major US steelmakers to the International Trade Commission is looking to completely ban all Chinese steel imports. The US steel industry claims that some 12,000 workers have been laid off in the past year because of unfair Chinese competition.

China claims the weak economy is more responsible for the industry’s problems and that it has taken steps to reduce its steel production.
Last year, China’s exports of cold-rolled steel flat products to the US were valued at an estimated $272.3m (£188.5m).

UK Unemployment Falls

UK Unemployment Falls
UK unemployment fell to 1.69 million between January and March, official figures show, down 2,000 from the previous quarter. The jobless rate remained at 5.1%, the Office for National Statistics said.

There were 31.58 million people in work, up 44,000 from the previous quarter, and the employment rate hit a record high of 74.2%. Average earnings including bonuses rose 2% from a year earlier, up from 1.9% in the three months to February.

The ONS said the timing of bonuses this year had affected the rise in total earnings.

Excluding bonuses, earnings rose by 2.1% year-on-year in the three months to March, down from 2.2% in the three months to February.

The number of job vacancies dropped by 18,000 to 745,000, the ONS added, marking the first fall for almost a year. The number of people claiming jobless benefits fell by 2,400 in April to 737,800, although revised data showed the figure rose by 14,700 between February and March, the largest increase since autumn 2011.

David Freeman, a senior statistician at the ONS, said: “The employment rate has hit another record high, but this time the increase is quite modest. “With unemployment very little changed, that is further evidence the jobs market could be cooling off.”

The Secretary of State for Work and Pensions, Stephen Crabb, said: “These are another record-breaking set of figures, with more people in work than ever before and the unemployment rate is the lowest in a decade at 5.1%.”

Sainsbury’s to Stop Brand Match Scheme

Sainsbury’s to Stop Brand Match Scheme
Supermarket chain Sainsbury’s is to stop running its Brand Match scheme, which gives money back when branded goods are cheaper at rival Asda. The supermarket which has been running the promotion since 2011, will end it in three weeks’ time. It says it will use the money saved to cut prices on basics.

Increasingly shoppers buy little and often, which means fewer baskets contain the 10 items needed to qualify for Brand Match.

Earlier on Thursday, the Co-op credited the “little and often” method for its growing sales. The Co-op has 2,800 stores, more than double that of Sainsbury’s.

This is the second change in promotional strategy from Sainsbury’s this year. Earlier this year, it announced it would stop multi-buy deals, saying customers found these caused “logistical challenges at home in terms of storage and waste”.

Sainsbury’s is following a trend among its rivals, who are all facing fierce competition from the fast-growing discounters, Aldi and Lidl. Morrisons last year stopped the price-matching element of its loyalty card scheme and Asda has made changes to its scheme.

Research also shows that a plethora of special offers and promotions leave shoppers confused.