I have had 6 of my clients since Christmas either reduce down significantly (eg want to go from Ltd co to sole trader), or close their small business.
To be fair all of them were fairly marginal to start with, none of them great, but all of them seem to be suffering from:
1. Reduced rates on offer (these are small freelancers, eg one is a graphic designers, another a proof reader etc etc)
2. Less work generally on offer
3. Much more competition
4. Companies reducing their freelance work (which is ofter an overflow to employees on fixed salaries)
Have I just been unlucky to lose a spate of work, or is all not good in the world of the freelancers?
I also have several contractor clients out of work or having long gaps between contracts too.
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I take the optimism, portrayed by a variety of financial forecasts, with a large pinch of salt. I imagine that they do, in numerous boardrooms, across the country; ToysRUs, Jamie Oliver, House of Fraser, to name just a few?
I prefer to avoid the conflict of politics but, recent and successive Chancellors have shown little imagination in the "balance", between shrewd financial control and, an element of growth, which is so obviously and desperately needed, in the general economy.
Ask any nurse or other public sector employee, if they believe the economy is in a good place?
One of my first client's, from the early 1980's who, like me, had experienced more than a few economic downturns, would always suggest that, each and every one, of these difficult periods, had always been resolved by the construction industry being "fuelled" to take the lead. Given what I've said here, common sense might suggest "affordable housing", in its most basic interpretation?
We now have families where the second generation can no longer afford to leave home and, parents continue to fund those lifestyles, not through choice, simply through necessity.
I'm sad to say that, this situation (lack of financial imagination) has been allowed to persist for far too long and, unless and, until those in responsible office, accept these facts, the situation will only get worse.
A forecast, of economic growth, of 1.5%, hardly raises my excitement levels and, once again, politicians gloat on below average expectations.
To answer your enquiry, directly, I'm not at all surprised at what you're experiencing and I can't see any change soon.
Ask any nurse or other public sector employee, if they believe the economy is in a good place?
Most of the rest of what you say is spot on. This bit not so much.
Nurses aside, I don't feel too much sympathy for the public sector though. In the roles for which i know the conditions (from family, friends, clients, etc working in the public sector) I have to say that for comparable roles, the public sector still has pay and conditions much more attractive than the private sector and as such I think they deserve their stunted growth largely. Perhaps those who only took public sector jobs in the last five years might have a genuine grievance, as they aren't normally on such lucrative deals.
"Ask any nurse or other public sector employee, if they believe the economy is in a good place?"
I don't think I suggested that I had much sympathy either? I was simply stating the obvious and how the public sector portray how hard it is, since 2008.
On the whole most clients seem to be ok and quite a few are doing well. I do tend to have 4 or 5 stop trading each year - retirement/back to employment/focus on another business.
There are a few perenial strugglers - the type of business which just about get by.
I am a little concerned about the ease with which businesses can get Funding Circle loans. The due diligence done seems to be paper thin - more of a box ticking exercise.
Some businesses seem to get these types of loans to paper over business inefficiencies/failings and lifestyles that are too extravagant, rather than to help grow the business. The cash just gets swallowed up rather than being used for specific projects/purposes.
Repercussions here could take a few years to filter through.
Wish you'd posted this last year, before I lost £600 on FC ! I used to get swamped with their regular mailings to my clients at the registered office.
I'm fortunate I think in that all my business clients are doing well and I don't know any of them who've had to go for financial support to institutions or other third parties for years. Most of mine are in their 30s and South UK, which may be indicative of their wellbeing?
I think they find themselves inundated with investors monies because the offered rates of return are so good.
They then feel obliged to 'spend' it asap. Collect their decent set up fee and they're happy - another deal done.
Paul, that is interesting that your "30 somethings" are doing well. I know you have a tech focused firm. It seems to me those people do well, the trades do well (as no-one wants to do it) but there are lots of people who's skills are getting eroded, and they tend to be in the 45+ bracket and be a bit old school. The economy is moving fast in many directions. FC are [***] now you cant choose who you lend too. I halved my stake which I had grown from £7k to £10k over 5-6 years as I think its going to go pop at some point.
Good point on the 45+.
There does seem to be a huge number of business consultants/coaches (just look on Linkedin) and I struggle to see how they all make a decent living.
As they do reach 45 and beyond - do they lose touch with the type of businesses (Tech start ups etc) which may need their guidance and advice?
FC investment - I didn't get beyond £500.
I see these things less from my clients and more through our tenants.
All comments re Edinburgh
What I see is no expansion but as yet limited contraction. Pre 2007 we would have had some tenants coming to us looking for extra space, a few getting ahead of themselves in difficulties (flying too close to the sun, got burnt etc), there would be a buzz.
What I see now is business apathy, reservation, fewer people trying to expand etc, less casualties because fewer risks being taken.
Now we have more factors than rUK, we have had downturn in 2008, slow climb out with signs of recovery, Indy ref 1 campaign to 2014 reducing confidence, slow climb up again after this, Brexit vote June 2016 slowing confidence, scares re Indy ref 2 now slowing confidence, uncertainty causing lacklustre business confidence.
We have now had 10 years of slow/sluggish activity (we took hits in 2007/2008/2009 and rebuilt slowly) but little in way of excitement/buzz, residential market has performed okay in fits and starts (we are mainly out of it but from conversations with those building think it may be slowing), commercial market certainly slow, more properties being converted from commercial to residential.
Frankly governments might be able to use Keynesian inputs to stimulate growth but the cheaper way would have been to have sent every politician to an island with no communication with the outside world, the slowdown and sluggish growth is due to uncertainty and is self inflicted by Brexit, Nats, self indulgent idiots and the rest of the media circus.
If they want growth stop playing with the controls and let the grown ups who generate it get on with the job; pretty simple.
I've got a mix of both and it all comes down to the business owner in my experience. You've got the ones who graft really hard and make a good living and then you've got the sort who think the world owes them a living and spend most of their time in coffee shops on their Apple laptops looking at expensive watches to buy or thinking up the next get rich scheme hoping the spotty teenager they've employed to run their empire is coining it in while they are busy with "business development". These type are also the ones who "can't" pay you because money is tight after they've paid for their 3rd foreign holiday of the year so far. Good riddance to them I say!
I've got a mix of both and it all comes down to the business owner in my experience. You've got the ones who graft really hard and make a good living and then you've got the sort who think the world owes them a living
My feelings/experience exactly. When times were good and everyone was spending like no tomorrow, anyone can build a business. When money is tighter, it's survival of the fittest, so the inefficient, lazy, less customer focussed ones, struggle first. I've got clients in similar businesses, similar locations, similar customers, where one is doing better than ever, yet another is really struggling - no reason other than the business owners themselves.
I think on the whole most of them seem to be doing quite well. I'm seeing a slight squeezing of margins in quite a few sectors, some areas doing very well and the traditional strugglers are still doing so. Generally the mood seems to be one of having expected real problems and being pleasantly surprised that none of them are doing as bad as they imagine everyone else to be.
The property market in London certainly ain't what it was 2 -3 years ago re rents and market values (which are both declining in annual double digit %s in some areas), probably due to Brexit 50% and adverse tax changes the other 50%, so the Government is arguably to blame for all that (or to be congratulated if that was their policy).
Interesting how if you buy a £5m resi property with a 70% mortgage and it declines 15% a year later you effectively lose your whole 30% equity in one year due to also paying c15% SDLT (and you are exposed to 40% IHT on it if it does not get wiped out). No wonder the market is suffering.
These SDLT and IHT costs may not be an issue when the market is rising in double digit annual %s (like between 2010 and 2015), but when it's declining they really have a major (psychological and therefore real) impact; hence the £5m+ London resi market is pretty much dead right now.
"Interesting how if you buy a £5m resi property with a 70% mortgage and it declines 15% a year later you effectively lose your whole 30% equity..."
WTF!!
My heart bleeds...
Just to add to the ease of getting FC loans, I’ve got 3 clients for whom the first I heard that they were looking for loans is when we did the quarterly bookkeeping and saw the cash hit the bank.
No mgmt accounts for any of the F.C. loans. For a £100k loan, the latest set of accounts were 20 months old!
I think it depends on where your base is. I've not seen a slow down (Dorset and Surrey) and apart from those who retire (some of those are coming back as they cant survive on their pensions) nearly all of mine are doing well and taking on staff. Even in the building and related trades.
None of my landlords are finding it difficult to find tenants. In fact one of my clients - a letting agent says they dont bother advertising anymore because if they do they are inundated with tenants - it's the properties they dont have which is a result of the George Osborne's mortgage interest restrictions. I have seen an increase in the number of HMO landlords tho.
Generally they seem to be doing ok, although two of my construction clients are not. One has gone bust but that was entirely his own fault. He refused to take advice and is now in VAT default to the tune of 20k. He thinks he can walk away and already has a newco up and running. Balance sheet = creditors - vat and trade creditors
Debtors - DLA overdrawn.
Silly boy.
The other one I feel really sorry for as his troubles are no fault of his own. We are hopefully going to save the company through refinancing though this relies on two high Street banks playing ball with each other!
Funnily enough we looked at finding circle some time ago, but they wanted to charge stupid interest rates.
None of my construction clients have been directly affected by Carillon.
Other than that, they are all making money.
Post crash the NE was stagnant for a good (bad really) 5 years where very little happened.
Over the last 18 months there has been a slow recovery and business in general doing better. At a higher level than I operate at manufacturing is improving and all the ports are very busy exporting our goods as somebody must have realised making stuff and selling it overseas is the way to trade out of a bad spell not 9 years of austerity and belt tightening. Big construction is on the go, a lot of cranes are working in Newcastle City Centre, big house builders are building, small developers who do 20/30 house schemes seem to have disappeared and not returned.
I don't have many shop clients, I imagine that is pretty desperate if you are a retailer. The profile of high street I operate on has nose dived in last few years. It looks something like this now, greasy spoon, Turkish barber, boarded up pub, bookmakers, charity shop, boarded up, boarded up, takeaway etc.
The e commerce traders who are killing high streets also make very little profits with amazon and ebay often making more from their business than they do.
Restaurants are at saturation point and in Newcastle that is down to licencing policy. We are a party city with the place full with student, stag and hen parties every week, yet the local council wants to make it some cool cultured place like Barcelona. Anyone who has a licence has to serve substantial food until 11.00pm. so they end up as bar/restaurants when really most would work better if purely wet led. All that happens is every one will do £15k worth of food make no money on it, but that is £15k that would have previously come from a genuine restaurant and it just dilutes the pool of money so no one makes any money.
Jamies restaurants run at a 75% GP, have 20% labour cost yet still lose money unless they turnover £60k + per week which is huge targets for a food led venue.
Service guys always seem to trade well plumbers, sparkies etc.
For me in general there is a massive push for growth everywhere, bit most of the growth comes via reducing margins, so a lot of activity but no profits. The Carillion setup was a bad example of this.
The big success I have seen locally is the emergence of the co working/incubator hubs. Locally a lot of old buildings have been converted to these and are hugely popular. One I do some work with has 270 units and is 92% occupied. Any new ones opening get filled very quickly. I suppose that many of these businesses will not scale greatly and many will not get beyond providing a reasonable income for the owner but never create jobs etc.
Within my clients there is a bit of a "make hay" mentally to make and store some cash as they expecting a bit of brick wall coming in 18 months or so when the Brexit deal unravels and the uncertainty it will bring.
I have a good year though and I am confident for the future.
No definitely we are noticing it to with clients. Some are doing very well but quite a few are struggling.
A few taxi drivers have said to me it has been deadest 3 months since 2oo8. I don't drive so I get taxis a lot and this is not this usual moaning. Something big is happening and I think we have a recession on the way. On top of that clients are issuing a P45 and not replacing employees.
Speaking from Glasgow, Brexit is not helping business confidence, if anything it is causing anxiety and stopping risk taking and investment. That might settle down if they could see a plan in the future but longer it goes on the bigger mess it has become and that is putting a stress on peoples spending.
You asked about Freelancers yes it is dire. IR35 has finally caused the demise of many - why, because organisations will not want to argue with HMRC about the arcane and ridiculous rules about whether people they engage are employees or contractors and therefore just deduct PAYE - end of. This is particularly the case with government, so what do they do, they now use large consultancies and pay 3 times as much for outcomes that are no different (or worse) than when contractors were used. Dynamic economy my foot!
And of course the contractors who maybe worked direct now instead work through these large consultancies, escaping IR35 in the process as the large consultancy does not view the engagement as IR35 and knows how to draft a mean contract.
The funds letters from FC and the like get sent to Companies willy nilly, some are dead, some in the process of striking off and some just people you wouldn't lend to if you looked at their balance sheet. This is a mailing list from Companies House with no supervision at all. I certainly wouldn't lend them 2.5p
