Drawing on national and regional insight from over 200 clients and contacts, the findings of our recent survey identifies opportunities and concerns facing UK manufacturing and engineering businesses. UK SME manufacturers and engineers remain optimistic and confident about future growth, despite the uncertainty surrounding Brexit, rising production costs and skill shortages.
2017 was a very busy year for transactions for MHA firms nationally and our latest Corporate Finance Overview sets out transactions completed in the year.
advised on 85 completed domestic and cross-border transactions, enabling our entrepreneurial client base to pursue strategies for growth, deliver succession plans and realise shareholder value; this represents a 37% increase on 2016 completed transactions.
MHA firms also secured top rankings in a number of the UK’s regions in 2017 and our teams won numerous M&A awards. MHA Chiks advised on corporate deals worth in excess of £25m in 2017.
Business owners need to give consideration to the tax planning strategies related to their transactions, for example does a sale qualify for Entrepreneur’s Relief? Our tax 2017-18 planning guide offers guidance.
What can we expect from the corporate deals market in 2018?
Stephen Gregson, Corporate Finance Director at MHA Chiks believes there will be many opportunities in 2018 for those who have an open mind and are alive to them.
Stephen said: “If you are thinking of selling then ask yourself why this is. What is it that you are trying to achieve by selling the business? Is it a sum of money? Or is freeing up your time more important?
Depending upon your ultimate goal it may be possible to achieve this in another way and yet still retain ownership of the business.
“To those who are considering acquisitions, getting your funding in place beforehand will give you certainty, flexibility and the ability to act quickly.”
Read more of Stephen’s thoughts regarding the corporate deals market in 2018.
The report covers the Current Outlook, The Future, including on-line retail, Alternative Fuel Vehicles (AFVs) and the future of car dealerships in general, and the M&A Outlook. The report also features the Dealer View from Trevor Reeve, Pentagon Chairman, the Manufacturer View from Paul Flanagan, former Renault/Dacia MD UK and Ford MD France and expert commentary from Sue Robinson, Director at the NFDA.
- Only 24% of UK dealers expect an increase in profits in 2017; a drop of 20% from 2016.
- 8 out of 10 dealers say Brexit uncertainty will have adverse impact on the sector.
- Used car performance expected to have most positive impact on profitability.
- Pre-registration levels, consumer confidence and costs have most adverse impact on profitability.
- Online retail set to become integral part in the future new car purchasing model.
- 59% happy with franchise partners’ future proofing strategy for AFV and autonomous vehicles.
View the full MHA Motor Dealer Report 2017
Steve Freeman, Head of the MHA Motor sector comments: “I am not surprised to see the survey results confirming the marked change in dealer confidence levels we have heard from our clients recently. The industry is really going through a period of change and I do think that online developments may start moving at a pace now. The continued strength and resilience of the sector is certainly dependent on all parties (including manufacturers and their franchise partners) working together to ensure a sustainable business model for the future.”
If you would like to discuss any of the issues raised in this report in more detail or you would like to speak with a member of our team, please contact Ginni Cooper or call on 01772 821021 to be put in contact with a member of our Motor team.
In March 2015 MHA conducted a survey to examine the key factors now affecting the hospitality
sector in the UK.
The survey results for 2015 point strongly towards growing business confidence and are
encouraging for the development of the hospitality industry.
The agriculture sector extends beyond the bounds of business, it is a way of life. In addition to
facing the challenges and pressures faced by other sectors, there are external, uncontrollable
factors that are unique to agricultural businesses.
MHA conducted a survey at the recent LAMMA 2015 show which identified the issues currently
facing the agricultural sector. This report is based on over 100 responses from farmers about
their concerns for the coming year and benchmarks the results against last year’s survey
responses. The findings will no doubt prove insightful, identifying the key expectations and
concerns of those in the agriculture sector as we move further away from the effects of the
Chiks has given its backing to a ‘Manifesto for Manufacturing’ which calls for radical changes to the education system to boost skills.
The report, compiled by the Manufacturing Group at MHA, the national association of independent accountants, calls on government to move towards ‘demand-led education’ to help the sector bridge the current skills gap.
Businesses contributing to the report recommendations believe secondary and tertiary education needs to be re-focused away from ‘abstract academic targets’ towards skills needed by employers.
The recommendations in the report, which will be sent to politicians of every political persuasion ahead of the 2015 election, are designed to put the case for increasing the support given to the manufacturing and engineering sector by whichever party forms the next government.
Ginni Cooper, head of the manufacturing team at Chiks, which is one of nine MHA members, said: “The UK has made some significant steps in re-establishing manufacturing as a mainstream economic activity, but unless our schools, colleges and universities start to produce young people in large numbers with the skills and motivation to become engineers and technicians, our ability to compete in the global market will be severely limited.
“Demand-led education is an obvious way to help achieve this. Instead of targeting our schools to achieve abstract academic targets we should as a nation, look at what we need by way of a future workforce and challenge our schools to meet that need. In simple terms, it’s about educating our young people in the skills which employers want now, and in the future.”
The report also recommends changes to the tax system to encourage investment and innovation as well as a more consistent delivery of government support across the UK to encourage things such as exports and re-shoring of production into the UK.
The Manufacturing Group at MHA also seeks to engage and influence where
there are challenges and opportunities facing the sector, working with industry
and governmental bodies to promote manufacturing and engineering in the UK.
Participants in this roundtable included manufacturing and engineering
businesses, together with advisers and facilitators specialising in the sector
from England, Scotland and Wales.
The aim of the roundtable is to influence all of the major political parties as they
formulate policy heading into the UK General Election in 2015.
The majority of farmers are optimistic about future growth and are planning for expansion where possible, according to the second agricultural survey conducted this year by MHA.
The , compiled in partnership with Chiks, was first conducted at LAMMA in January and rerun at Cereals 2014 in June. Collectively these surveys take into account the views of more than 200 farmers nationwide.
Key findings include:
– Despite falling prices, optimism for growth is high – 69% of those who responded were expecting growth.
– Expansion is an aspiration for many with 51% planning to increase their acreage.
– Succession planning is a concern which is moving up the agenda for many respondents.
EU predictions earlier this month, that the European cereal harvest is set to beat the average for the second year running, may be part of the reason for the optimism among those surveyed, outweighing the impact of recent drops in commodity prices.
However, many sounded a note of caution around profitability as the squeeze on margins continues to bite. There is also a shortage of available land for those looking to expand their businesses.
Liz Cliffe, head of Chiks’s farming and rural business team, said: “Although the recent falls in the price of both cereals and meat was a key topic of conversation, it is encouraging that there is an underlying optimism as we go into harvest. For those looking for expansion however, the availability of the right land at the right price remains a barrier to expansion as land prices continue to rise while supply remains static.”
Aside from the concern about available land, planning for the future of the business is a worry for many. 17% of those surveyed felt that succession planning was a “great concern” and an additional 39% acknowledged that this was of “some concern”.
Liz Cliffe added: “Planning for the business is essential if anticipated levels of growth are to be achieved. In this business more than any other, a long term view must be taken and advice should be sought. For many of those we spoke to succession seems to be creeping up the agenda and planning for this essential. The earlier this can be done the better.”
Of those surveyed by MHA, 54% would consult their accountant as a first port of call when making decisions about their business. Sound financial advice is essential – whether you are planning to expand or looking to hand over the reins to the next generation.
In the first of a series of articles examining the issue of financial stability for law firms, Karen Hain, head of the professional practices team at Chiks and MHA, explains how to identify if your firm is on the road to financial ruin.
A constantly evolving legal services sector, combined with tough economic conditions paints an unsettling picture for many practices.
The gravity of the situation is underscored by the SRA’s confirmation that it has placed 160 firms under intensive supervision, following concerns about their financial positions.
Against this backdrop of uncertainty, it has never been more important to be aware of financial danger signs, while recognising the importance of sound financial governance, strong cash management and effective business strategy.
Many law firms run their finances effectively, but the SRA believes some are still too focused on work volume rather than profitability.
The good, the bad, and the best way forward
The number of different business models means the way firms handle their finances will vary enormously. However, the basics of solid financial management remain the same and the SRA’s Risk Index sets out lists of good behaviours to aim for and poor ones to avoid.
– Amounts of drawings exceeding net profit levels
– High borrowing to net asset ratios
– Increasing indebtedness by maintaining drawings levels
– Firms controlled by an ‘inner circle’ of senior management
– Key financial information not shared with ‘rank and file’ partners
– Payments made to partners irrespective of cash in the bank and all net profits drawn, with no ‘reserve capital pot’
– Short-term borrowings to fund partners’ tax bills and VAT receipts used as ‘cash received’, resulting in further borrowings to fund VAT due to HMRC.
– All partners regularly receive full financial information including office account bank balances
– Drawings are linked to cash collection targets and do not exceed net profits
– Provision is made to fund partners’ tax from income received
– A capital element is retained from profit, and a capital reserve account built up
– Premises costs are contained
– Profitability levels are tested and unprofitable work is dropped.
How Lexcel drives better financial management
If your practice is struggling with financial management, you may want to consider the Lexcel accreditation – the Law Society’s practice management standard – which can strengthen your firm’s finances in a number of ways.
The process of gaining the accreditation in itself means firms become more profit conscious, proactive, and risk aware. Lexcel provides professionals in law firms with a management framework that drives operational efficiencies, effective risk management, and cost reductions, all of which should result in greater profitability.
Additional benefits include better customer service, which means higher client retention rates, increased success in tenders, improved marketability, and more effective risk management which leads to fewer claims and lower insurance premiums.
If you would like to discuss a legal practice financial management issue, please call Karen Hain on 01772 821021 or e-mail [email protected]