Commercial Broker (NACFB Magazine) September 2023

Broker

The award-winning magazine for the National Association of Commercial Finance Brokers

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Opportunities, challenges and emerging trends in the UK logistics sector

THE NEXT BIG THING?

An outlook for the purpose built student accommodation industry

A rising tide lifts all boats

Why nations, like businesses, need a clear strategy

Further Information

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Norman’s Note

Norman Chambers Managing Director | NACFB

It’s that bustling time of year again at the NACFB – awards season is in full swing. As the celebrations of the Commercial Broker Awards come to a grand culmination, our dedicated expert judging panel is in the midst of meticulously assessing nominations for the Commercial Lender Awards. The enthusiasm and dedication we’ve witnessed is truly commendable.

Reflecting upon the season, it offers us a pertinent reminder of the importance of evaluation, acknowledgement, and celebration in our industry. By taking a moment to assess our collective achievements, we do not just reward success, but we also set the gold standard for future aspirations. Recognising and honouring the very best amongst us serves as a beacon, guiding the way forward for our entire community.

This September issue of Commercial Broker magazine dives deep into the significance of strategy, both on a granular level for individual firms and at a broader macro level for both the industry and even the nation. Crafting and refining strategy, as you’ll read, is not just about short-term gains but setting a path for sustainable success.

Furthermore, in our continuous quest to enhance our practices, we’re looking forward to sharing more details about the transformation of how we, at the NACFB, review Member firms. The rollout of our assurance process marks our commitment to upholding the highest standards of excellence and ensuring your trust in our community remains unwavering. Thank you for being a part of this journey. Here's to celebrating excellence and charting the future.

Association updates for September 2023

NACFB News

Broker Academy celebrates graduates and doubled enrolment

The NACFB Broker Academy is poised to celebrate its first-ever graduates at the upcoming Commercial Broker Awards in Manchester.

The inaugural and pioneering students have successfully achieved their CertCFB qualifications. Steve Olejnik, NACFB board director, expressed pride in the graduates, stating: “This milestone symbolises not just the graduates’ commitment, but also a significant advancement for the NACFB and the entire commercial broking sector. Their success showcases the promising potential of the next generation in finance.”

Parallel to this achievement, the NACFB Broker Academy has announced a remarkable doubling of its student intake for the forthcoming academic year. This increased enrollment underscores the academy’s burgeoning reputation as a premier institution catering to emerging commercial finance professionals.

The NACFB’s Norman Chambers commented on the growth, noting: “After a triumphant launch of the Broker Academy, the filled seats for the next year are a testament to our impact. With the imminent graduation ceremony at the Commercial Broker Awards, we’re optimistic about the industry’s vibrant future.”

NACFB forms working group to tackle conditional selling

The NACFB is taking definitive steps to counteract the challenges presented by conditional selling. In late August, the Association set up a focused working group comprising seasoned asset finance experts.

The group’s mandate is to delve deeply into consumer detriment and the anti-competitive tendencies emerging from certain motor dealers. Their primary goal is to ensure that consumers maintain free and unhindered access to financial choices.

Following their inaugural meeting, the group has already chalked out a strategic plan. This encompasses collecting proof of anti-competitive actions, tapping into the knowledge base of NACFB Members to glean deeper insights, and contemplating partnerships with pivotal industry players to heighten consumer awareness about these practices.

The NACFB’s head of compliance, James Hinch, noted: “This move is not new but a continuation of persistent efforts to combat the growing issue of restrictive conditional selling. The current scenario demands a robust accumulation of evidence which corroborates the assertions made by asset finance intermediaries. We’re on a mission to solidify our position with indisputable data.”

Summer slump or summer surge?

Rethinking seasonal business trends

Jonathan Prince Senior Commercial Manager Allica Bank

After the typical end-of-financial-year rush, the fabled ‘summer slump’ sneaks up quietly. Before you know it, every email gets an ‘out of office’ reply, and the pace of deals moves to a trickle. This quieter period (along with Christmas) always felt like a counterweight to the hubbub of the rest of the year. That is, at least, until recently…

Summertime madness

According to Allica’s application and completion figures, we simply didn’t see the slump you might expect this year. Commercial mortgage application numbers remained almost the same over the summer as they did the months before. While our asset finance application volumes actually increased!

Fascinatingly, this isn’t just a 2023 phenomenon. The same was true in 2022, where again our commercial mortgage volumes only dipped slightly and our asset finance applications stayed the course.

My theory

Now, I of course have no solid evidence for why this trend is emerging. But my hunch is that much of this behavioural change

could be down to the more flexible approach many brokers are taking to their work.

The ability to work remotely while maintaining full contact with your team means the wheels can keep on turning no matter whether you’re keeping an eye on the kids while they’re off school, or you’re sat in a chateau in France.

In fact, one broker I’ve been talking to recently is spending six weeks in Spain with his family. He was still working Monday-to-Friday, but was able to enjoy his evenings and weekends in warmer climes –a fantastic decision considering the rather drab summer we’ve had here in the UK!

The pandemic may have bottled up our travel plans for a couple of years, but it also taught us to work flexibly. And many people’s work-life balances are benefitting as a result.

Change comes slowly

As the summer has drawn to a close, it has left me wondering: have we seen the end of the summer slump?

I suspect not. At least, not completely. But it looks to me like maybe future summers won’t be quite the period of inactivity they once were.

Regardless of how fast you’re moving or where you call from, Allica Bank is excited to work with you and your clients as we head into autumn. I’m looking forward to some respite over Christmas!

Industry News

1. MPs seek crack down on late payments

A recent YouGov survey shows most MPs want tougher measures to crack down on late payments. The survey commissioned by the Association of Accounting Technicians and the Association of Chartered Accountants, found that two-thirds of MPs think the Prompt Payment Code should be made compulsory for organisations with over 250 employees. The code is voluntary and Federation of Small Businesses research found that in every quarter in 2022, most small businesses experienced late payments.

3. UK recovered faster from COVID than first thought

The UK economy shrank less during the pandemic and bounced back faster than previously thought, revised figures from the Office for National Statistics show. The updated figures add nearly 2% to the size of the economy as of the end of 2021, meaning Britain recovered to its pre-pandemic size almost two years ago. The ONS previously said the economy was still 1.2% smaller than its pre-lockdown size at the time. However, GDP is now believed to have been 0.6% above pre-pandemic in the final three months of 2021.

4. Eurozone lending growth slows again

6. Chancellor rules out major tax cuts this year

Jeremy Hunt has ruled out significantly cutting taxes before the end of this year, citing high inflation and economic volatility. The Chancellor is still hoping to reduce the tax burden in a pre-election Budget but has emphasised that tackling inflation and balancing the books must take priority. The Autumn Statement, scheduled for November, is now too late for an economic turnaround. Conservative MPs expressed dismay at the decision, calling for cuts to inheritance tax and corporation tax.

7. Young leaders taking charge of UK businesses

2. Business confidence reaches highest level since February 2022

Business confidence rose by 10 points to 41% in August, according to the latest Lloyds Business Barometer, reaching the highest level since February 2022. Trading prospects improved, with 57% of firms anticipating stronger activity in the next 12 months. Employment intentions also rose, with 50% of firms expecting to increase their workforce. The construction, retail, and service sectors saw increased confidence, while manufacturing confidence declined. Overall, business optimism is higher than at any time since the Russian invasion of Ukraine.

Growth in lending to companies in the eurozone slowed again in July. Lending to firms in the currency bloc expanded by 2.2%, year-on-year, marking a slowdown compared to the 3% growth recorded in June. The ECB raised interest rates for the ninth time in a row in July, increasing the rate that it pays on banks’ deposits from 3.50% to 3.75%. The bloc saw inflation of 5.3% in July, with some analysts suggesting that it will not fall back to the ECB’s target of 2% until 2025.

5. UK house prices fall at fastest rate since 2009

House prices fell by 5.3% in the year to August, according to Nationwide, the fastest annual drop in 14 years, bringing the average house price down £14,600 to £259,153 compared with a year ago. “The softening is not surprising given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels,” said Robert Gardner, the chief economist at Nationwide.

Millennials will make up an estimated 75% of the global workforce by 2025, meaning businesses will have to adopt more diverse styles of leadership. According to a recent study by Companies House, 49% of new business owners are aged between 25-40. Research by Approved Business Finance shows that combining both younger and older executives in leadership teams can boost productivity and create an innovative workplace. Younger leaders are more likely to challenge the status quo and drive permanent change, it is suggested.

8. Half a million SMEs flag tax bill pressures

New research from Premium Credit shows that more than 550,000 SMEs are currently struggling to pay tax bills. Around 10% of SMEs say they are struggling to cover tax costs, while up to 15% have had issues paying them in the past 10 years. The survey found that 19% of SMEs feel affording tax bills has become more difficult because of the cost-of-living crisis. Of those facing issues with tax bills, 54% say their issue is with corporation tax, while over a third (35%) pointed to VAT.

9. Building society boss: Landlords are being demonised

Stuart Haire, chief executive of Skipton Building Society, says Britain’s landlords are dealing with a triple blow of higher taxes, rising mortgage costs and increased red tape, including tighter energy efficiency regulations. He warned of a “slightly demonised” private rental sector, where landlords “...are getting squeezed from a tax basis and from the increased mortgage rates they are having to pay if they have debt associated with that property.” Office for National Statistics data shows that rents rose by 5.3% in July, the fastest pace on record.

10. Services sector profits continue to fall

Profits for Britain’s services sector companies have fallen for a seventh consecutive quarter, according to a survey by the CBI. The decline in profitability is attributed to cost pressures and disappointing business volumes in the consumer and professional services industries. The consumer services industry saw a sharp decline in business volume, while professional services remained steady. The weak output in services industries is expected to contribute to a contraction in UK GDP during the third quarter, potentially leading to a technical recession.

Membership News

Planning delays stretch property development cycles

Research published in Brickflow’s August Industry Insights has found that delays in planning has extended the full cycle for property development projects to four years, up from the historical two to three years.

Despite continual accounts of delays from developers across the UK, the government’s most recently published figures show that 86% of decisions for major applications are made within the agreed timescale.

The Brickflow report reasons that the data does not align because government statistics are based on when the application is determined as ‘received’ by the council, and this is when the clock starts. The rate of on-time approvals also depends on which council the planning applications are submitted.

The knock-on effects are more heavily felt for SMEs says the report, particularly as these smaller developers are likely to have their capital tied up in just one or two sites, so lengthy delays in planning can bring their businesses to a grinding halt.

The most successful SME development businesses will typically have one (or more) projects at pre-planning, one (or more) in planning, one coming out of the ground, and one being sold. The only way to achieve this multiple-project model, beat the odds and scale sooner is by being clever with funding says the report.

Reward lends £8.3m in first year of launching in Scotland

Reward Finance Group has helped boost Scotland’s economy by providing £8.3 million of funding to SMEs in the first 12 months of launching north of the border.

Having experienced unprecedented growth, the NACFB Patron has supported Scottish businesses operating across a diverse range of sectors and is looking to further build on its success by expanding its team internally and further develop its commercial finance broker network in the year ahead.

The company attributes this rapid success to its straightforward and flexible lending products, speed of delivery, and the confidence of an increasing number of SME-sized companies to build their business and drive growth post-pandemic.

Brian Machray, Reward’s business development director for Scotland, said: “The first 12 months of establishing any business in a new market can be extremely challenging, so to go on such a rapid growth trajectory has been a superb achievement.”

Among the SMEs in the region benefitting from Reward’s support is a tile specification company which needed £150,000 in flexible working capital to assist with receivables and large orders imported from Europe. Scotland’s first, industrial-scale tyre recycling plant was also supported with £350,000 working capital to help improve operational efficiencies, invest in vital machinery, recruit and support its drive to increase revenues by 92%.

This one’s for the brokers

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We’re making it even easier to do business with us, with a new, bespoke service specifically for lending requests under £150,000. Our bank of knowledge is open Monday to Friday, 9am to 5pm. And now with our specialist team on hand, you and your customers can expect clear timing plans from the get-go. Contact our local centre of excellence at brokerteam@natwest.com Security may be required. Product fees may apply. Over 18s only. Subject to status, business use only.

Truly valued

Commercial property valuations holding up

Stephen Todd Chief Commercial Officer & Co-founder VAS Valuation Group

How time flies. Saturday 23rd September will mark the anniversary of Liz Truss’s mini-budget, and while it’s fair to say the overriding ramifications for the 2023 property market had been destabilising, we see real room for optimism in the commercial market.

Since the first rate rise in February we have slowly seen some positive signs, and the team can literally feel the increased confidence from our lender and broker partners. This has culminated in some consistent figures over the last few months including August, which historically has been one of our quieter months.

We see a lot of data on the UK property market in the media, but most is regarding the residential housing market. Commercial property too plays a significant part in the UK economy. According to the British Property Federation it supported, either directly or indirectly, more than 2.6 million jobs in 2022. Over the last ten years we have seen on average around £45 billion worth of commercial property sales every year with a total value of £1.3 trillion. These figures include offices, industrial and retail units.

It is hard to say how many actual commercial property valuations are completed each year across the UK. On average there are

around 14,000 to 16,000 commercial property sales per year and the majority of these will have a valuation. However there will also be many commercial valuations completed for refinancing purposes or accounts valuation.

Over the last ten years the volume of sales has fluctuated. 2015 was the high point with around £50 billion worth of sales, and 2020 was the lowest with just over £30 million. All sectors have been hit, however some have suffered more than others, especially property funds and the prime property market which was one of the main markets affected after last year’s mini statement.

“

Over the last ten years we have seen on average around £45 billion worth of commercial property sales every year with a total value of £1.3 trillion

When we look at the figures in closer detail one sector sticks out. The sale of office space has taken a real hit in the last few years. In 2020 sales volumes dropped to around £15 billion; this is approximately half the amount of 2015. This recovered slightly in 2021 but declined again in 2022. Will employers force workers back to the office and will they need as much office space in the future? These are the big questions that will be answered over the next few years.

Retail has seen the same drops and uncertainty, especially as we see many ‘big’ name retailers leaving the market following COVID. In a lot of cases, competition from online retailers and increasing costs have made it too difficult to trade on the High Street. This is turn will bring opportunities for the property market for residential conversions.

The news is not all bad, industrial has seen significant growth in the last 10 years with sale volumes over £18 billion in 2021. Industrial logistics has been the real star in this sector with a steady increase in volumes and sales. However, with interest rates rising the prime part of this market has seen a correction. With four months left of 2023, there’s still plenty of time left to see more improvement in the market.

How VAS fits in

VAS Panel, part of the VAS Valuation Group, is a panel manager that

specialises in all property valuation sectors. We have over 50 staff with a dedicated team to support brokers with their instructions, plus several in-house RICS valuers who can add their expertise to support any transaction lenders and brokers are looking to complete.

Working with brokers and lenders

To help brokers we bespoke our broker interaction at the lenders’ request. This means we can tailor the valuation journey to the lenders’ needs. When interacting with brokers directly, VAS Panel will still work to the requested lender’s own pre-agreed requirements. We provide brokers with their own VAS dashboard where they can view all their cases that have been requested through ourselves where they are able to view real time updates and leave notes on the case.

If requested, we can also provide MI to our brokers which shows a 12-month rolling month-on-month breakdown of quote requests vs instructed vs completions, plus a breakdown of report SLAs along with a heat map of which lenders they have instructed on behalf of.

To support brokers further, we have just launched our Knowledge Hub, which answers frequently asked questions. We love hearing from our brokers, and the team is here to support and help with any type of valuation or enquiry.

“ Industrial logistics has been the real star in this sector with a steady increase in volumes and sales

PEPs in focus

Politically exposed persons and UK lending

James Hinch Head of Compliance NACFB

The financial world is rife with challenges, and in the UK, the matter of Politically Exposed Persons (PEPs) remains at the forefront of risk and compliance issues. The recent incident involving Nigel Farage, whose bank account was terminated in a high-profile manner this summer, further propelled the issue into the limelight. With the backdrop of Farage’s case, below we explore and develop our understanding of the nuances of PEPs for both commercial finance brokers and lenders.

What are PEPs and why do they matter?

In essence, a PEP is an individual with significant public functions, often with a level of influence and authority, and this stature often exposes them to potential risks like bribery and corruption. In the realm of commercial finance, a PEP’s involvement can pose severe reputational and regulatory risks. For brokers and lenders, understanding the gravity of these risks is paramount.

While Farage’s issue primarily stemmed from political affiliations, it underscores the broader implications of dealing with PEPs and the requisite due diligence processes. Whilst the NACFB is not seeking to interrogate the merits or otherwise of the Farage case, the story certainly throws into relief what is an incredibly precarious concept, fraught with grey areas.

The intricate process of verifying PEPs can sometimes be a doubleedged sword for commercial finance professionals. On one hand, adhering to stringent guidelines ensures regulatory compliance,

but on the other, there’s a risk of alienating legitimate customers. With advancements in technology, commercial finance brokers and lenders are better equipped to perform this verification. Tools like the one provided by NACFB Partner Red Flag Alert offer robust solutions, combing vast databases to filter out potential PEPs. Yet, with cases like Farage’s, the boundaries become somewhat more blurred, raising questions about fairness, discrimination, definitions, and the infallibility of such systems.

Earlier this month, the FCA launched a review into the handling of PEPs by financial firms. The regulator’s examination will address how companies are defining PEPs, conducting risk assessments, implementing due diligence, and communicating with PEP customers. While the FCA cannot modify the existing PEPs legislation, it aims to ensure firms' practices are proportionate and in compliance with the law. The FCA's findings will be reported by June 2024.

The broader context

A recent survey from SmartSearch also raised eyebrows. Their findings suggest a rather lax approach by some challenger banks, with 54% admitting to performing checks regarding sanctions or PEPs only occasionally. This is concerning, especially in the wake of stringent Russia-related sanctions that followed the Ukraine crisis. The onus then falls upon commercial finance brokers and lenders to bolster their compliance checks and due diligence processes.

While PEPs inherently carry associated risks, it’s vital for firms to judiciously balance risk management and customer rights. With growing scrutiny, especially after high-profile cases like Farage’s, commercial finance professionals must employ a blend of both caution and technology to navigate the intricate maze of PEP-related compliance. By doing so, they can uphold not only regulatory standards but also the trust and confidence of their SME clients.

Menopause friendly workplaces

Deborah Garlick CEO

Henpicked: Menopause in the Workplace

There have been 14 million working days lost in the UK because of menopause. Six in 10 menopausal women say it has had a negative impact on their work, and 42% of women consider leaving their job because of it. This month’s expert is Deborah Garlick, CEO of Henpicked: Menopause in the Workplace. Here she delves into the pressing topic of menopause in a professional setting. Drawing from her extensive expertise, she provides invaluable guidance to employers and employees navigating this natural transition.

How do menopause symptoms differ between women?

There are over 30 menopause symptoms and everyone is affected differently. Some barely notice any change whilst others can be completely floored. Symptoms can also change over time. The symptoms women have said affect them most at work include difficulty sleeping, hot flushes, fatigue, anxiety, worry and difficulty concentrating. 67% say that they have reduced confidence, 70% cite high stress levels and

Q75% reveal a loss of focus or ‘brain fog’.

How can colleagues and managers be more supportive during this stage of life?

It is vital that people don’t feel they are alone and that their organisation takes menopause seriously. Firstly, training people in the workplace, especially line managers, helps them understand how they can offer support. Training all colleagues makes everyone aware of menopause. It will give managers, HR, and department heads confidence when talking to someone experiencing menopause and help employees understand how they can support their colleagues.

and an understanding ear.

&

Listen carefully to colleagues’ concerns: you will often find that small workplace changes will make a massive difference to people, such as a cooler office space, a quiet breakout room, more flexible working hours, and more relaxed work clothing policies.

What is the business case for menopause in the workplace?

Are there any other ways that organisations can create a more supportive environment?

One of the most effective ways to begin is by hosting a menopause event in person or online. This will get the conversation started, allow colleagues to explain what is preventing them being their best at work and highlight what you can do to help. Many employers find passionate advocates and ‘champions’ within their organisations this way. Committing to being menopause friendly – and appointing menopause champions – helps colleagues know who they can turn to for advice, reassurance,

A3.5 million working women are aged 50-65 with perimenopause affecting those years earlier. It is crucial for organisations to support these experienced colleagues. The Equality Act 2010 covers menopause under the protected characteristics of age, sex and even disability discrimination. Menopause is being cited in an increasing number of employment tribunals and this trend is set to continue to rise.

One in four contemplate leaving work due to symptoms and replacing someone earning £25,000-£30,000 costs around £30,000, with recruitment costs averaging £6,100. Menopause-friendly workplaces see fewer absences, better productivity, higher retention, improved recruitment, more equal pay, and fewer litigations. Embracing this is key to diversity and inclusion, signalling a commendable business ethos to partners and associates.

A portal to simple bridging deals

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Supporting the high-growth economy

How for some businesses, rapid expansion is at their core

of their growth, qualifying businesses have access to a named business relationship manager, a named personal banking relationship manager for business owners, and a dedicated line for any international product needs.

Resilience has been the cornerstone of many businesses. The UK economy is suffering, of course, but for a select coterie of businesses, outperforming the national average has become the norm. According to research by Beauhurst, the UK’s high-growth segment is driving significant economic growth and developing next-generation technologies. Its list of the 10 fastest growing businesses in the UK between 2021 and 2022 reflects all parts of the economy, from supply chain specialists to life sciences, wedding planners and pub operators to adventure parks and fintech.

But no matter how diverse high growth businesses may be, they have one thing in common: the need for financial support. This is vital to high-growth businesses in the UK economy, and brokers are the go-to options for thousands of businesses looking to invest in their operations – whether that is in machinery, plant or land.

Relying on our network

Why do businesses choose the support from NatWest and its broker network?

As a bank we support hundreds of high-growth businesses, with the aim of helping them spot and maximise new opportunities, including possible access to funding and finance, markets, talent, leadership and infrastructure. At every stage

We also maintain a High Growth Hub, our free online thought leadership resource that provides actionable insights to help high-growth businesses move forward. We also have a full calendar of bespoke events (both offline and online) throughout the year. They include our Investor Readiness and How to Grow Your High Growth Business events. Collectively, they offer invaluable learning and practical knowledge, and spark new connections and networks. And we have programmes that could help leaders build a sustainable business for the future – including the Business Exit Programme and the Accelerator Programme.

But in this we don’t overlook the complementary approach we offer via our broker network: each intermediary is designated a local

“ The high-growth section of the economy doesn’t sleep, and it certainly doesn’t slow down when the economy does

Dave Furnival Head of Broker NatWest

business development manager who is on hand for face-to-face meetings and to offer sectoral expertise to suit the nuances of any deal. We back this up with support from specialist BDMs at asset finance specialist Lombard. Lombard’s in-depth knowledge of how our products may help a business is available to our broker network.

Aside from reach and scope, we’re keen to make doing business easy for our brokers. In this vein, our broker portal helps brokers get quotes 24/7 on deals worth between £50,000 and £750,000. We are working

on improvements to streamline the quote process even further.

The high-growth section of the economy doesn’t sleep, and it certainly doesn’t slow down when the economy does. For those businesses that choose to invest in the future, together with our broker network we’re ready.

Business lending – Security may be required. Product fees may apply. Over 18s only. Subject to status, business use only.

Calling all brokers

Joining our Broker Panel, you’re joining a community. You’ll get direct access to our Broker Portal, which makes getting a decision simpler than ever. And you can count on extra support building your own brand from our team of business and broker development managers. You’ll also get free access to our Business Builder programme – digital and event -based learning built with businesses like yours in mind.

Email brokerteam@natwest.com to join

A rising tide lifts all boats

Why nations, like businesses, need a clear strategy

Norman Chambers Managing Director NACFB

In the corporate world, the formula for success has been meticulously dissected, analysed, and interpreted countless times. Business magnates and thought leaders have consistently championed the quintessential element that underpins lasting success: a clear, coherent strategy. Yet, while businesses have been immersing themselves in strategy development sessions and painstaking SWOT analyses, there’s a more colossal entity that stands to benefit from similar discipline – the nation itself.

Drawing parallels between running a business and governing a nation might seem far-fetched to some. However, the underlying principles remain strikingly similar. Both need to anticipate future challenges, optimise their resources, understand their stakeholders, and, most importantly, set a direction that is both visionary and grounded in reality. Just as a ship without a compass is at the mercy of the seas, a nation without a grand vision is vulnerable to external shocks, internal discord, and missed opportunities.

Take the UK, for instance. Emerging from a series of once-in-ageneration events and transitions, the need for a comprehensive industrial strategy is more pronounced than ever. While tactical measures can offer momentary respite, they are but sticking plasters to deeper systemic issues. The UK’s path forward should not just be a series of reactive steps; it needs a grand vision – a clear path etched for businesses to confidently stride down, invigorated by the promise of a nation that knows where it’s headed.

Beyond buzzwords and battlefields

When we utter the word ‘strategy’, the images that traditionally flood our minds are those of boardrooms brimming with charts, or military generals hovering over a map. But to pigeonhole strategy into mere corporate lingo or to confine it to military manoeuvres is to misinterpret its depth and richness.

So, what exactly is strategy? At its core, strategy is the art and science of making informed decisions today that pave the way for a desired future. It’s a harmonious blend of foresight, objectives, and the means to achieve them. It’s not merely a plan, but a coherent framework that defines what an entity (be it a business or a nation) stands for, where it aims to go, and how it intends to get there.

Strategy is decidedly not a one-off activity, a checklist, or a short-term gambit. Nor is it a reaction to immediate challenges. Those are tactics – useful, but not a substitute for the broader vision. Imagine playing

“

To pigeonhole strategy into mere corporate lingo or to confine it to military manoeuvres is to misinterpret its depth and richness

chess and focusing only on the next move without any consideration for the endgame; you might capture a piece or two, but you’re unlikely to checkmate your opponent.

On a micro level, such as in a small enterprise or a local community, a strategy might involve identifying core strengths, understanding the desires of stakeholders, and charting a roadmap for growth or improvement over a set period. This strategic approach provides clarity and purpose, ensuring every decision and action aligns with the overarching goals.

When we extrapolate this to a macro or national scale, the intricacies grow, but the foundational principles remain unchanged. A national strategy involves gauging the collective aspirations of its citizens, recognising global trends and threats, and formulating policies that steer the nation towards a brighter, more prosperous future. It’s about setting priorities, making trade-offs, and building bridges to the future while understanding the historical and cultural underpinnings that define a country.

In essence, the need for strategy, be it in a startup or a sovereign state, springs from the same human desire: to shape the future, rather than be shaped by it. It’s the compass that guides entities through the uncertain voyage of time, ensuring that every tactical decision made en route is in service of the grander vision.

Shaping the conversation

The NACFB has developed a louder and more pivotal voice in the

national conversation, shaping the UK’s business horizon. As the UK stands on the precipice of defining its economic future, the trade body remains firmly committed to ensuring that this future is robust, inclusive, and progressive.

A clear sign of this commitment was on display last month when the NACFB submitted compelling evidence to the MP-led inquiry into SME access to finance, extolling the intermediary as an indispensable lifeline for SMEs grappling with this challenge.

Yet, while the NACFB can and does champion tactical initiatives –such as the call for a rejuvenated Bank Referral Scheme or enhanced incentives for SME housebuilders – there’s an underlying sentiment that’s hard to ignore. These tactical proposals, as crucial as they are, must be components of a larger, holistic vision. Standalone initiatives can bring about change, but for that change to be transformative and lasting, it needs to be anchored within a comprehensive national industrial strategy.

It is with this understanding that the NACFB will be actively engaging with all political parties in the run-up to the next election. The message is clear: while tactical measures are essential, they achieve their fullest potential only when they align with a bold, forward-thinking industrial strategy. A strategy that doesn’t just respond to today’s challenges but anticipates tomorrow’s opportunities, setting the UK on a trajectory of sustainable growth and innovation.

In these dynamic times, the NACFB isn’t just a spectator but a proactive contributor, ensuring that the narrative on the UK’s

The need for strategy, be it in a startup or a sovereign state, springs from the same human desire: to shape the future, rather than be shaped by it

business environment is not just about surviving but thriving in a globally competitive landscape.

All vessels must rise together

Historically, Conservative governments have often eyed the concept of an industrial strategy with a dose of scepticism. The ghost of British Leyland, a testament to the pitfalls of excessive state intervention, has long haunted the corridors of Conservative thinking. The legacy of such interventions has rendered many right-leaning MPs wary, concerned that the demarcation of an industrial strategy would inevitably produce both victors and casualties in its wake.

Yet, as we stand in the middle of this transformative era, the winds of change are palpable. Echoing sentiments from Make UK – the national trade body representing manufacturers – there is an ever-growing chorus from industry stalwarts championing the need for cogent industrial strategy. These voices acknowledge the merits of informed state intervention, especially when contrasted with global counterparts who have leveraged strategic frameworks to forge ahead, like the recent ‘Inflation Reduction Act’ proposed by the Biden administration in the US.

What’s even more heartening is that there’s a broad consensus among stakeholders regarding the pillars of a successful industrial strategy. These pillars have been distilled into five critical themes: skills, which dictate the workforce’s proficiency; infrastructure, laying the foundation for commerce; finance, the lifeblood of enterprises; innovation, the engine of growth; and the overarching business environment that determines the ease of operations and growth.

It’s within this context that the role of the intermediary comes into sharp focus. The potential of intermediary-led lending, as championed by the NACFB, isn’t an isolated lever for progress. It’s a piece of the larger puzzle. To truly harness the transformative power of intermediary-led lending, we cannot be content with merely elevating a single vessel. The NACFB’s mission is grander: to aid decision-makers in grasping the broader vision, ensuring that as the harbour swells, every vessel, big or small, is buoyed by the rising tide.

The UK’s future is shimmering with promise. By embracing a comprehensive industrial strategy, we are not merely responding to challenges but forging a path where innovation, collaboration, and strategic vision converge, leading the nation towards increased prosperity.

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Standalone initiatives can bring about change, but for that change to be transformative and lasting, it needs to be anchored within a comprehensive national industrial strategy

Swim against the tide

Weighing profit with purpose

Phillip Bate Acting Director of Business Banking Triodos Bank UK

As more and more businesses introduce ESG strategies, there’s a growing recognition that profit must be balanced with social and environmental impact as a measure of performance. Companies are increasingly being held to account for more than just their financial results and shared values are often an important factor when consumers make choices about where to spend their money.

Yet there remains a common misconception that making a positive impact on society, culture and the environment often comes at the cost of financial profit. At Triodos Bank, we firmly believe that isn’t the case and that a focus on people and planet can go hand in hand with a good financial return.

A flexible approach

By working with partners that share their values, businesses which prioritise their impact on the environment and society can find support that helps give them the flexibility and stability they need to achieve their goals while remaining focused on maintaining healthy profit margins. We know that sharing core values often leads to a more innovative approach to finance and lenders which prioritise environmental and social ideals are more experienced at balancing an organisation’s financial needs with their wider impact.

An example of how this works in practice can be seen at Sea Lanes, an open-air swimming centre that recently opened on East Brighton’s seafront with the backing of a £2.5 million loan from Triodos Bank. It is home to the National Open Water Swimming Centre of Excellence, the UK’s first outdoor swimming training centre and features a 50 metre, heated outdoor pool. The site also includes 23 carbon neutral modular units that house local businesses including a bar, coffee shop, yoga studio and retailers that fit with the overall ethos of the project.

Set on the site of the former Peter Pan playground on Madeira Drive, Sea Lanes was formed by a group of Brighton-based businesses and open water swimming enthusiasts to encourage people to enjoy sea swimming and live healthier lives.

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The best advice for now is to work with lenders who are responsible and transparent about how they work and who they will lend to

Created with physical wellbeing and environmental sustainability at its heart, the centre aims to cater to swimmers of all abilities, with both membership and pay-per-swim options. The focus of the pool is for training and coaching, acting as a stepping-stone to facilitate swimmers and all water users to gain the skill, confidence and technique to start accessing the sea, both safely and enjoyably.

Due to the nature of the lease on which the site is held, the basis of our lending was calculated, not as a real estate recovery value as you might expect, rather against the historic trading performance of the smaller original site and the confidence we had in the forecast cashflow modelling. By working closely with the founders of Sea Lanes and professional partners, we were able to overcome the various technical challenges that arose to begin drawdowns. We were willing to be as flexible and innovative as we could to support a business that’s having a demonstrably positive impact on society and the environment.

Sea Lanes opened to the public in June this year, with more than 1,000 members signed up and all available business space fully let. As Sea Lanes Brighton director, Joe McNulty, said at the time of opening, this was the culmination of a long journey working

with the local community, adapting the design to reflect Brighton’s heritage and environment while regenerating a derelict brownfield site with what is set to become another iconic Brighton destination.

What to look for

For brokers working with clients that prioritise positive impact, a lack of clear standards and definitions by some lenders can make it difficult to source finance that genuinely fits borrowers’ values. In the absence of such guidance, the best advice for now is to work with lenders who are responsible and transparent about how they work and who they will lend to. Find out what percentage of a lender’s total balance sheet they deem sustainable. Does sustainability form part of their mission and underlying principles? How do they put those values into action? Determining the answer to these questions will help you to present potential options to your clients.

The ongoing impact of economic uncertainty and the cost-of-living crisis can make it difficult for SMEs to balance their financial priorities with their environmental and social impact, but working with values-driven partners means there’s often more willingness to be flexible and innovative in support of common goals.

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A focus on people and planet can go hand in hand with a good financial return

Under the bonnet

What brokers should consider when selecting a lender

Gavin Fell VP of Partnerships OakNorth Bank

As a trusted broker, you’re in the business of people. Your main goal is to secure the most favourable financial solutions for your clients because when they succeed, you succeed. And when your clients trust you to deliver the best possible outcomes for them, they stay your client, and are more likely to refer others in their network to you. While competitive interest rates and arrangement fees are undoubtedly a part of this, it’s crucial to see beyond just the cost and take a good look under the bonnet.

Brokers need to play the long game too. This means aiming for client retention and loyalty, which can only be achieved when your clients trust you to look at their needs holistically, and beyond the commission.

Flexibility

Depending on your client’s goal, there are several factors that may be as important – if not more important – than cost. Flexibility of the loan terms is one. Low-interest rates will no doubt seem appealing, but they can often be accompanied by rigid structures, and off-theshelf products that might not be suitable if your client’s needs are

more complex. A more bespoke solution may come with a slightly higher rate but could be advantageous in the long term. It may give them the option to make early repayments or adjust payment schedules, which could empower your clients to manage their finances more effectively. Depending on their business model, this could be key during the current unpredictable economic conditions.

Speed

Another factor is speed. How quickly can you get a ‘yes’ or ‘no’ from the lender? Depending on the growth ambitions of your client, time may be the most important aspect. Many lenders will take months to approve an application, or most frustratingly, simply reject it,

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Beyond the immediate success of this venture lies a broader narrative about the importance of collaboration and adaptability

with no clear insight as to why. When this happens, time-sensitive opportunities can be wasted, which inevitably leads to an unhappy client. A critical part of this is transparency. How much insight will you get into the decision-making process? You’re of course working towards your client’s best interests, but no one knows a business better than the person in charge, and they should be given the opportunity to advocate for it.

Customer service – to the broker

It might seem like a softer benefit or even a ‘nice to have’, but it is vital for a lender to provide an exceptional level of customer service to you the broker as well as to your client. Will you be kept up to date on how the application is progressing, without having to chase? Will you be told upfront how long the process is likely to take? Will you have one dedicated point of contact that knows the transaction inside out? Applying for debt finance to scale a business or simply to maintain healthy cash flow, can be a stressful time for any management team, and your client needs to feel supported throughout the process. If you’re unable to communicate with them effectively because the lender isn’t communicating with you, this will have a knock-on effect on your relationship.

Reputation

Reputation is also crucial. You’re no longer restricted to high street banks when seeking finance for your clients, which is fantastic, but with this greater level of choice, it’s never been more important to do a thorough review of a lender’s credentials. For example, if the business is a restaurant chain, find recent examples of hospitality businesses the lender has supported. Most reputable lenders will have these case studies easily accessible on their websites, and if not, they should be able to send them to you on request. Case studies will not only give you peace of mind that the lender understands the unique challenges of your client’s industry, but they also demonstrate their commitment to help deliver positive customer outcomes.

To maintain a strong relationship with your client, you need to recommend lenders that you’re sure will work with them to achieve the best possible result for their business. While rates and costs are undeniably important, it should not be your sole focus. By taking a more holistic approach and really taking a look under the bonnet to consider loan flexibility, approval efficiency, customer service and a lender’s track record in your client’s industry, you can ensure they get the right loan to suit their unique business needs.

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It might seem like a softer benefit or even a ‘nice to have’, but it is vital for a lender to provide an exceptional level of customer service to you the broker as well as to your client

By road, rail, water and air

An overview of the UK logistics sector

Sarah Watkins Deputy Director, Policy Information Logistics UK

The UK logistics industry comprised 227,000 logistics enterprises last year, directly employing 1.8 million people across all four nations. Add to this, the 890,000 people employed in logistics roles in non-logistics businesses and you discover that there are 2.7 million people employed in logistics across England, Wales, Scotland and Northern Ireland.

Not only is it a vital sector for the country’s economy, it presents a sizeable opportunity for commercial brokers and lenders, especially when you consider that, despite many challenges, logistics companies expressed cautious optimism and reported improvements in overall business confidence.

Our Logistics Report 2023 analyses the ongoing opportunities and challenges facing the UK logistics sector and assesses key trends which have shaped the industry over the past year, as well as what is expected when looking ahead. It also contains the results of the Logistics UK Industry Survey 2022/23, which represents the views of 569 respondents from the sector. A detailed summary of the report is freely available at logistics.org.uk; in the meantime, here’s an overview of the key findings.

Overall business performance was perceived to have improved by January 2023 and 77% of survey respondents have the same or better economic expectations for 2023 compared to 2022. Interestingly, 26.6% of retail sales were made online in 2022, compared to 19.2% before COVID-19.

Road freight activity improved during 2022 and is expected to progress again during 2023. Approximately a third (31.6%) of HGVs are owned by fleets with 50+ vehicles, up from 27.9% nearly a decade ago. However, haulage rates saw a significant increase of 13.9% in 2022 compared to the previous year, reflecting rising transportation costs.

Activity in the rail freight industry improved during 2022, although actual freight volumes were 5% lower than 2021 and 6% lower than 2019.

Around 67% of survey respondents reported that there was no change or decreasing trade with the EU, despite more than 65% expressing that trade with the rest of the world and Northern Ireland increased. However, transport efficiency factors related to customs clearance procedures and other border-related government agencies have not improved since the end of the Brexit transition period.

From an environmental perspective, transport remained the highest greenhouse gas (GHG) emitting sector across the UK in 2022, although advances are being made in the electrification of vehicle fleets and railways. Unfortunately, gaining adequate power supplies remains problematic, along with accessing chargepoint infrastructure and energy supply.

Some progress has been made across aviation, with the first commercially produced Sustainable Aviation Fuel (SAF) available last year. However, aviation will likely remain one of the UK’s largest residual-emitting sectors in 2050.

An effective supply chain is vital to keep Britain trading, directly impacting over seven million people employed in making, selling and moving the goods that affect everyone everywhere. With Brexit, technology and other disruptive forces driving changes in the way goods move across borders and through the supply chain, logistics has never been more important to UK plc.

Professions Finance Professionally speaking

Whether your client is a legal or medical professional looking to spread the cost of their VAT bills, company and partner taxes or insurances or they require funding for refurbishments or business acquisitions, speak to our specialist Professions Finance team today.

Rising to the occasion

When collaboration and adaptability align

Michelle Walsh

When a sudden £2.5 million HMRC tax bill landed on the desk of one business with a mere four weeks to settle, panic could easily have set in. Moreover, in an economy where unexpected expenses can unseat even the most robust financial strategies, swift, innovative solutions are crucial. But with the right allies, seemingly insurmountable challenges can be tackled head-on. This is exactly what happened when the team here at Together collaborated with NACFB Member Synergy Commercial Finance, delivering what was an agile response to a ticking financial time bomb.

The circumstances were less than ideal: a significant amount, a tight deadline, and the looming shadow of the HMRC. While many financial institutions might shy away from such pressure, through our partnership with Synergy we rose to the occasion; orchestrating a commercial bridging loan underpinned by seven diverse commercial assets. The loan was swiftly completed thanks to the diligent efforts of all parties and the valuation expertise provided by chartered surveyors Eddisons.

Kara Williams, intermediary sales manager at Together, detailed the uphill battle they faced: “Many lenders might have balked at the proposition – the swift turnaround, the substantial amount, the high stakes. But we recognised an opportunity to not only showcase our adeptness but to genuinely assist a business in dire straits. By securing the loan across a spread of commercial assets, we ensured the customer could meet HMRC’s demands head-on, sidestepping additional costs or even legal ramifications.”

Piotr Twaits, managing director at Synergy Commercial Finance, provided a similar perspective, and highlighted the importance

of synergy (pun intended) in such ventures. “The moment this case was brought to us, we knew that aligning with Together was the best course of action. Their reputation for credit appetite and prompt turnarounds made them an ideal partner for this intricate, time-sensitive task. Their ability to fully finance the client in time is a testament to their efficiency and commitment.”

Beyond the immediate success of this venture lies a broader narrative about the importance of collaboration and adaptability in the intermediary-led lending sector. In a rapidly evolving business landscape, the ability to respond dynamically to challenges – be they regulatory, economic, or otherwise – can make the difference between thriving and merely surviving.

In scenarios like these, where the stakes are high and the clock is ticking, consider seeking guidance from experienced financial professionals who understand the intricacies of the challenge at hand and can navigate the complexities with precision.

If you have a similar case, or wish to speak to a member of the Intermediary team, please call 03301 739 437 or email newbusinessteam@togethermoney.com

Head of Intermediary Sales Together

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Beyond the immediate success of this venture lies a broader narrative about the importance of collaboration and adaptability

We're flexible on larger loans.

• We're able to consider larger loans for many di erent types of purposes and completion timescales.

• Our criteria suits a wide range of circumstances, including self-employed clients.

• We can cross charge against multiple properties to leverage equity available.

• We accept multiple types of income and we'll consider up to 100% additional income.

• Interest only accepted on transactions with no minimum income level (subject to plausibility).

Get in touch with our team.

03301 739 437

After the storm subsides

Traversing the post-COVID lending landscape

An important feature of the business borrower market in recent years has been the role of government-backed loans, particularly those tied into the pandemic. With the terms of some of these deals coming to an end, many business borrowers find themselves at something of a crossroads.

Looking for certainty

One trend that we have seen at Atom bank has been around the refinancing of Coronavirus Business Interruption Loan Scheme (CBILS) debt. These loans proved vital for plenty of businesses during the most difficult periods of the pandemic, when usual activity had to be paused. However, we know that many SME borrowers are looking at them afresh in this current climate and considering how refinancing may open up new opportunities.

A good example here has been the swathe of customers with such COVID-related unsecured debt looking to refinance over a longer-term period on lower rates and securing that debt against some sort of business asset. Doing so may free up cash flow during this testing period, putting them on a surer footing for the future. This trend also creates an excellent opportunity for savvy brokers, since these borrowers will need expert assistance in pinpointing the lenders active in the SME space who are best placed to support them on their borrower journey.

Given the other financial pressures businesses are facing now, it’s clear that having some level of guarantee around how much is going out each month on their borrowing is valued by business leaders.

That certainty is also proving invaluable for borrowers who opted for a Bounce Back Loan following the initial impact of the pandemic. These loans were initially available on six-year terms, with a fixed rate of 2.5%, but borrowers are able to extend that loan term to ten years at the same fixed rate. The appeal of doing so has grown substantially over the last year, given the successive increases to base rate and the knock-on impact on the cost of borrowing elsewhere. The ability to secure such a low rate over a lengthy term is hugely valuable, giving businesses the time and space needed to get their finances in better shape for the challenges still to come.

Building a relationship

One important feature of the Bounce Back Loans which is often overlooked is the fact that most applicants were first-time borrowers. It’s become clear over time that many of these borrowers do not wish to borrow further, with their focus instead on clearing the existing debt.

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One important feature of the Bounce Back Loans which is often overlooked is the fact that most applicants were first-time borrowers

Tom Renwick Head of Business Lending Atom bank

Nonetheless this does open the door for brokers to build relationships with these borrowers, so that should their circumstances change, and they require funding, they know brokers who can guide them and ensure the process remains a smooth and efficient one.

Finally, there is the Recovery Loan Scheme (RLS). The current version runs until June 2024 and is backed by a host of lenders, including Atom bank. However, the success of the scheme has been somewhat hampered by awareness and particularly a misunderstanding of what it is there for. There has been a misconception around the recent incarnations of the RLS that any potential borrower will need to demonstrate the impact of the pandemic on their business, which we know has put off some potential applicants. The reality is rather different however – despite the name, the RLS is really about supporting business growth and so may be an excellent option for a greater number of SME borrowers.

Once more there is a tremendous opportunity for brokers to clear up these misconceptions and help their SME clients tap into a broader range of financial solutions.

Challenging the market

A particular cause for optimism around the market at the moment is the diversity that we are seeing. Where once this was something of a limited market, borrowers today enjoy a much broader range of options. In fact, Bank of England data published by the British Business Bank showed that last year around 55% of gross lending to SMEs came from challenger and specialist banks.

This is a really positive development, with new lenders bringing a fresh approach and level of competition that ultimately benefits brokers and their clients. It’s also a useful reminder that brokers may be able to serve a greater number of clients by looking beyond the most obvious names and working with challengers.

While the pandemic, and the challenges that have emerged since, do present some hurdles for business borrowers, there remain plenty of options open to them. By working with challenger and specialist banks alongside more established names, brokers can build greater relationships with their business clients and help set them on a positive path for success.

“ There is a tremendous opportunity for brokers to clear up these misconceptions and help their SME clients tap into a broader range of financial solutions

Strength in numbers

The case for becoming an Appointed Representative

Lee Simms Managing Director Asset Finance Solutions (UK)

One of the biggest decisions you will face as a broker is whether to join a broker network. Networks provide a range of services and support aimed at getting you up and running as quickly as possible and helping you grow a sustainable business. Typically, they offer services that you may find difficult or expensive to procure on your own, or they provide valuable business connections, knowledge and skills through mentorship arrangements.

When evaluating whether to join a broker network, it is essential to consider the success rates of franchisee business models compared to non-franchisee models. While exact statistics may vary, franchisee businesses often have a higher success rate than non-franchisee models. According to industry studies, franchise businesses have a success rate of around 90%, while non-franchise businesses have a success rate of approximately 20%. This stark difference can be attributed to the support and resources provided by franchise networks.

Franchise networks offer a proven business model, established brand recognition, comprehensive training programmes, access to IT applications, ongoing support, marketing assistance, and a network of experienced professionals to lean on. These resources can significantly reduce the learning curve and provide a solid foundation for brokers to thrive.

Moreover, networks often have established relationships with lenders and financial institutions, making it easier for brokers to access a wide range of financing options for their clients. This access to a broader pool of lenders can be a crucial advantage in securing deals and growing your business.

Additionally, being part of a franchise network allows brokers to leverage the reputation and credibility of an established brand. Clients often feel more confident working with brokers affiliated with reputable networks, which can lead to increased business opportunities and client trust.

Not all networks are created equal

Networks come in many shapes and sizes, and it is important to evaluate their specific contract terms, taking a long-term view of the commitment rather than solely considering the initial joining fee. To make an informed decision, it is recommended to list out the services provided by each network alongside their terms and costs, enabling you to make a comparison. Consider not only your immediate needs, but also where you plan to take your business and whether the network is the right partner to grow with you and support your goals. It is crucial to think about how many of the benefits you will actually use and any potential limitations on accessing them.

This exercise will help you gauge the type of support on offer and determine if it aligns with your needs.

People and reputation matter

If you decide to enter into a network agreement, it is important to find one that shares your values and aspirations. Look for networks that have solid references from members and funders, and a likeminded group of employees. Don’t be afraid to ask for references and get to know the organisation’s values before committing.

What is the alternative?

Not every new broker joins a network; some decide to go it alone and manage the requirements of regulation, compliance, managing funders, clients, and negotiating premiums for association membership, IT services, and insurance independently. If you choose this route, consider listing out the bare basics that you will need to cover and plan how you will allocate your time to handle all the necessary aspects of the business.

It is never too late

In general, individuals in the asset and commercial finance industries are incredibly supportive of each other, even in a competitive environment. If you decide that a network is not for you when you first start out, there is always the opportunity to join one later when you are more established and looking to grow.

While joining a broker network may involve upfront costs and ongoing fees, these expenses are often offset by the benefits and support provided. Consider the long-term value and growth potential a network can offer, rather than focusing solely on the initial costs.

Joining an asset or commercial finance broker network can be highly beneficial to brokerages at any life stage. The comprehensive support, resources, and established brand recognition provided by a network can accelerate the growth and success of your brokerage. However, it is essential to evaluate different networks, their services, terms, and costs, ensuring they align with your long-term goals. Ultimately, only you can decide what’s best for you and your business.

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Consider the long-term value and growth potential a network can offer, rather than focusing solely on the initial costs

The next big thing?

Spotting opportunities in the purpose built student accommodation industry

Phil Gould Chief Lending Officer Avamore Capital

The latest data available from the Higher Education Statistics Agency (HESA) highlights the continued appeal of UK Higher Education (UKHE). In 2020/21 there were 2.1 million full-time students in the UK, of whom more than 407,000 were international. In fact, since 2010, student numbers have ballooned by 25.4% with acceptances from Chinese students jumping by 22.7% year-on-year alone. Although acceptances from UK students dropped by 1.5% last year, there was still a record participation rate among UK 18-year-olds, with 37.5% of all 18-year-olds being accepted onto courses.

Population projections from Savills highlight an increase in the number of UK 18-year-olds over the next decade. This, coupled with the continued attraction of UKHE to international students, leads to forecasters expecting further growth in overall student numbers over the long term. Data from Knight Frank also suggests there will be an increase in the total full-time undergraduate numbers between now and 2030.

Even though the availability of purpose built student accommodation (PBSA) has increased significantly in recent years, looking ahead, its growth may not keep pace with rising demand. The current student-to-bed ratio in the UK is 2.3:1 reflecting a chronic supply and demand imbalance.

Since 2016/17, there has been a slowing of the number of beds submitted for planning alongside declining site availability which means that future supply growth is likely to remain low by historical standards, leaving room for opportunity with developers and investors.

This is all underpinned by the affordability of accommodation being a major factor for most students, particularly for domestic

applicants, the majority of whom utilise a maintenance loan to cover the cost. There are several cities in which the PBSA market is entirely out of reach for the average domestic student, and without additional income or financial support from family, there is a limited pool of housing available.

The issues around affordability make it clear there is a growing requirement for small-scale, low-amenity student housing targeted at domestic and price-sensitive international students. It’s our view at Avamore Capital that this requirement can be serviced by the refurbishment of existing first generation PBSA stock and the repurposing and retrofitting of existing office and commercial stock.

Given our extensive experience in heavy residential refurbishments and office-to-residential permitted development conversions, we’re using our creativity to pivot into this underserved part of the market, and we anticipate other lenders will also look to move into this space.

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The issues around affordability make it clear there is a growing requirement for small-scale, low-amenity student housing targeted at domestic and pricesensitive international students

On the up

Utilising asset finance to manage cash flow

Jamie Chaplin Sales Director Renaissance Asset Finance

Despite the rate of inflation falling to 6.8% in the year to July, (down from 7.9% in June), inflation – driven by soaring food and energy prices – remains high. Combined with current interest rates, which recently rose for the 14th time since December 2021, it is increasingly hard for businesses to manage their cash flow and remain liquid.

Navigating these challenges is likely an important factor as to why asset finance continues to gain in popularity. Figures released by the Finance & Leasing Association (FLA) show that total asset finance new business grew 18% in June 2023 compared with the same month last year. In the first half of 2023, new business was also 15% higher than in the same period in 2022.

Purchasing assets outright may not be the most effective or affordable way to deploy capital and can have a detrimental impact on cash flow. Asset finance is a great way to stay on top of cash flow as it allows businesses to borrow or lease essential assets – typically equipment that helps a business undertake its daily work and generate income. Asset finance also provides an opportunity for equity release by freeing up money and expanding capital by taking out a loan which can be secured against existing assets.

In line with the general trend, we too are experiencing an uptick in enquiries from brokers whose clients are considering utilising asset finance to maintain or increase cashflow. Digging a little deeper into our loan book we have identified the three primary uses for our asset finance solutions.

Credit

We are servicing more queries from independent finance houses

who are seeking block discounting and wholesale products that will enable them to grow their business. Block discounting is a way to raise funds against a future income stream, and these providers need the finance to leverage and expand their operations as more customers come to them due to the economic climate and general credit appetite. Block discounting is a flexible alternative to a credit line, which may be more sensitive to rises in interest rates. It also allows the finance house and its shareholders to build an annuity/ pension fund.

Refinance – hire purchase

As inflation eats away at SMEs’ existing cash reserves, refinancing is helping businesses raise cash from the assets they already own. Here, the finance is secured against the asset’s value, and the client pays it back over an agreed period whilst retaining ownership of the asset on completion of all scheduled payments. In practice, we are seeing clients use this solution often to take advantage of what may be favourable market conditions. For example, to purchase property because of falling prices or to raise capital, deploying when the time is right.

Liquidity

Businesses are opting for hire purchases when acquiring certain assets, whether they are business-critical or not – such as luxury cars. They want to remain liquid, so fixed monthly payments, which are not affected by interest rate rises, allow these businesses to manage cash flow and retain excess cash. Our parent company, Arbuthnot Latham (also an NACFB Patron), is also experiencing a similar situation with its high-net-worth individual clients in wanting to remain liquid.

As the future economic outlook remains uncertain, we expect the uptick in the use of asset finance by SMEs to continue. We also urge brokers to keep it in mind when discussing products to maintain and increase cash flow with their clients; it’s a credible solution for many scenarios.

Products and services are subject to eligibility, status, terms and conditions and availability. All lending is subject to status and our lending criteria. The right to decline any application is reserved.

types of faith-based lending

Commercial lending is not just about numbers and creditworthiness. It’s also about understanding and respecting the diverse beliefs and cultures that make up our modern world. For many individuals, their financial decisions are deeply intertwined with their faith. Recognising this, the UK’s lending sector has developed various faith-based lending solutions to ensure that everyone, regardless of their religious beliefs, can access the financial services they need in a manner consistent with their principles.

Faith-based lending represents a vital bridge between financial services and cultural respect, understanding, and inclusivity. By acknowledging and catering to the diverse beliefs in the UK, lenders not only promote financial inclusivity but also foster community trust and unity. Below we explore five such faith-based lending types available to SME borrowers.

2. Kosher lending

While not as established as Shariah lending, Kosher lending caters to the financial needs of the Jewish community. Traditional Jewish law, or ‘Halacha’, has specific regulations about lending, particularly on interest charged among Jews. Kosher lenders typically structure loans in a way that they don't involve interest or avoid prohibited transactions, ensuring they align with Halachic principles.

3. Christian biblical lending

Rooted in biblical teachings, Christian lending focuses on the principle of not overburdening another with debt and avoiding usury. Several Christian financial institutions in the UK offer loans based on these principles, ensuring that terms are fair, transparent, and don't exploit the borrower. While there isn't a strict ban on interest, rates tend to be more modest, and the focus is on mutual benefit and stewardship.

4. Sikh principle-based lending

The Sikh faith emphasises community, selflessness, and service. Many Sikhs believe in ‘Vand Chakko’, which means sharing with others. In the context of lending, this has led to a culture of community-supported financial initiatives. Sikhs might lean towards interest-free community loans or low-interest loans where the focus is on helping the community member rather than profiteering.

1. Shariah-compliant lending

Shariah-compliant lending is based on the principles of Islamic law, which prohibits ‘riba’ or interest. As a result, Islamic banks offer alternative arrangements like ‘Musharakah’ (partnership finance) or ‘Murabaha’ (cost-plus finance). In these arrangements, the bank and customer enter a partnership, sharing the risks and rewards of the investment. Instead of earning interest, banks earn profit by selling the goods at a markup or leasing them out.

5. Buddhist ethical lending

Buddhism encourages right livelihood and ethical financial practices. While Buddhist teachings do not explicitly detail financial transactions, they emphasise non-harm and fairness. As a result, lending practices inspired by Buddhist principles tend to focus on ethical investment, avoiding support for industries that cause harm (e.g., weapons, animal exploitation), and ensuring that loan terms are fair and compassionate.

Five Minutes with: Alan Austin

Alan Austin Head of Asset Based Lending Metro Bank

Describe your role in ten words or less?

I lead the asset based lending team at Metro Bank.

How do you make a difference?

Open and honest dialogue is essential, so I don’t over-promise and always seek to deliver on what I say. I respond promptly to customers and always seek to meet their needs as creatively as I can.

In your view what are the key elements to a successful deal?

A successful deal should be a win-win for everyone involved. The customer gets the structure, quantum and relationship they are seeking at a reasonable cost. In return we get a long-term customer with appropriate risks and returns.

What’s the most common reason for turning away a deal?

We want to be a trusted partner to all our

customers for as long as they need us, which sometimes means that we need to turn customers away. Particularly customers with challenging forecasts where we may not be able to meet their needs completely over the long term

Which person has inspired you the most?

My wife, she is the rock our family is built on.

Where is your favourite place in the world?

In the UK, Devon and Cornwall. In the whole world it would be California.

What advice do you have for the modern commercial finance broker?

Always make sure your customer is prepared for the questions lenders will ask and for the information and back-up they will need to get through the credit process – particularly in today’s market where under-performance is becoming more common. Ensure for

instance, they are able to demonstrate how the business is going to revive performance and make sure it is realistic.

What is your favourite piece of management/leadership advice?

It is what I call the Fred Astaire moment. We all have setbacks but pick yourself up, dust yourself down and start all over again, or in other words be resilient.

What was the last great book you read?

I never read about the Second World War at school but recently found Winston Churchill’s account of the war, over six volumes (!) at an antique shop. It certainly makes you consider and admire the people involved.

What law would you pass if you were Prime Minister for the day?

I would love to pass a law which requires all parties to work together for the good of all people, not just a specific part of the population.

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