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Wealth Management

FUNDING RETAIL FLEET INVESTMENT

Brian Foster, Head of Industry Finance at Siemens Financial Services in the UK examines how flexible finance can help logistics providers meet the changing needs of retailers and consumers.

 

The upward trend of online shopping shows no sign of abating; research forecasts a 69 percent increase in parcel volume in Europe by 2021.[1] UK consumers that utilise online shopping currently make 87 percent of their retail purchases online, up from 80% in 2017.[2] Apart from the continued increase in volume, the nature of online retail is also evolving. Convenience of delivery is an important factor for consumers choosing where to shop. A PricewaterhouseCoopers (PwC) report shows that fast and reliable delivery would influence where almost a quarter of consumers choose to shop. Additionally, 40% of shoppers are willing to pay an extra charge for same-day delivery.[3]

 

As consumers expect more from retailers, retailers will expect more from their logistics operators. Retailers that can offer speed and flexibility will win the customers and, therefore, the logistics companies that can facilitate that speed and flexibility will win the retailers. Consequently, logistics providers need to be ready to continually adapt and modernise to maximise cost efficiency and asset productivity,[4] enabling their clients to meet consumers’ delivery expectations cost effectively.

 

Investing in new technology is key to achieving this.[5] ‘The Internet of Things’ (IoT) offers future potential and creates opportunities for a connected transport system, where vehicles, goods and infrastructure communicate with each other. For example, “radio-frequency identification” (RFID) tagging can provide fleets with GPS and location data informing them of factors such as bad weather that might delay deliveries. Planning for these factors will enable carriers to deliver more goods on time.[6] Similarly, data can be analysed to identify areas where efficiency can be improved; for example, identifying efficient drivers and routes.[7] Smart location management systems can enable companies to easily track driver activities, vehicle location, and delivery status with real-time information, meaning that business processes can be streamlined.[8]

 

Looking further ahead, the very assets which transport goods are also likely to change radically. Self-driving vehicles continue to be tested and could produce significant benefits for the logistics industry. Many companies are faced with massive driver shortages and the drivers make up about 30% of the road transport costs. Driverless vehicles can increase speed and flexibility of freight flows and, unlike drivers, can operate 24/7. [9]

 

Implementing new technology, however, takes time and investments in new vehicles and technology requires considerable capital expenditure. Tailor-made financing packages for the acquisition of a variety of new truck and trailer models are gaining popularity as a cost-effective investment-enabler. Asset finance can help logistics operators embrace new technology. Pay-to-use or access financing techniques such as leasing, and pay-for-outcomes agreements whereby the savings or gains made possible by a given technology fund monthly payments, are effective, alternative methods of funding equipment and technology investments and upgrades. Such financing techniques spread the cost of machinery over an agreed financing period, with monthly finance payments arranged to align with expected benefits gained over time from new/retrofitted equipment, such as improved productivity, operating cost savings, energy efficiency and access to new markets. This removes the need for a large initial outlay, thereby increasing the funds available for other expenditures. In other words, asset finance allows manufacturers access to the latest technologies, without having to commit scarce capital or use traditional lines of credit. Financing arrangements can cover other costs such as installation, as well as providing the flexibility to upgrade technology in line with technology developments.

 

Unlike traditional, generalist financiers that might lack comprehensive technical knowledge to fully evaluate the impact a potential investment can bring to a logistics operator, specialist financiers active in the transport arena understand the technology, its potential future value and its practical application.  This comprehensive understanding of the financed equipment and technology enables specialist financiers to determine appropriate and tailored financing solutions that meet the company’s specific needs. Their expertise in equipment and technology and finance makes it possible for specialist financiers to assess the cost savings and/or expected benefits for the term of the agreement and factor that into the financing arrangement. Specialist financiers, moreover, can devise financing plans that cover a broad range of costs associated with using the equipment and technology, not just the cost of acquisition, meaning greater transparency regarding the expected operating costs for the customer. By using flexible financing, logistics companies have the opportunity to benefit from the investment in equipment and technology straight away rather than delaying their acquisition, and through that timely investment gain an important competitive advantage.

 

Internet shopping continues to become more popular and consumers are becoming increasingly demanding. Logistics companies need to be ready to help retailers meet these demands by investing in technology that enables them to be more efficient. Technology is developing rapidly and holds many exciting possibilities for the industry. But the transport sector operates under tight margins and investments must be made sustainably. Operators that don’t meet this challenge risk being left behind.

 

 

[1] Logistics Manager, ’Huge growth in urban logistics space vital to meet online demand’, 18 October 2017 https://www.logisticsmanager.com/huge-growth-urban-logistics-space-vital-meet-online-demand/

[2] Net Imperative, ’Online shopping in the UK up 9% in a year’, 11 September 2018 http://www.netimperative.com/2018/09/online-shopping-in-the-uk-up-9-in-a-year/

[3] PricewaterhouseCoopers, ’Signed, sealed, delivered (and regularly returned)’, 2018 https://www.pwc.com/gx/en/industries/consumer-markets/consumer-insights-survey/delivery-expectation.html

[4] Ibid

[5] Indigo, ’How are logistics operations adapting to the increased popularity of Internet shopping?’, 24 January 2018 http://www.indigo.co.uk/article/2018/1/24/how-are-logistics-operations-adapting-to-the-increased-popularity-of-internet-shopping

[6] Iot for all, ’What’s Ahead for IoT and Logistics in 2018’, https://www.iotforall.com/logistics-and-iot-trends-2018/

[7] Ibid

[8] Innovation Enterprise Channels, ’The top six IoT applications in logistics’, 13 July 2018 https://channels.theinnovationenterprise.com/articles/how-the-internet-of-things-will-revolutionize-the-logistics-industry

[9] Sabinext, ’Self-Driving Vehicles: The New Reality for Logistics?’, 17 June 2018, https://sabinext.com/self-driving-vehicles-new-reality-logistics

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Wealth Management

THE END OF YEAR TAX CHECKS THAT COULD SAVE YOU THOUSANDS

Charlie Reading, Founder and MD of Efficient Portfolio

After HMRC’s tax return deadline at the end of January, it can be tempting to drop your guard, believing that your new tax bill is a long way away.

It’s true, you’ve got a whole year until the next bill is due. What most don’t consider, however, is that there is a range of checks that you can do reduce that bill significantly.

Astute investors make use of their tax-free allowances every year and save thousands of pounds in the process. With such massive savings on the line, it’s a strategy to certainly consider.

With that, here are some easy checks and tips from Charlie Reading, Founder and Managing Director of Efficient Portfolio chartered financial planners, that could start you on your way to a much leaner tax bill:

 

Charlie Reading

1. Maximise Your ISA Allowances

Good returns, flexibility, diversity and tax efficiency should be key components in your financial strategy, and the ISA helps to deliver all of these. Historically, ISAs have been at the cornerstone of tax-efficient saving and are often referred to as one of the essential steps in your strategy, as they can help your wealth grow without you being penalised by heavy tax charges. They are an incredibly useful way of saving, and, as such, it is generally encouraged that people take advantage of their benefits. However, the ISA allowance is offered on a ‘use it or lose it’ basis, so if you fail to maximise it, you can’t make up the funds later on.

Up until 5th April 2020, you can contribute up to £20,000 into an ISA, and a further £20,000 from 6th April 2020, thereby sheltering up to £40,000 per person, as long as you’re over 18.

 

2. Top Up Your Pension While You Still Can

At the time of writing, the highest level of State Pension you can receive is £129.20 a week, which is frankly a paltry sum to live on. That’s why saving for the future is so important. It might seem wise to enjoy life now and worry about retirement later, but you’d only be damaging your future quality of life.

Pensions are a highly tax-efficient way of saving and now offer a great deal of flexibility in retirement, as when you retire you can gain access to 25% of your pension pot as a tax-free lump sum, with the remainder taxed at your marginal rate.

The current pension annual allowance is set at £40,000, so if saving for your future is a priority, it is worth investigating which pension is right for you, sooner rather than later.

 

3. Protect Your Estate from Tax

Inheritance Tax (IHT) is a concern for people from all walks of life. If you are hoping to leave a legacy to your loved ones, the last thing you would want is for that legacy to be taxed at 40% and lost to the Government.

One simple way of combatting this is to consider using your annual IHT allowance. During your life, you are allowed to give away £3,000 per year without incurring any IHT charges upon your death. There are of course downsides to this, in that you lose all access and control over the money, but it may be a tax-efficient strategy to consider.

 

4. Don’t Overpay Your Capital Gains Tax

The final tax consideration at this time of year is Capital Gains Tax, which is also given on a ‘use it or lose it’ basis and is currently set at £12,000. The issue of Capital Gains Tax is most acute if you hold investments which have grown above your tax-free allowance.

To ensure you make the most of your Capital Gains Allowance, it is generally recommended to sell down a portion of your portfolio to realise the growth made, but only enough to maximise your allowance, is the most prudent strategy.

These funds can then be used to fund any outstanding allowance on your ISA, for example. The advantage of doing so is that by placing your money from a taxable to non-taxable environment you have the potential for further growth, and you benefit in the longer term by potentially reducing a future bill.

There’s plenty of time left before the taxman comes knocking once again, but there’s no better time than the present to start looking into how you can save you and your business thousands of pounds simply through tax allowances you might not have previously been aware of.

 

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HOW TECHNOLOGY IS FUTUREPROOFING STOCK MARKET TRADING

stock market

Tony Shaw, Executive Director, London Office and Head Sales UK & Ireland at the Swiss Stock Exchange

 

Markets are shifting, there’s no doubt. Amid all the disruption and volatility from the past year, the Swiss Stock Exchange asked traders about what they expected in 2020 and beyond in our industry survey. The findings point to a rise in digital to help traders content with external forces.

 

First and foremost, traders are enthusiastic about what digital assets can offer.

Two thirds of traders polled said they’d had a marked rise in interest from their clients for digital assets and crypto-products. Given the interest, traders are increasingly bullish about the potential of these products – so much so that 80% have predicted an increase in overall demand in the long term. Market users believe these assets will help generate cost synergies and streamlining trading and settlement processes by creating efficiencies and ultimately reducing costs.

Our 2019 results reflect what traders have told us when it comes to digital assets and products. Last year, we saw significantly higher trading volumes from products with crypto currencies as underlyings. Overall volumes grew by +8.5% over 2018, but the increase in crypto products alone was +17%, reaching CHF 518.2 million ($534.54 m). There was a year-on-year increase in the number of transactions, as well (+21%): 19,636 trades in total.

The potential digital assets hold is clear – evidenced by the building of the SIX Digital Exchange (SDX), a fully integrated issuance, trading, settlement and custody infrastructure for digital assets.

According to traders, artificial intelligence (AI) is expected to bring further benefits to market operations.

Two thirds of our survey respondents anticipate AI will create more opportunities for the traditional equities business, while a similar number expect it to reduce the cost of trading. Innovation in AI is already – and will continue to be – a key driver in making our industry more effective at withstanding future risks and challenges both within and beyond the market itself.

In Europe, there is growing momentum behind calls for shorter trading hours – this trend was reflected in our survey as well.

Industry groups such as the Investment Association are advocating for stock market trading hours to be cut from 8.5 to 6.5 hours to open the industry to working parents and women who cannot commit to such long workdays. We found traders were largely supportive of this, with many saying that it could even facilitate operational benefits. The roll of AI is clear here in improving efficiency while minimising time wastage: 36% of traders said the introduction of shorter trading hours would prompt greater market liquidity.

Beyond the market itself, geopolitics continue to shape wider market sentiment.

It comes as no surprise that four fifths of traders said their strategies have been – to some extent – influenced by Donald Trump’s tweets. Interestingly, only 39% of those polled viewed Brexit as an influencing factor in trading activity, while three quarters believe the US election will drive trading activity in 2020 and 65% acknowledged trade wars would also have an impact.

More broadly, traders are split on the state of the global economy – 58% are bracing for a global recession while 42% predict stable macro-economic conditions over the next three years. What seems clear is that whatever happens in the wider economy, traders are making headway with new technologies that can improve their strategy, efficiency, and overall market health.

 

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