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REASONS TO BE CHEERFUL BY NUMBERS… DESPITE BORING OLD BREXIT

Mark Brownridge, Non-Executive Director of Velocity Capital Advisors and Director General of the EIS Association, flashes the figures to prove that, deal or no deal, now’s the time to invest in hugely exciting high-growth UK tech startups.

 

After two years of negotiations, we don’t seem any closer to a Brexit deal and although it’s the eleventh hour, uncertainty still reigns. Will there be a deal, no deal, a referendum, a general election…? Who knows?

 

Mark Brownridge

All this uncertainty is pretty much the worse thing for investors. The markets don’t like it either, whether currency or equity.

So can any positivity at all be gleaned from this Brexit black hole? Or is it all simply doom and gloom?

To find out, let’s look at some figures… no, really, come back!

We currently have 5.7 million SMEs in the UK, which makes the country a hot spot for start-ups, with or without Brexit.

 

The Centre of Entrepreneurs announced recently that last year was the biggest ever for start-ups with over 600,000 launching. Now that’s got to be a positive – and I’m sure it surprises a lot of people considering the climate. This is particularly good news on the employment and revenue front as the UK’s SMEs employ 99% of the population, and produce 61% of turnover – that’s more than the FTSE 100. That’s a major contribution to the UK economy and one that appears to be growing, even in the shadow of Brexit.

 

Investors must surely be getting cold feet, though not according to the stats. Some £8.7 billion was invested in SMEs in the UK in 2017. The figure for 2018 is likely to be slightly lower, but we’re still at a high watermark, showing Brexit is not stopping these deals coming through. And what’s really interesting is that the year before, when we proclaimed we’d be leaving the EU, the figure was half this, which clearly did not dent investor confidence. Meanwhile, foreign investment totalled over £5 billion, which is pretty bullish.

 

In 2017, there was a 79% increase in private equity taken on by SMEs, according to the British Business Bank. This shows that more and more companies are looking for private equity funding. This is a sign that the UK remains ‘very’ open for business and SMEs are raising more money than they ever have done – and it doesn’t look like this is going to stop any time soon.

 

On the startup front, £175 million was raised in the Government’s SEIS initiative last year, while a whopping £1.8 billion was raised through EIS, the second highest fundraising year ever – so this initiative that aims to drive investment in high-growth tech startups continues to garner support and remains very important.

 

These schemes offset the potential risk of investing in high-growth startups by offering higher rate tax payers 50% tax relief on investments up to £100,000 (SEIS) and 30% tax relief on investments up to £2 million (EIS). What’s more, investors can gain even more by choosing portfolios offering tax carry back for those that invest before 5 April, which is particularly important for investors who are self-employed.

 

Those investors who don’t think they’re getting a good deal through SEIS and EIS should consider that the two schemes where recently benchmarked as the best two tax incentive investment initiatives in the EU. In fact, the Government is getting lots of enquiries from countries across Europe and beyond looking to replicate them.

 

The UK’s not only a hot bed of great high-growth tech startups with unrivalled tax incentives to invest in them, but also the companies themselves are very optimistic. Some 74% of all SMEs expect revenue to grow more than 20% over the next year, which is reassuringly bullish. Meanwhile, 24% expect increased productivity, even in the face of Brexit.

 

Feeling more optimistic?

Put simply, there has never been a better time to invest in exciting high-growth tech startups in terms of choice, confidence, growth potential and risk.

Forget Brexit! Startup Britain is very much open for business.

 

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Finance

SAFEGUARD YOURSELF FROM FINANCIAL STRUGGLE AND UNCERTAINTY IN THE CASE OF DEMENTIA

Despite the rising incidence of dementia globally – The World Health Organization (WHO) estimates one new case every three seconds – and the risk of losing mental capacity in old age, few individuals plan for this possibility.

Dementia is caused by a variety of brain illnesses that affect memory, thinking, behaviour and ability to perform everyday activities. The WHO estimates the number of people living with dementia worldwide will almost triple to 152 million by 2050.

September is Alzheimer’s awareness month, an international campaign by Alzheimer’s Disease International to raise awareness and challenge the stigma that surrounds the illness. Financial management is one of the first tasks which deteriorate with the condition, leaving people struggling to do simple tasks such as paying bills or managing their tax affairs.

“Most people don’t like to think about death, dying or incapacity,” says Mark Hawes, certified financial planner at Alexander Forbes. Figures from the Masters of High Courts back up this assertion, revealing that more than 80% of South Africa’s working population don’t have wills.

“If you have been diagnosed with dementia, the best way to avoid unnecessary financial burden or being taken advantage of financially, or otherwise, is to put plans in place immediately. If one day you are not able to look after yourself, you and your family should know who these responsibilities will fall to.”

Most types of dementia are progressive. Therefore, the earlier it is identified the better. In addition, the easier it is to put the necessary preparations in place. Very importantly, while our faculties are still with us we can and should be involved in the important decisions for our own future.

At the very least, it is time to ensure that your wishes are documented, understood and are willing to be carried out by all involved. Naturally the inverse is true. For the caregivers and the persons tasked with the respective areas of responsibility, making sure that you understand and are willing to carry out the wishes of the affected person (within reason) is paramount in the early days of diagnosis.

“It is therefore important to allocate someone you trust with different areas of your life. Consider your options and where you have existing policies in place, double-check what you are covered for.”

Putting your plan in place simply gets everyone pulling in the same direction. Do this for at least three areas with the help of a trusted professional:

 

  1. Set up or review your will

To ensure that this is done accurately, you need to be fully informed about what assets and other financial products you have. Importantly, remember that all retirement funds fall outside your estate and so beneficiaries should be nominated on each retirement fund respectively. In addition, bring in your trusted and professional financial adviser to make sure your legacy planning is effective, efficient and accurate to ensure that your wishes and priorities are met.

 

  1. Choose your healthcare professionals and caregivers

Understanding the expected treatment and what your lifestyle may look like in the years to come will provide insight into what facilities and care you may require. This information puts a sense of control and independence back in the affected person’s hands. It will create a great sense of comfort that the challenging journey ahead will be manageable and on your own terms. Of course, it is always recommended to include your loved ones when making the decisions – especially the ones who are expected to carry out your wishes, if only to understand if they have the capacity to do so. The cost of care for those with advanced dementia should also be factored in, as full-time nursing can be expensive. Knowing your expected care and the respective costs puts you back in control.

You can then compare your requirements with any existing insurance policies to see where you can provide the financial resources. Importantly, as cash flow may come under pressure for you and your family, you would also be able to see which policies are no longer a priority and can be cancelled. In addition, you will be able to allocate your savings and investments toward your expected expenses or make alternative arrangements with the people in your support structure – especially your family where available.

 

  1. Who will conduct your financial transactions on your behalf?

The Covid-19 pandemic has seen increased reports of fraudsters targeting unsuspecting and vulnerable people. Those with dementia who are already struggling to use ATMs or do internet or telephone banking may be more prone to being targeted or simply telling strangers their bank details. Now more than ever identity theft is a real concern.

It is therefore highly recommended that a trusted and responsible person or family member is appointed to conduct financial transactions on behalf of the affected. For high net worth people, a special trust can be set up and preferred trustees (along with an independent professional trustee) appointed to ensure the financial affairs and assets are managed effectively. Again, legacy planning is crucial to helping the affected person to rest easy.

Many people are unaware that a power of attorney is invalid if a person is no longer of sound mind, and financial institutions will not assist until the person is placed under administration or curatorship.

Therefore, it is important that this person is aware of your lifestyle and preferences. This can be simply from what groceries you buy to which financial institutions and structures your make use of. The latter should be considered together with your trusted professional’s financial adviser.

Hawes says it is important to know what policies one has and what they cover. “You need savings to cover your cost of living when you’re alive and no longer working. Understand your medical aid and what they will cover – at minimal, you should have a hospital plan and gap cover.”

Hawes also advises introducing your trusted confidant to your certified financial planner, in the event that something happens.

“Many people only bother to find out their family history after something happens to them. Find out if you have a history of cancer or heart conditions, Alzheimer’s or dementia in your family. By having these difficult discussions now, a person is better able to decide how their money should be used, and is less likely to be financially exploited at a later stage.”

 

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Finance

BOOM OR BUST: HOW THE FINANCIAL SERVICES SECTOR IS COPING

by Simon Black, CEO, Awaken Intelligence

 

Covid-19 has had an impact across all industries and businesses are feeling the sting. However, is it equally devastating within every sector? As industry and individual concerns grow during the inevitable economic crisis, financial services are seeing an increase in demand as everyone attempts to stretch every penny as much as possible.

By collating data from Trust Pilot and cross-referencing the demands for these services in the first half of 2019 compared to the same period in 2020, we take a look at how the financial sector is coping during the pandemic in both the UK and the USA. Both in the UK and across the Atlantic, there has been a significant increase in demand for these services. The UK saw a 175% rise, while the USA has seen a 47% rise.

The greatest increase has been seen within accounting and tax services, up 372% in the UK and 517% in the USA. Presumably due to companies seeking ways to extend and defer payments with HMRC and the IRS, while ensuring penalty fees are avoided. This was the only industry that gained more demand in the USA than in the UK.

Simon Black

While all financial industries saw an increase, the most significant difference between the two countries was the demand for real estate. The market in the UK has begun to reopen and a backlog of eager buyers and sellers are pushing the conveyancing process with an 87% increase on last year.

The USA is still struggling to control the virus, which has led to homeowners pausing their sales and buyers holding off on their search until both the economy and health return to normal, which has led to a meagre 3% increase.

Demand is up across the board, despite the public being unable to visit many of these service providers in person, banks are pushing their technology teams to digitalise their services as quickly and efficiently as possible to ensure they are available remotely. In a bid to handle the demand across the board, some businesses have started to use voice analytics software, a powerful piece of AI that helps contact centres increase efficiencies.

Real estate agents are providing digital tours of properties and insurance companies are growing their teams to meet the demand of customer service helplines for both claims and individuals now wanting to ensure they are covered against all eventualities previously not predicted.

Car insurance providers are seeing an increase in demand for their services as the public are seeking ways to reduce payments due to financial hardship. Insurers’ service lines are kept busy and in demand with requests to reassess risk levels as people are driving less and potentially waiving cancellation fees or processing fees for amending policies. This has led to an increase in demand of 311% within the UK for the insurance industry.

Credit and debit services have increased 52% in the UK but demand fell by -16% in the USA. In the UK, a change of circumstances has led to more people having to utilise overdrafts and credit cards to cover essential costs. In the US, unemployment insurance was expanded from three to four months, and temporary unemployment compensation of $600 per week was provided. This led to a drop in demand for Debt Relief Service, Credit Counseling Service and Credit Bureau services.

Customer service centres are also being inundated with requests for loan and mortgage payment holidays until their financial status changes. However, the USA has been providing citizens with Economic Impact Payments, which could be a contributing factor as to why less Americans are using credit services.

Investment and wealth services have seen just a 30% increase in the USA, compared to 119% in the UK as mortgage applications rise and businesses and individuals look for ways to secure their funds ahead of an economic downturn.

Despite apps and online assistance available to those who are looking for these services, these transactions are favoured with expert human input. With most of these businesses still closed for the protection of staff in the USA, this form of service has proven hard to keep up with resulting in a slight drop in 2020.

This sector is now witnessing the importance of having systems in place to allow clients to seek the advice they require remotely. Had this been implemented beforehand, we may have witnessed a similar rise to the UK who has begun to reopen.

Overall, the financial services sector has experienced lots of activity with consumers and businesses demanding seismic shifts in their financial support requirements, both in terms of products and services. Such demand is likely to grow as non-contact transactions and online activity become the norm.

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