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Small businesses to be hit by pension costs

Government plans to automatically enrol employees into pension schemes could significantly increase costs for businesses, according to a new report.

Research by the Association of Consulting Actuaries (ACA) revealed that only one in five small companies have started to consider the impact of the new statutory pension rules. The automatic enrolment of workers into the pension scheme is due to come into effect in 2014.

Commenting on the survey results, ACA chairman, Stuart Southall said: “The success of the auto-enrolment policy in smaller firms is likely to hinge on how well the economy recovers over the next few years. The opt-out rates expected are much higher than we found amongst larger organisations – 35% as against 15%.”

Over half of firms say the reforms will ‘add significantly to costs’, while 29% say they are ‘likely’ to reduce future pension contributions into existing and new schemes to meet the additional cost of newly pensioned employees.

Nevertheless, 54% of small businesses say they support automatic enrolment, but they expect 35% of employees to ‘opt-out’ of the new pensions.

Furthermore, nearly all the small firms currently not providing pensions say they do not principally because of cost, and half of those say that those with fewer than five employees should be exempt.

“The ‘cost of pensions’ to both employees and employers is the ‘big issue’ that has prevented the extension of pension provision to date in the sector. Whilst auto-enrolment may break the mould, if we are all still paying higher taxes to recover over-spending, it’s difficult to see how this will not bump up optout rates”, added Southall.

Crimson Business Ltd 29/09/10

SMEs crippled by late payments

Small businesses are not doing enough to protect against severe cashflow problems, according the Law Society.

The Society has found that £24bn is owed to SMEs at any one time, and they have to wait on average 41 days longer than the agreed timescale to receive payments from customers.

President of the Law Society, Robert Heslett, said: “Average commercial debts caused by late payments are high in the UK, and for SMEs a lack of cashflow can be crippling. With credit less available to those businesses from banks, late payments have a far more serious consequence for SMEs”.

The Society claims that too few businesses are aware of the protections available to them, and believes contracts between businesses, which include late payment clauses, should become a common feature in the SME market.

There are also concerns that the increase in VAT to 20% may add to the cashflow woes of small businesses, making it even more important to safeguard against late payments, the Society said.

Crimson Business Ltd 09/07/10

Recession costs entrepreneurs £16bn

The recession has cost entrepreneurs £16bn in personal savings, according to a new report.

One in five small businesses bosses invested personal money into their firms to get through the last year, according to insurers Hiscox. The average amount invested was £17,030, while a third halved their own salaries to improve cashflow.

The report also found that a third of bosses have increased working hours, on average by 12.5 hours a week, while a quarter have suffered sleep problems as a result of recession worries.

“SME bosses have been the unsung heroes of the recession,” said Alan Thomas, small business expert at Hiscox.

“They have made enormous sacrifices and taken significant personal and financial risks to pull their businesses through the last two years.”

The biggest strategy adopted by entrepreneurs to survive the recession was to focus on securing relationships with existing clients, according to 36% of respondents.

Despite difficult trading conditions over the past year, 55% of business bosses polled reported feeling positive about the year ahead, while a quarter are planning expansion.

Thomas added: “[Business owners’] positive outlook for the year ahead is testament to the resilience of UK entrepreneurs and with 25% planning to expand in 2010, they are doing their bit to help lead the UK’s recovery.”

Social enterprise can treble by 2010

Social enterprise needs government support if it is to succeed in its aim to treble its economic contribution by 2020, the Social Enterprise Coalition said this week.

The organisation’s new manifesto sets out ambitious targets to dramatically increase the impact made by the UK’s social enterprises over the next ten years.

According to government statistics there are currently 62,000 social enterprises in the UK which contribute over £24bn to the economy and employ 800,000 people.

The new manifesto aims to raise the profile of social enterprise in the run up to a general election. The Coalition said businesses with social aims are critical to rebuilding the economy and offer ‘a more accountable and sustainable business model’.

Peter Holbrook, chief executive officer of the Social Enterprise Coalition said: “This is a crucial time for the social enterprise movement – as the UK emerges from recession the public demands, and deserves, a fairer and more sustainable economy. Social enterprise can help to achieve this, but we need the right support.”

The manifesto outlines some key policy changes which the Social Enterprise Coalition believes can maximise the impact of social businesses.

Suggestions include support for social enterprise models to be developed across public sector agencies, as well as a package of tax incentives to encourage social investment.

 17/02/2010 Crimson Business Ltd