We’ve hit the National Borrowing Target!

News has filtered through and been hailed by economists this week that the UK government has managed to reach its annual borrowing cut target. What benefits could this bring to those who are looking to sell their business in the current economic climate?

National borrowing rates directly affect businesses. This is because, the more the country borrows, the more prices, taxes etc. go up. This effects a company’s bottom line and weakens their position when trying to persuade a potential buyers of the benefits that said company can bring to their own bottom line.

A Victory for the Budget

It has been reported that the nation’s government borrowed a sum totalling £107.7 billion in the previous financial year. This may seem a lot, but in fact it was significantly lower the £115.1 billion borrowed by the country the year before.

So what have the government set as the target for national borrowing rates? In the budget the Chancellor suggested that for the full year, the budget deficit should measure £107.8 billion. This means that not only has the national economy narrowed the gap, but it has done so by £0.1 billion than it expected to; always good news!

Specifically, the numbers quoted on the issue by the Office of National Statistics (ONS) suggests that leaving out fiscal interventions, borrowing fell from £11.4 billion in March 2013 to £6.7 billion for the month this year. Furthermore February’s data was revised from £9.3 billion to £8.8 billion.

A Psychological Boost

Figures like these have both physical and mental effects for UK economic growth, and one is as important as the other. Howard Archer, chief economist at analysts Global Insight commented on the issue:

"While in reality, it made little difference whether the chancellor just hit or just missed his fiscal target for 2013-14, the fact that he did make it provides a psychological boost for the government and it may support belief that he can hit his longer-term targets."

At RTA Business, we recognise that the psychological effect this will have on buyers will help you in your quest to sell your business. It will further convince them of the sustainability of the economic recovery, which will give them more incentive to expand by buying your business.

UK Productivity Is Picking Up but Has Long Way to Go

It’s been a grim few years for the UK productivity rate as the recession has hit every part of UK business, right down to the average worker’s hourly output. Good news then this week for the business community, as UK productivity rates are beginning to show signs of life again. What could this mean for you if you’re looking to sell your business soon?

Productivity refers to, literally, how productive your workers are. Productivity directly affects profit margins, which in turn affects your ability to sell your business. The recession hit productivity because it hit the resources workers had to carry out their jobs with. That’s why the recession wasn’t a great time for the business acquisition industry.

The economic recovery has been such a relief for everybody. A stronger economy means that more resources are available for workers to use to help expands the profitability of your business. However it also led to a rapid rise in the employment rate and one consequence was a sharp decline in productivity numbers.

So what are we dealing with here? This week productivity started to grow again, as the rate of output per hour grew by 0.3%. This figure highlights the fact that Britain has faced a productivity problem for years; rising employment in the wake of the financial recovery has led to a rapid decrease in productivity. However we could be clawing our way out of it.

The issue is that productivity is still 3% below 2008 levels and 21 percentage points below the average recorded for other G7 countries. The widest gap since 1992, the slight recovery of output numbers disappointed many in the finance industry and highlighted just how much work we have left to do.

The Financial Times reported Philip Rush, an economist at Nomura, commenting on what the figures mean. Rush said that “It was a small pick-up in productivity, one that disappointed even my pessimistic expectations.” In fact the economy expanded slightly faster than the rate of UK productivity and this is a problem we need to address if we wish continue to recover from the ravages of the recession.

So RTA Business Consultants asks, what does this mean for you if you are looking to sell your business? Productivity is essential to any business model, and you can’t grow your business without it. These figures show that, yes, productivity is picking up, but there’s a long way to go. If you are thinking about selling your business right now, productivity is something you need to be thinking about. 

The Importance of a Credit Report

When it comes to selling off your business there are few things that are more important to the process than conducting a credit report. Why do you need to do this and what can it bring to a business sale?

At RTA Business Consultants, one of the country’s leading business acquisition services, we recognise that confidence is key on both sides when you are selling a business. You have to be confident that a buyer has the funds to go through with the purchase and they have to have the confidence that your business will benefit them financially.

This is why you should not only carry out a credit report on your own company, but on theirs too. A credit report is a report that you can obtain which details your credit history. It details accounts, loans, missed payments, jointly held financial agreements, publicly available financial records etc. Normally they are used to ascertain how likely a company is to uphold financial agreements.

There are several services that provide a credit report. Prices for such a service often vary, but usually it clocks in at around £15. However depending on the price the level of service you are provided varies. Look around and conduct some internet researching to find the service that most suits your needs.

It’s easy to see you would want to request a credit report for a potential buyer of your business. You are depending on the buyer to uphold their end of the bargain and a credit report tells you whether they have a history of doing so or not. It provides security and shows that they are trustworthy. It’s insurance.

However it’s not always  so easy to see why when you are selling your business you would conduct a credit report on the business itself, as you might not have a perfect credit history, which is common for small businesses as they’ve gotten started.

However you have to think about it from the buyer’s perspective. They know that no business is perfect and they don’t want to be lied to. Providing a credit report shows them the true state of the business and shows them that you re honest and that they know what they’re buying.

At RTA Business we recognise that when you are selling your business you need to be prepared. Investing in credit report means that you know what you are dealing with and how to proceed. 

What Does the State of the Union Mean for The Economy? - RTA Business

Tuesday 28^th January saw US President Barack Obama give his annual State of the Union address to the American people. Considering America’s role as the lynchpin of global trade, what does the State of the Union mean for the global economy?

The State of the Union speech was a tradition started by American founding father George Washington. Although it has been dropped and revived, the State of the union speech is now an American tradition. It acts to lay out the President’s agenda for the year. It acts in a similar way to the Queen’s speech at the opening of Parliament.

So what does Obama’s speech tell us about the global economy? Critics and pundits are already commenting on how Obama’s speech was one that was politically charged. It certainly was; Obama made it quite clear that he is going to bypass a Republican House of Representatives wherever he can to get his agenda passed.

This was the key overarching theme that we should be interested in. Obama has had enough of being blocked at every turn. His anger has been ignited particularly by the House’s reluctance to raise the national minimum wage.

This was the central issue as far as global economy was concerned and it played out in several ways. It is a key issue because a higher minimum wage would increase American spending power. America as the world’s largest economy is crucial to helping the global economy expand by injecting money into it. More spending by America leads to more room for business growth; strengthening economic activity around the world.

This played out directly and indirectly. Directly Obama raised the minimum wage for federally contracted workers to $10.10 an hour; a significant increase that will broaden the spending power of numerous low level government workers. It gives the American economy a cash injection.

The indirect approach was used by Obama to urge Congress to raise the national minimum wage and to urge state legislatures to do the same. He’s unlikely to get anywhere with this message with the Republican controlled House, however he could with the states. 20 of them have already done so off their own backs and with a crucial election year coming up, more may do so.

At RTA business we reckon this has a direct effect on business acquisition. A stronger global economy means more room for growth, which traditionally leads to both an expanding pool of potential buyers and rising values for business’ on sale.

UK Economic Growth Forecast on the Rise

The International Monetary Fund (IMF) has sharply raised its forecast for the rate of UK growth this week. What does this mean for the industry of business acquisition?

The IMF released its current forecast of UK growth this week and it significantly outmatched previous expectations. It has now stated that it expects the UK economy to grow by 2.4% in 2014. The previous figure suggested was 1.9%, meaning a rise in expectation of 0.5%.

This wasn’t the only figure on the forecast of UK growth the IMF released. They also released an expected figure of 2.2% for 2015, which if these figures prove correct would only be a drop of 0.2%.

Notably the organisation put global economic growth for 2014 at 3.7%, slightly higher than it has previously predicted. It also released its figures for the world’s largest economy, the US, 2.8%, which is a 0.2% improvement from the figure it quoted back in October.

The report also provided figures for two key economic areas; the Eurozone and China. The Eurozone together is predicted to grow by 1%, a significant figure considering the trouble the continent has faced over its finances in the past few years. It measured China’s economic growth at 7.5% a figure that’s expected for the world’s largest growing economy.

These figures are telling. The whole world is set to grow this year, however the rate of British economic growth is particularly strong. An article for the BBC on the subject reports a statement made by the Treasury on the news.

It said that "[The IMF] report provides further evidence that the government's long term economic plan is working." However the spokesperson also noted that the job is “not yet done” and that “the government will go on taking the difficult decisions necessary to deliver a sustainable recovery for all."

This rising confidence in the expectations of the UK market has come from several factors. Unemployment is decreasing, the manufacturing and retail industries are enjoying strong growth and inflation has fallen into line with the government’s 2% goal.

At RTA Business we see this as a sign that buyers will be much more hospitable to the idea of buying a business. After all, more economic growth means more opportunity. When you’re looking to capitalise on that opportunity, you look to see how buying a business would help you do so.