Bluestone’s Q3 Market Update by Richard Tamlyn 2022


Hi, I’m Richard Tamlyn and this is Bluestone’s Q3 market update for 2022.

The last couple of years have seen more changes to the commercial finance market than at any time previously; it’s a big ask for UK businesses to stay up to date with the opportunities and ensure they’re making the best financial strategy decisions to maximise the benefits available.

Here at Bluestone we’ve been working with our clients to make sure they’re utilising the most effective options for their business; maximising tax savings, capitalising on deferred repayment options and accessing the most appropriate finance solutions for their needs.

Whilst the cost of living crisis and fuel bills are impacting businesses as well as the general public, it’s not all bad news for companies and their finances. The chancellor has committed to reform and cut investment taxes for UK corporations, with announcements expected in the August budget statement. It’s expected to include a permanent increase to the Annual Investment Allowance, an increase to the rates of writing down allowances, and an introduction of a General First Year Allowance for qualifying expenditure on plant and machinery. The government invited businesses to feed in to the decision-making process by submitting their views on the website – you can search “Potential Reforms to UKs Capital Allowance regime” on the site for more information.

In the meantime, the chancellor announced in October that the temporary Annual Investment Allowance would remain at the increased rate of £1m per annum (up from £200k) until 31st March 2023. In addition, the super-deduction tax, which enables companies to offset 130% of the value of qualifying assets against their corporation tax bill, has also been extended to 31st March 2023. Both of those provide big incentives to UK businesses to make any planned investments in the coming 9 months.

So what does that mean for finance? Well firstly there’s been a lot of press coverage of the 5 consecutive increases in the Bank of England base rate as the UK attempts to tackle the soaring inflation levels. It’s expected they’ll continue rising with most commentators anticipating the current 1.25% to reach 3% by year end.

Whilst that doesn’t sound great, it’s important to remember that we’ve been spoilt in the last decade with unprecedented low levels of interest making money as cheap as it’s ever been. If we go back 15 years to just before the financial crisis rates were between 5% and 6%, and if we go back 30 years they were over 10%. So in relative terms, the current 1.25%, and even at the forecast 3%, money is still very affordable.

We often talk to businesses about Net Present Value. In its simplest terms, NPV is the value of money today, compared to the value of the same amount, at a future point in time. When inflation is high, such as the double digit inflation we’re seeing at the moment, net present value becomes a more important consideration. So £100 today, if we continue to see 10% inflation for the next 5 years, might only be worth £62 in real terms by 2027. So if you spread the cost of your investment over 5 years, the true value of your repayments, and therefore the real cost you end up paying, will be significantly lower in times of high inflation.

So a fixed finance repayment of £100 a month secured now, might only cost you £62 a month by 2027 in real terms monetary value. That’s a huge saving of up to 38% on your repayments and well worth considering if you believe inflation is going to remain high.

When you spread the cost of those investments in line with the return on investment you might see in your business, add in the tax breaks, and consider NPV, utilising finance makes more sense than ever when making purchases in the most cost-efficient way for your business.

And what have we seen in terms of sectors we’re providing finance for?

Well the move to home working and the death of the office seems to have been massively overstated. The office fit-out market has bounced back strongly post-pandemic and we’re seeing huge growth across the sector. Much of it is businesses re-designing their offices to accommodate a more hybrid working pattern, but after a couple of years of subdued market there seems to be a huge pent up demand that’s now coming to fruition. Whilst a great working environment has a huge impact on productivity, staff well-being and engagement, it doesn’t offer a direct return on investment so financing this (often costly investment) makes enormous sense. We are the market leaders in this sector and work with most of the biggest and best suppliers in the UK, so please get in touch for some no obligation advice on how to most effectively finance your fit-out project.

The IT sector has certainly seen some challenges throughout Covid and Brexit. The rush to equip teams for home working and remote access to phone systems has saturated the market and created significant supply issues for new hardware, particularly micro-chips. With more businesses moving to cloud based systems demand for servers and software is declining with big growth in software as a service or subscription solutions.

This has led to more demand for refurbished and re-manufactured hardware which we’re also able to finance. Recently we’ve secured finance for refurbished laptops, copiers and desktop PCs so it could well be a consideration for your business if you’re finding hardware difficult to source.

We work with some of the UKs major re-sellers so if you’re just looking for finance or want an introduction to people who have hardware available now, give us a call.

The fuel crisis is impacting businesses in many ways – both by needing to increase wages to maintain employees standard of living, and tackling the increased costs of running their offices and mobilising their fleets. For many that can cause cashflow problems.

Whilst The Recovery Loan Scheme, created to help businesses transition out of Covid, ended on 30th June, there are many other solutions to help businesses manage short-term cashflow challenges, such as loans or invoice finance. We work with multiple funders with varying solutions and can find the right fit for your business if that could help.

Alternatively, many businesses are tackling the problem head on by using finance to help them become greener and less dependent on expensive fossil fuels to power their offices and fleets. Solar panels, electric vehicles, LED lighting, all contribute to becoming a greener business, reducing your fuel costs, and running a more self-sufficient business, less reliant on expensive fuel.

Off-setting the costs of finance against the energy savings you’ll make means you could make the change to become a greener business at a net neutral cost, and in some cases you could see a cash generative outcome. We have calculators and models we can apply to your business to show the potential savings available and how they could offset against the finance costs so you can see the possible impact on your company’s bottom line.

Our team across the country are working on more and more diverse projects, providing finance for farm equipment, agri-tech and vertical farming, education funding, security systems and green energy in addition to our traditional sectors. Our vehicle division has been growing and doing more Electric vehicles and fleet packages. Whatever your business is investing in, we can offer a no obligation quote so don’t wait to get in touch.

And speaking of education funding – the IFRS16 regulations were meant to apply to all schools and MATs from 1st April 2022. The regulations would have meant schools could now enter in to finance leases rather than just operating leases. Due to Covid, CIPFA (the Chartered Institute of Public Finance and Accountancy) conducted an emergency consultation and submitted their findings to the Treasury’s Financial Accounting Advisory Board.

The upshot is all Multi-Academy Trusts will now adopt IFRS16 accounting standards from 1st September 2022.

All LEA schools will adopt them from 1st April 2024 but LEAs do have the option of adopting them earlier should they choose to do so. Once transitioned MATs and schools will be able to take out finance leases for qualifying assets, such as IT hardware, gym and catering equipment or minibuses, without the Secretary of States prior approval. We’ve worked with schools on multiple projects over the last decade from 1-2-1 devices to coaches and AstroTurf hockey pitches. We are very happy to work with your finance team to advise how the changes can be used to help your school or MAT make the transition.

The Bluestone Difference

At Bluestone we’re proud to be different in the broker world. Our focus is providing finance solutions for our introducing partners, and working with our customers over the long term to help them achieve their growth goals and ambitions. Whilst we can provide a quick transactional solution, we aim to always consult, listen and understand a business’ unique requirements so we can recommend the most appropriate products that enable our clients to maximise their financial opportunity in every purchase and investment they make. Our ongoing relationships enable us to  revise and adapt those solutions as companies develop, be that helping them navigate challenging periods or accelerating growth plans in the most cost-efficient ways.

We’re delighted that difference has been recognised in the Business MoneyFacts Awards 2022 where we again won the Award for Finance Broker of the Year. The Business Moneyfacts Awards are the largest business and commercial finance awards in the UK and judged independently by the business community so we’re delighted our work in supporting UK businesses through the pandemic and beyond has been acknowledged. We have account managers across the UK ready to support your business so please don’t hesitate to get in touch and we’ll connect you with our account manager in your region.

The changes keep coming, but the whole team here at Bluestone are looking forward to helping UK businesses grow and navigate the ever-changing financial markets.  

And to finish on a lighter note, we took some time out to get the team together at the Urban Playground in Manchester last month to take on the Cube Live Experience and play some mini-golf. We’ve loved being able to get the team together this year and celebrate the work they do across the country. Bluestone is all about our people and we value the contribution all of them make to help support UK business. Everyone had a fantastic time and really appreciated the chance to get together with colleagues from further afield and enjoy some food and fun away from the office.

That’s all from me. Please leave a message below or get in touch through our website if you’d like more information on any of the topics covered.

Thanks for your time, I look forward to seeing you soon.

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