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Should we do more to repatriate jobs to the UK

21/11/2011 By Mushroom Internet

Are we missing a trick? Last week saw the US approving legislation to bring jobs back to America that had previously been outsourced to lower-cost economies. The measure is aimed at reducing America’s 9% unemployment, and with the economic case for outsourcing no longer as compelling as it was 10 years ago this seems like a good idea.

This begs the question – should we be doing more to repatriate jobs to the UK, to tackle our own unemployment?

Bringing jobs back to America

Congressman Frank Wolf  reports that “legislation approved yesterday in both the House and Senate requires the Commerce Department to immediately set up a task force to examine what needs to be done to encourage U.S. companies to bring their manufacturing and research and development activities back to America’s shores. ”

“The department also must develop a list of “best practices” for states and communities to follow to help foster the repatriation of jobs that have moved abroad.”

Is this not happening already in the UK?

“Small manufactures are considering shifting production back from the Far East to the UK to save money and provide a better service to customers” according to the Telegraph.

Speaking recently to the owner of a Sussex-based electronics company, he agreed, saying that part of the recovery in his order book has been down to his customers bringing work back from China and India.

And this is happening in other sectors as well. To improve customer satisfaction, Santander had just brought its call centre back to the UK, and two years ago BT repatriated 2,000 call centre jobs.

Why is the repatriation of jobs such a good idea?

  • with labour costs going up, the lower-cost economies are less competitive;
  • transport costs have gone up with the price of oil;
  • political instabilities are increasing the supply chain risk; and
  • there are serious concerns about the environmental sustainability of an economic model that relies so heavily on transporting goods globally, etc.

Add these to the well-known issues surrounding the protection of intellectual property, and the consequences of goods being at sea for several months – inventory cost, on-time delivery, lack of flexibility for products that are configured to order – there seems to be a good case for in-sourcing back to the UK to create jobs for unskilled and semi-skilled employees right through to science and engineering graduates.

But so far I have not been able to trace any UK government initiative on the repatriation of jobs: feel free to post a comment if you can shed some light on it.

Posted by Peter Johnson, Business Advisor with SGBA. Call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk if you would to talk to someone about your business.

Filed Under: Uncategorized Tagged With: back office, business advisors, call centres, cost saving, manufactring, outsourcing overseas, repatriation, risk, SMALL BUSINESS, supply chain

Bank or pawnbroker?

14/11/2011 By Mushroom Internet

There was a time when as a small business owner you could go to your bank with a reasonable business plan and you would get a modest overdraft. But not now: what has happened to make the banks so dislike overdrafts?

Are banks now behaving more like pawnbrokers than old fashioned banks?

Banks don’t like unused overdrafts

I was at a talk last week by a senior manager from a national bank, and he explained that his bank requires that an overdraft has to be covered by a capital reserve. And this is the case even if the overdraft is secured by the borrower.

And fundamentally, what the bank doesn’t like is unused overdrafts – they have a capital reserve for funds that have not gone out of the bank!

This is why, if you go in to talk about a long term facility, they move you towards a loan.

Short term support

However, the presenter did say that many clients make the mistake of asking for a long term overdraft facility when what they really need is short term help.

Especially for working capital to cover orders in hand, the banks like invoice factoring because they can let you have funds that are secured on invoices – they get their money when your client pays them and you get the funds a month or two in advance.

And there are now companies in the market that will factor single invoices, so you don’t have to enter into long term commitments with high charges to get access to short term money.

A short term overdraft

Nevertheless there is still the alternative of a short term overdraft. If they can see and believe that your business is sound and just needs help over a few months, they will consider a short term overdraft.

But like a pawnbroker, they will probably ask for business or personal security. Even so, this may be a decent option.

Squaring the circle

So here we have the dilemma. Banks don’t like having a capital reserve against a facility that is not being used; banks are reluctant to take any risk, and ask for security even against short term funds; and borrowers don’t like the idea of securing their overdrafts against their business or personal assets especially if they are not making use of the funds.

Surely, to square the circle, banks should be encouraged to go back to lending small amounts of money over a short term without needing security. For a micro business, 8% of turnover (equivalent to one month’s receipts) over 3 months would seem like a a good starting point.

Posted by Peter Johnson, Business Advisor with SGBA. Call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk if you would to talk to someone about your business.

Filed Under: Finance Tagged With: banks, business advisors, cash flow, MICRO BUSINESS, overdrafts, risk, SMALL BUSINESS

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