M Institute

A hung Parliament?

Should we care that next week we may have a hung parliament in the UK? M Institute co-founder Jyoti Banerjee investigates the options.

I see that a recent study of growing businesses by the British Chambers of Commerce finds that two-thirds are concerned or very concerned about the impact of not having a majority party, while only one in seven respondents feel that it would be a good thing.

Let’s try and place the hung parliament discussion in context. The one thing that medium enterprises crave from their politicians is a stable economy so that business decisions within the firm are not constantly upset by changes without. But it is not just a stable economy that they need. Medium businesses also need top-flight transport and communications infrastructure, access to finance, and a well-educated workforce.

So ask yourself this question? Will a hung parliament actually deliver any of these hopes? Or will it stand in the way of achieving these objectives?

It is reasonable to expect the main political parties to be different from each other, and given the opportunity to exercise their policies, the UK could look very different in a Labour regime of Big Government, compared to a Tory government of Small Government / Big Society, or even Nick Clegg’s Open Government.

But reality is likely to be very different. While each of them could lead Britain into completely different economic territory, that is going to take rather a long time. I suspect Britain’s appetite for a hung parliament may not last long enough to see change on that scale. In fact, a split leadership may not even last the course of a single parliament.

Should we care that next week we may have a hung parliament in the UK? M Institute co-founder Jyoti Banerjee investigates the options.

I see that a recent study of growing businesses by the British Chambers of Commerce finds that two-thirds are concerned or very concerned about the impact of not having a majority party, while only one in seven respondents feel that it would be a good thing.

Let’s try and place the hung parliament discussion in context. The one thing that medium enterprises crave from their politicians is a stable economy so that business decisions within the firm are not constantly upset by changes without. But it is not just a stable economy that they need. Medium businesses also need top-flight transport and communications infrastructure, access to finance, and a well-educated workforce.

So ask yourself this question? Will a hung parliament actually deliver any of these hopes? Or will it stand in the way of achieving these objectives?

It is reasonable to expect the main political parties to be different from each other, and given the opportunity to exercise their policies, the UK could look very different in a Labour regime of Big Government, compared to a Tory government of Small Government / Big Society, or even Nick Clegg’s Open Government.

But reality is likely to be very different. While each of them could lead Britain into completely different economic territory, that is going to take rather a long time. I suspect Britain’s appetite for a hung parliament may not last long enough to see change on that scale. In fact, a split leadership may not even last the course of a single parliament.

IT decisions in crunchy times

Accountancy Age's Rachel Fielding recently interviewed a panel of experts on a webcast, asking what impact tightening financial reins will have on IT spending. Paul Druckman, chairman of M Institute, was part of the panel and here are some of his comments answering the question "What role can FDs take in IT investment decisions?"

The economic turmoil has tilted the balance and the finance director (FD) is becoming much more involved in IT investment than this time last year. Good FDs think strategically about IT rather than just through efficiencies and that has been one of the failings historically.

There is a different style of IT project evolving. People are looking for the cash implications to be less onerous on the business, but that doesn’t mean that they are shelving projects. The projects that are likely to fail are where the organisation doesn’t understand the change that is going to happen. People are starting to understand that projects impinge right across the business and you can’t just bring in external consultants to do that work in the business.

The banks were irresponsible with medium enterprises

M Institute co-founder Paul Druckman was wondering how medium enterprises have been impacted by bank actions over the past few months of the economic crisis. Here's what he found.

An excellent source from within the accountancy profession prompted me to check out which businesses have been put under by the banks in the last three months of 2008. 

A quick perusal of the list shows that a number of medium enterprises are among the casualties. These had been profitable, but which the banks just chopped, in some instances with less than 24 hours' notice to rearrange their facilities.  In the North of England, I am told that Yorkshire Bank and the Co-op have rescued quite a few at next to no notice.  

However things have gone quieter in the last month since the Government leant on the banks to change their behaviour. 

Does anybody have any bank actions to report? Do get in touch.

Say no to bank bonuses!

Should Britain's failed bankers be able to reward themselves with bonuses in the billions? M Institute's co-founder Jyoti Banerjee thinks that would be a travesty.

Let me say this as plainly as I can: Britain’s bailed-out bankers should not get a bonus. 

It must be a morally-corrosive atmosphere in Britain’s banks if their senior management are prepared to pay out bonuses in the billions of pounds a few short weeks after these banks have been bailed out by the public purse.  Their argument is two-fold – they need to reward those who did a good job, and they need to hang on to the talent needed to rebuild Britain’s banks.

Their PR message seems to be getting across to some quarters since even Chancellor Alastair Darling, arguably the closest thing we have to an owner of the near-nationalised banks, is parroting the same worn spiel. 

Both arguments are a nonsense. 

Mandelson initiative reaches medium business

As the government announces new support packages aimed at SMEs, M Institute co-founder and chairman Paul Druckman asks if these packages are really addressing the challenges facing medium enterprise in the UK.

M Institute welcomes the business support packages announced by Peter Mandelson, the Secretary of State for Business, Enterprise and Regulatory Reform (BERR). The packages, aimed at the SME sector (small and micro enterprise), actually do raise the game to include many medium enterprises, after much lobbying over an extended period of time by M Institute.

Mandelson’s announcement has three schemes on offer which use company turnover as the qualification criterion. By focusing on size, the government is clearly still not fully embracing M Institute’s characteristics model. However, the size definitions used in the packages show that they are bringing more medium enterprises into their thinking: 

Frail banks corrode market confidence despite public funding

Andrew McErlain is an investor dealing with funding issues in medium enterprises at the coalface. M Institute asked Andrew to comment on the market conditions he is witnessing. Andrew was managing director of outsourcing at KCS Software before its acquisition by Sage in 2007. Here is Andrew's report.

At present there seems to be a considerable gap between the reassuring statements from Government about the freeing up of lending channels and reality at the coalface. It is very difficult to get medium sized acquisition deals funded in the current climate as the banks have little or no appetite for new business.

Judging by recent press commentary about the balance sheet frailty of our leading banks, I wonder if the real exposure to loss here is significantly higher in the banks than has been recognised within official channels. Is it perhaps the case, that because of the underlying complexity of many of the leading banks’ derivative exposures, they still do not know the full measure of their liabilities? This would perhaps explain the constant flow of further bad news from the banks and the increasing realisation that the first round of government funding has proved inadequate.

New mezzanine finance in government strategy

The new Enterprise Strategy paper from the Department of Business, Enterprise and Regulatory Reform (BERR), published alongside the Budget 2008, announces a number of finance initiatives that are extremely relevant to medium enterprises. For the first time, the government acknowledges the need for mezzanine finance vehicles of the sort that M Institute has been campaigning for on behalf of medium enterprises.

Banks have better things to do with their money...

... than to invest in the growth plans of medium organisations. M Institute co-founder Jyoti Banerjee asks if the investment preferences shown by banks are really the results of market imperfections that need to be dealt with by policy-makers.

A few months ago, I took part in a meeting at HM Treasury organised by M Institute where a few leaders of medium organisations were invited to present their stories: how their companies became medium-sized, and the challenges they had to overcome and still have to deal with. A recurring theme for these business leaders was the way in which problems relating to access to capital impair their growth performance.

Should government be doing something about it? Clearly, the Treasury officials we spoke to did not think so as there is no evidence in their eyes of market failure. Without evidence-based market failure, how can the government generate its favoured route of evidence-based policies? (One wag recently commented that it is not evidence-based policy-making at work here – simply, policy-based evidence-making).

There is urgent need for a formal research study that can show if the evidence exists that access to finance is slowing down the growth of medium companies. This is particularly apposite in the context of a Brown government that has shifted attention from start-up enterprises to existing companies that demonstrate growth – an arena of business where medium companies are very successful. M Institute may not claim credit for engendering this shift in policy, but it certainly fits our policy recommendations. In this context, please see an earlier blog item commenting on Margaret Hodge’s enterprise policy.

Empowering medium enterprise - a guide for policy-makers

A new research study, from M Institute, sets out challenges facing medium organisations and asks policy-makers to respond.

The UK government wants to see Britain as the best place in the world to start and grow a business. Yet most of its attention is on policies and measures aimed at starting businesses. A new research study from M Institute, Empowering Medium Enterprise: A guide for policy-makers, seeks to focus government attention on the challenges facing medium businesses, and the actions government can take to support their continued economic growth performance.

The research, released October 2006, was carried out by M Institute, and received support from Microsoft and the Institute of Chartered Accountants in England & Wales (ICAEW).

Key themes emerging from the research study:
• Medium business is very different from large or small business
• Medium enterprise growth is held back by certain economic factors

 

Growth and finance: an imperfect relationship

Growth needs money, and money looks for growth. But the two often don't find each other in the M segment of the market. Jyoti Banerjee gives credit where credit's due...

There seems to be this special bond between growth and mid-sized organisations, or M organisations as I like to call them. Talk to most leaders of M businesses and they will tell you that they expect to grow at around 20% per annum for the next three years or so. What’s so remarkable about that anyway? After all, most small and start-up businesses probably expect to grow at around 200% per annum. Why should we care about the twenty percenters?

We should, for a number of reasons.