90. Taking the Temperature
Tectona was asked by The Business Magazine to take part in one of their insightful sessions called “Taking the Temperature” focusing on key issues affecting small and medium size business.
The Panel were asked to consider three issues – or Exam Questions:
- The chief concerns affecting us all
- Heathrow expansion
- Gender pay gap legislation
Exam Question 1: Within your business sector what are your chief future concerns? For example, immigration control (lack of incoming international talent); trading tariffs; lack of EU funding support; ongoing political negotiations delaying a stable and level business ‘playing field’. And what are the key opportunities for the UK as a whole?
We see the single main issue to be uncertainty – primarily about the cost of doing business – which you can break down in to 2 key areas:
- Exchange rate uncertainty or volatility
- Possible tariffs and quotas post Brexit
Clearly a weak pound helps UK businesses export. And we are convinced this is the primary reason that the UK economy has not nose-dived post Brexit. Exporters have been taking profits and only now are we seeing the favourable exchange rates flow through in to sustained export growth. But be careful – movement in exchange rates of the magnitude we have seen, and crucially in such short timescales, can decimate your profit and your cash flow.
Flip side is that it is very hard for importers; one of our clients buys from the US in US$ and if it were not for the fact that their major sales are back to US customers (again in US$) they would have had a real problem.
The clear call to action is to be aware of the risk. If you were, chances are that you would be pretty scared!
And you would probably want to do something to minimise that risk so you can sleep easy at night.
To help you through the jungle Tectona has just published their 4th Entrepreneur’s Guide entitled “The Currency Conundrum”.
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Exam Question 2: What do you think about Heathrow’s expansion … still effectively on a stacking flight-path?
First some context:
Heathrow is at max capacity NOW. Gatwick will run out of space very soon.
Heathrow mainly serves Long Haul and Business. Gatwick majors on Short Haul and Leisure
So we believe that the UK cannot afford not to build additional runways. Furthermore, it should not be a choice between Heathrow and Gatwick. It should be both!
The M25 analogy is perfect (and it is conveniently the single road that connects the two of them). By the time the M25 was completed it was in urgent need of upgrading and widening. The same will be true of our runway capacity.
So our view is a clear – bite the bullet and get started on both Heathrow and Gatwick … NOW.
So what can business do – it really is a matter of lobbying. Not just for Heathrow but also for the much needed expansion at Gatwick.
Lobby who? Local councils, MPs and Ministers to make sure these critical infrastructure projects are not kicked in to the long grass by other distractions – for example, Brexit.
Exam Question 3: Gender pay gap legislation** came in to force from 5th April 2017
How could such pay-gap reporting change the climate, the ‘temperature’ of UK plc?
This is an interesting one. Depending on which source you believe, there is around a 15% pay gap. What is clear is that it is closing glacially.
Intuitively we should aim for “comparable worth” – meaning the same pay for people doing the same jobs – regardless of gender.
Requirements to report will help with visibility and transparency. But we believe that this, in itself, is not the solution.
It boils down to the “How”. We all know it is hard enough running a business and these sort of legislative requirements simply lay down more banana skins.
And it will not necessarily drive the right behaviours or, indeed, outcomes.
We cannot help feeling that this would be too much of an intrusion of politics into the management of private business and will not help resolve this thorny issue.
** For private and voluntary-sector businesses with more than 250 employees
You can read the full article “Taking the Temperature in The Business Magazine” where Tectona’s thoughts are echoed by a number of other influential business leaders.
And if you have any questions (of a financial nature), why not put them to our team of commercial FDs – for Free. You will get your answer within 48 hours.