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Finance a vital resource as billing delays hit building industry

Businesses in the UK construction sector have been hit by a leap in payment delays, with invoices taking an average of 69 days to be settled.

Analysis of more than 13,000 companies by Funding Options, the online business finance supermarket, shows that delays have risen 8% in the past two years.

It warns that a single late payment can be an issue even for successful firms, which can be caught out if a major client delays a payment significantly. If that late payment coincides with a major bill coming in, such as a tax, VAT or rent payment, the consequences can be severe.

Furthermore, the construction sector has a long supply chain which includes many small and medium-sized enterprises and delayed payments could create a domino effect that impacts hundreds of small suppliers.

Slow payment of bills is a major reason why the construction sector has such a high number of insolvencies; 2,557 construction firms entered insolvency during 2016.

Conrad Ford, CEO of Funding Options, said: “What this data again underlines is that the construction sector has a persistent problem getting clients to pay early on.

“Long supply chains in industries like construction mean that the ripple effect of delays is likely to affect many other businesses further down, with SMEs hit the hardest. In an industry with high overheads in terms of materials and labour costs, this can be difficult to deal with.

“These figures show that it’s more important than ever that the construction sector fully understand the options available to them to free up the funds they require and to minimise the impact of late payment and other poor payment practices.”

Choices available to manage cash flow range from invoice finance and asset finance to crowdfunding and peer-to-peer lending.

Ford added: “Unfortunately, small businesses leaders often don’t know which sort of finance is the best fit for a particular need, or who is out there to provide it.”

Funding Options as a UK online marketplace for business finance, raising tens of millions of pounds for SME finance each year.

It works with dozens of lenders across the alternative business funding spectrum, from challenger banks to invoice finance, hire purchase, leasing, peer-to-peer lending and property funding.

Funding Options has been designated by HM Treasury and the British Business Bank for the bank referral scheme, to help UK SMEs find alternative finance when they are unsuccessful with the major banks.

Average wait in days for invoice payment in construction sector

funding options

Source: Funding Options

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Value of UK’s housing stock soars past £6tn

The total value of all the houses in the UK has passed the £6tn mark for the first time, according to research by Halifax which also highlights the vast concentration of property wealth in London and the south-east.

The value of homes in London is now more than all the houses in Scotland, Wales and the north of England combined. The research also reveals how property values in the south have escalated since the financial crash of 2007-08, despite incomes remaining relatively flat.

In 2007 Halifax estimated that the UK’s housing stock was worth a total of £4,077bn, but over the past 10 years the figure has risen to £6,015bn.

To put the £6tn figure into context, it is nearly four times the size of the UK’s national debt, which is currently just over £1.8tn, and three times our total national output in 2016 (around £2tn). But even if every house in Britain was sold, the money raised would pay off less than half of the US’s national debt.

The big rises in the value of the UK’s housing stock have mostly taken place in the south. In 2007, the value of housing in the north-east was estimated at £114bn, but today it stands at £136bn – an increase of £22bn.

But in London, houses have jumped in value from £718bn in 2007 to £1,338bn today, a gain of £620bn. Over the same period the value of properties in Northern Ireland actually fell.

In total, 68% of private property wealth, amounting to £3.8tn, is concentrated in the south, up from 62% in 2007.

The stock of privately owned homes in Britain also increased in number from 21.5m to 23.4m.

Among the biggest gainers of property wealth in the south have been landlords and second home owners. Halifax said that while the average rate of owner-occupation in the UK was 63%, it stands at just 48% in London.

The vast majority of housing wealth is owned by the over-55s. Halifax estimated that under 35-year-olds own just 3.3% of the UK’s net property wealth, while the over-55s hold 63.3%.

Russell Galley, managing director at Halifax, said: “The value of housing stock has grown by close to £2tn in the past decade, and with the equity rich regions of London and the south-east largely responsible, it highlights a considerable regional imbalance in the distribution of housing wealth.

“Within the capital there is also a mix of fortunes. While more than a fifth of total property wealth is in London, lower levels of owner-occupation reflect a major barrier to the property ladder with a far greater number of people renting where house prices are at their highest.”

The property market has bestowed much higher levels of housing equity – the difference between the value of a home and the outstanding mortgage – on people living in the south. Halifax estimated that the average homeowner in London has net equity worth £360,193, compared to £134,273 in the north-west of England.

How housing stock values have changed – 2007-2017

North-east £114bn to £136bn

North-west £355bn to £469bn

Yorkshire and the Humber £262bn to £341bn

East Midlands £244bn to £327bn

West Midlands £294bn to £361bn

East £421bn to £688bn

London £718bn to £1,270bn

South-east £732bn to £1,089bn

South-west £401bn to £554bn

Scotland £257bn to £349bn

Wales £161bn to £183bn

Northern Ireland £121bn to £92bn

UK as a whole £4,077bn to £6015bn

Source: The Guardian

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London’s house price to salary ratio has hit a record high

The house price to salary ratio has hit a record high in London, piling even more pressure on the capital’s strained property market.

The average house price in London reached £496,000 in October, and average earnings were £34,200, representing house price ratio of 14.5 times Londoners’ salaries.

The ratios were also steep in Cambridge and Oxford, where the price to earnings ratio was 14.3 and 12.6 respectively.

The government has recognised that the housing crisis has become an unacceptable burden for young people, and in his Autumn Budget, Philip Hammond outlined his solutions.

Hammond’s big reveal was a cut in stamp duty for first-time buyers on homes worth up to £300,000. He also announced a stamp duty holiday on the first £300,000 of any purchase worth up to £500,000, to help young people living in London.

Richard Donnell, research and insight director at Hometrack, said: “Unaffordability in London has reached a record high despite a material slowdown in the rate of house price growth over the last year. Lower housing turnover in the capital has led to a tightening of supply in recent months which has stabilised house price growth.

“Even so, the gap between average earnings and house price in the capital has never been wider.”

Hometrack said London was expected to underperform over the next two to three years as earnings become increasingly stretched. However, the stamp duty holiday is unlikely to significantly change the number of first-time buyers in the capital because the biggest hurdle to home ownership is saving for a deposit.

Source: City A.M.

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Bank stress tests: longer-term resilience of lenders to be revealed

For first time lenders including RBS have been tested on resilience over seven-year scenario and not just to economic shocks

The Bank of England is to reveal the damage inflicted on the UK’s biggest lenders from £30bn of hypothetical consumer loan losses, an economic downturn and a collapse in the pound.

Threadneedle Street’s latest health check on the sector – the first was conducted in 2014 – could have an impact on a bank’s ability to pay dividends and on its business models. The lenders could be forced to sell off assets or ask existing shareholders and bondholders for more cash if they fail the tests based on hypothetical scenarios intended to put the sector under severe stress.

The results will be published on Tuesday alongside the Bank of England’s latest assessment of risks to the financial sector against the uncertainty created by Brexit.

Royal Bank of Scotland, which is still 70% taxpayer-owned, will be closely watched after it failed the stress test a year ago, and because it is being readied for privatisation by the chancellor, Philip Hammond.

In last week’s budget, the Treasury said it wanted to sell off £15bn of its stake in RBS, which is worth about two-thirds of the bank’s current value, even though this would leave taxpayers with a £26bn loss.

As well as RBS, results will be published for Barclays, HSBC, Lloyds Banking Group, Standard Chartered, Nationwide Building Society and the UK arm of the Spanish bank Santander. All are holding more capital than before the credit crisis and their financial strength has been measured against a series of hypothetical scenarios, including a 4.7% fall in UK GDP, a 33% fall in house prices, interest rates rising to 4% and 27% fall in the pound.

Threadneedle Street has already warned that under the scenario lenders could incur £30bn of losses over three years through lending on credit cards, personal loans and car finance. On Tuesday, it is expected to become clearer how the £30bn is distributed among lenders and which lenders the Bank of England has demanded hold extra capital against these loans.

Each lender has its own pass rate and the Bank will announce how each has coped with the tests.

For the first time the lenders have been tested not only on their ability to withstand economic shocks. They have also been tested on an exploratory scenario that will examine banks’ resilience over seven years of weak global growth, low interest rates and high legal costs and fines for misconduct. It will also look at the viability of their business models.

RBS is facing the added uncertainty of a multimillion pound settlement with the US Department of Justice over the way the bank packaged up and sold mortgage bonds in the run-up to the financial crisis. RBS has said it wanted to reach a settlement for this residential mortgage bond securities (RMBS) scandal. On 23 December last year, the DoJ extracted $12.5bn in settlements from Deutsche Bank and Credit Suisse in relation to this toxic bond mis-selling scandal.

Gary Greenwood, an analyst at Shore Capital, said this so-called conduct risk could lead to a “technical fail” for RBS, which last year had to cut back on risks when it did not meet the hurdle rate.

Analysts at Royal Bank of Canada do not expect RBS to fail and point out Barclays has a higher hurdle rate and in last year’s tests had higher losses on consumer finance than average.

Source: The Guardian

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London office property market robust with strongest nine months on record

Investment in the central London office property market has surged this year, rents remain stable and the extreme risk to Brexit related jobs is overstated, according to a new analysis.

Overall, up to the end of September investment into London offices reached £12.5 billion, the strongest first nine months on record, and up 44% on the same point in 2016, the report from global property consultants JLL shows.

By the end of the year central London office investment volumes are predicted to hit £18 billion which will make it one of the highest ever years and prime yields and capital values have remained stable with London yields the highest of all global gateway cities.

The report points out that while there is continuing uncertainty about the flow of financial services jobs out of London, the extreme downside risk to Brexit related jobs is overstated.

It explains that previously office rents rising at too fast a rate have set up the conditions for a market correction, this hasn’t been happening. Rents have been stable the last two years and once longer rent free periods has been factored in, rents in real terms have already undergone a mild correction.

It also points out that there isn’t the aggressive oversupply of office space witnessed before previous corrections. Vacancy remains low and the likely delivery of office space due onto the market from 2018 to 2020 is modest.

Indeed, there is only 12.1 million square feet in the development pipeline for 2018 to 2020, of which 44% is already pre-let, compared to 35 million square feet back in 1990 to 1992.

And it says that wider office take up remains positive with 11.3 million square feet being taken up in the last 12 months beating the 10 year average of 9.9 million square feet while vacancy remains at 5% below the 10 year average

‘Amidst all the Brexit noise, negative political sentiment and pessimistic forecasts, there is some uncertainty but central London office property market fundamentals remain sound in terms of supply,’ said Neil Prime, head of central London markets at JLL.

‘We are seeing new sources of occupier demand from life sciences and sustained activity from the TMT sector which will offset financial sector weakness. London remains attractive to global capital and the flood of money from Hong Kong has not slowed. Nearly £1 of every £2 invested in London offices is from Hong Kong and this is unlikely to change in the short term. The weak pound will maintain the currency arbitrage play,’ he added.

‘In the current environment, the market looks stable and whilst unlikely to deliver widespread growth, an increase in office rents is forecast to return from 2019. Office occupiers will seek flexibility, employees will seek the best places and location and asset choice selection will be key to investor performance,’ he concluded.

Source: Property Wire

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Rise of 115% in numbers applying for a short-term loan to pay their mortgage of rent

THE number of people in the UK turning to a short-term loan to cover their rent or mortgage has more than doubled, according to new statistics.

In the past two years the number of people applying for short-term loan who said they needed help paying for their accommodation increased by 115 per cent.

New data from FCA authorised credit broker CashLady found the total number of people applying for loans has also nearly doubled since 2015, with a 93 per cent increase in volume.

As well as the number of loan applications rising, the average loan amount requested by those struggling in the UK has increased by 45 per cent from £224 in 2015 to £325 this year. The statistics from CashLady come just weeks after the Financial Conduct Authority revealed that one in six people in the UK (17 per cent) would struggle to pay their mortgage or rent if it increased by just £50.

Earlier this month, the Bank of England’s Monetary Policy Committee announced it would increase interest rates for the first time in ten years — from 0.25 per cent to 0.5 per cent.

Figures also revealed that NHS workers still top the list of employees who most require emergency financial help.

They are followed by supermarket staff from Tesco, Asda and Sainsbury’s. Struggling members of the armed forces also make up the top five workforces requesting loans.

Managing director of CashLady, Chris Hackett, said being able to keep a roof over your head is “a basic human right.”

He added: “These figures, uncomfortable as they are, lay bare the state of the nation as people are struggling to cover their rent or mortgage payments.

“Wages for some of our most valuable members of society are just not high enough for them to manage basic living costs and they are regularly being forced to seek out short-term financial help.

“Housing expenditure is the largest monthly expense for our customers and they should be able to comfortably afford this before turning to emergency finance.

“We act as a broker for short term credit to help our customers find financial assistance from FCA authorised credit providers instead of seeking out illegal or potentially dangerous alternatives.”

The CashLady figures have been released after Chancellor Philip Hammond was accused of leaving ‘ordinary’ Brits out of yesterday’s budget, by failing to mention a wage boost for public sector workers, despite claiming to “support our key public services.”

Source: The National

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Expat Landlords Urged To Catch Up With Tax

If you are a British expat letting out a home while living overseas, you could be in for a nasty tax shock.

HM Revenue & Customs is warning landlords collecting rent from buy to lets or shared houses in multiple occupation (HMO) that they should declare any rental profits or capital gains on selling a property.

To make the process easier, HMRC is offering landlords the chance to join the Let Property Campaign to bring their financial affairs up-to-date if they have neglected to file tax returns in the past.

Am I a non-resident landlord?

You can find out by answering some simple questions:

  • Have you rented out or currently rent out property in the UK?
  • Is the property residential, ie a house, flat, HMO, or a permanently sited caravan or houseboat rented out on an assured tenancy agreement?
  • Do you live outside the UK for more than six months at a time?

If the answer to these is ‘yes’, then you are probably a non-resident landlord.

Why should I declare my rental profits or gains?

HMRC promises the best settlement terms to landlords taking part in the Let Property Campaign.

Not taking part means risking higher penalties if HMRC finds out an expat has let a property without declaring the income.

Penalties for landlords dealing with undeclared profits or gains outside the Let Property Campaign have a 100% surcharge, so expats could pay twice as much tax as they owe.

How will HMRC find out I am a landlord?

If you have a mortgage, employ a letting agent, advertise the property for rent online or have tenants with benefits, then HMRC probably already knows you are a landlord and has you on a list of potential tax avoiders.

This information is collected from lenders, letting agents, local councils and online property portals by default.

I’ve spent the tax and can’t afford to come forward

Unfortunately, that is not an excuse for not paying any tax that you may owe.

However, HMRC pledges to come to an agreement for paying tax from previous year, so long as the offer is reasonable and the payments are maintained.

Source: iExpats

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Only 10% of brokers think the UK government is in control of Brexit

Just 10% of brokers believe that the UK government is in control of the Brexit process, United Trust Bank’s broker sentiment poll suggest.

The survey of over 140 intermediaries working in the fields of property and asset finance, carried out by UTB in October, found almost two thirds (63%) of brokers felt that it was actually the European Commission who were in control whilst 24% thought that negotiations were evenly balanced. The remaining 3% didn’t know.

Harley Kagan, group managing director at United Trust Bank, said: “Since the EU referendum result was announced UTB has taken the view that Brexit would increase uncertainty and that we all needed to adapt to it.

“I’m pleased to say that that’s precisely what UTB and the vast majority of our customers have done.

This news follows a difficult period for the government following the recent departure of two cabinet ministers, Michael Fallon and Priti Patel and criticism of foreign secretary Boris Johnson.

Kagan added: “However, although Brexit hasn’t stopped UTB from having another successful year, there’s no denying that UK businesses and households would benefit from having a clearer picture of what life outside of the EU will look like after March 2019.

“At the moment, we appear to be making very little headway on very important issues such as trade and the free movement of labour, both of which could have a considerable impact on UK PLC.

“On the positive side, we’re not the only business which has grown despite the uncertainty. Figures from UK Finance show that mortgage lending for home purchases and remortgages has increased year on year.

“The FLA has reported strong growth in both asset finance lending and second charge loan volumes and bridging finance volumes have increased once again. Uncertainty appears to be the new normal and change will continue to happen.

“Whether you believe that Brexit, a slowing economy, cooling house prices or any other factor beyond our direct control will bring opportunity or failure, you’re probably right. At UTB, we choose opportunity every time.”

Source: Mortgage Introducer

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Property sales in UK confirm housing market is moving ahead steadily

Residential property sales in the UK increased by 1.7% between September and October 2017, some 9.2% higher than the same month in 2016, official figures show.

The data from HMRC also shows that there were 105,260 residential property sales and 11,280 non-residential sales.

It is more evidence that the property market is progressing at a steady pace despite political and economic uncertainty and the decision to leave the European Union with Brexit having no impact.

Stephen Wasserman, managing director of West One Loans, pointed out that stamp duty hikes have had more of an impact on the housing market and believes that further change to the property tax paid by buyers could boost the market.

‘The uptick in property transactions demonstrates the underlying stability of the sector, and is a positive message to the market ahead of Wednesday’s Budget, which is expected to be largely housing focussed,’ he said.

‘It will take some time for the market to fully recover from the upheaval of stamp duty hikes and economic uncertainty caused by Brexit negotiations, but if Hammond scraps stamp duty for first time buyers, as it’s rumoured he may do so, we could see the market grow at a faster rate,’ he added.

According to Shaun Church, director at mortgage broker Private Finance, while there have been no impressive monthly increases in the number of property transactions this year, annual comparisons are favourable. ‘Transaction levels are also now back to where they were before the stamp duty changes which came as a shock to the system in 2016,’ he explained.

‘High demand for housing and low mortgage rates will continue support activity in the long term, but for a markedly improved performance next year issues surrounding property supply and the stamp duty system must be addressed. The industry will be hopeful that tomorrow’s Budget unveils decisive action on these two fronts,’ he added.

Source: Property Wire

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Variable savings rates fell ahead of interest rate rise

Average rates for variable savings accounts fell in the run up to the Bank of England Base Rate rise, research reveals.

This was the first time since April that the average easy access account and easy access ISA rates have fallen.

According to data site Moneyfacts, no notice rate (excluding ISAs) stood at an average 0.40% in November 2016, 0.37% in May 2017, 0.40% in October 2017 and 0.39% in November 2017.

Notice accounts (excluding ISAs) went from 0.68% in October 2017 to 0.66% in November. No notice ISA accounts stood at 0.63% in October, falling to 0.62% in November.

Given the fact that variable rates fell in anticipation of a Base Rate rise in November, Moneyfacts suggests providers may have been reducing rates in an attempt to minimise the effect.

Charlotte Nelson, finance expert at Moneyfacts, said: “While this fall in rates may simply be a case of poor timing, the fact that the recent Base Rate rise was almost seen as a foregone conclusion indicates that providers may have been reducing rates in an attempt to minimise any subsequent rate increases.

“Since the Base Rate rise, things have unfortunately not started to look any better for savers, with providers slow to announce changes and many not passing the full rate rise on. This all boils down yet again to the main banks simply not needing savers’ funds. To make matters worse, challenger banks who put their rates up and down on a regular basis seem not to use Base Rate as a marker.

“It’s not just providers who appear to have prepared for the base rate rise that occurred on 2 November – savers have too. Moneyfacts demand data shows that the amount people are looking to invest in fixed rate bonds has dropped almost 10% (-9.25%) from the previous month. Interestingly, the amount savers are looking to invest in variable rate accounts has increased by almost 5% (4.47%) over the same period.”

The latest data from the Bank of England also reveals an increased flow of money coming out of fixed rate bonds, showing that savers are reluctant to lock their cash away, and that they’ve been stashing their cash in accessible accounts in preparation for a Base Rate rise.

Nelson added: “Savers had hoped the rate rise by the Bank of England would inspire the banks to start offering a better return on their accounts. However, the reality is that savers are still going to have to work as hard as ever to get the best possible deals.”

Source: Property 118