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Tony Glover

Apply For A Business Bounce Back Loan (BBBL)

The Bounce Back Loan scheme helps small and medium-sized businesses to borrow between £2,000 and £50,000. The government guarantees 100% of the loan and there will not be any fees or interest to pay for the first 12 months. Loan terms will be up to 6 years. No repayments will be due during the first 12 months. The government will work with lenders to agree a low rate of interest for the remaining period of the loan. The scheme will be delivered through a network of accredited lenders.

Guidance on how to apply is given on the British Business Bank Website: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/for-businesses-and-advisors/

Actions required:

  1. Find an accredited lender – there is a link on the above page;
  2. Approach them, ideally via their website;
  3. Complete a short application form which self certifies that your business is eligible for a loan under BBLS;
  4. If eligible you will need to complete the Banks Anti-Money laundering, fraud and Know Your Client checks;
  5. The lender makes a decision.

Talk to us if you need assistance in applying for a BBBL we will do our best to help.

 Who is eligible:

Your business must be able to self‑declare to the lender that it:

  • has been impacted by the coronavirus (COVID-19) pandemic
  • was not a business in difficulty at 31 December 2019 (if it was, you must confirm your business complies with additional state aid restrictions under de minimis state aid rules)
  • is engaged in trading or commercial activity in the UK and was established by 1 March 2020
  • is not using the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF), unless the Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility
  • is not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance
  • derives more than 50% of its income from its trading activity (this requirement does not apply to charities or further-education colleges)
  • is not in a restricted sector (see below)

Note: The above is not an exhaustive list – see The British Business Bank for more information.

Bounce Back Loans are available to businesses in all sectors, except the following:

  • Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive)
  • Insurance companies
  • Public-sector organisations
  • State-funded primary and secondary schools

Viewing your portfolio through the right lens

One of the positive consequences of the current lockdown is that is does provide the opportunity to revisit a few of those old tasks, hobbies and pleasures that always seem to get put on the back burner in our busy lives. For some that might be picking up a new or re-reading a favourite book.

Here is an example of the latter: in the early 2000s Nassim Nicholas Taleb published a wonderful book titled ‘Fooled by Randomness’ with the descriptive sub-title ‘The hidden role of chance in life and in the markets’. In it he compares the wealth of a dentist to a wealthier Wall Street trader. The trader makes more money and lives in a far bigger house than the dentist, based on the one life that they have both lived, so far. Yet on an ‘expected’ basis, the dentist is wealthier because if one re-ran the personal earnings drawn from a dental practice over many alternatives lives, each would come out broadly similar (teeth need to be cared for after all). The product of the outcome and the probability reflects a dentist’s ‘expected’ wealth, which is quite consistent and, to a large extent, divorced from randomness.

On the other hand, the trader’s wealth represents the spoils of one life that is potentially the outcome of randomness and hides the left tail risk of complete disaster (e.g. losing lots of money, being fired, defaulting on the mortgage and getting divorced!) and all of the other less lucky lives the wealthy trader could have lived, or other unsuccessful/unlucky former traders have already travelled.  The dentist’s wealth on this basis, makes her the richer person!

Taleb also uses the analogy of playing Russian roulette which – as any who has watched the Deer Hunter[1] will know – is likely to end in tragedy. Many people – such as the trader above – play Russian roulette in their investment lives, only with a gun with far more empty chambers. At some point, the chamber with the bullet in it will end up against the firing pin, with often disastrous portfolio consequences. However, because the event is rare, it often gets ignored. In the meantime, their investment life may be extremely rewarding.

From an investment portfolio perspective, one cannot simply use the lens of past (single life) returns – particularly with 20/20 hindsight (e.g. ‘we should have had more in US growth stocks and less in global value’) – to judge a portfolio. It requires a lens that looks at ‘expected’ outcomes and the chances of them occurring. We should ask ourselves whether over multiple lives – like those of the dentist and the Wall Street trader – the expected outcome of a portfolio structure is higher than the expected outcome of other alternative portfolio strategies. Taleb provides further wisdom:

‘Over a short time increment, one observes the variability of the portfolios, not the returns.  In other words, one sees the variance, little else. I always remind myself that what one observes is at best a combination of variance and returns, not just returns (but my emotions do not care what I tell myself).’

Nassim Nicholas Taleb, Fooled by Randomness

The investment weather can be exceptionally varied and one of the goals of good portfolio construction is to make sure that all the bases are covered. In structuring client portfolios, we seek to avoid the single left-tail bullets that ultimately result in the cardinal sin of investing – permanent loss of capital. Amongst these are concentration risk (e.g. too much in any one stock), liquidity mismatches between a fund’s investors and its underlying assets (e.g. bricks and mortar property funds), low quality bonds (default risk), active manager risks (e.g. Woodford), non-UCITs products and opaque investment strategies, to name a few. A broadly diversified global equity core across all markets, sectors, and companies, balanced with higher-quality bonds as necessary, provides structural robustness, if not necessarily the best absolute outcomes over specific short-term periods.

Figure 1: Making sure expected outcomes are likely to be good

As Taleb states:

‘One cannot judge a performance in any given field (war, politics, medicine, investments) by the results, but by the costs of the alternative (i.e., if history played out in a different way).’

Nassim Nicholas Taleb, Fooled by Randomness

We think that with the longer-term horizons of most clients, combined with the broadly diversified portfolios that they own, which have excluded the key sources of permanent capital loss, are well positioned to navigate the future. It may be less glamorous to look in people’s mouths for a living than to be the Wolf of Wall Street[2], but it should pay higher dividends over time!

Risk warnings

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Errors and omissions excepted.

[1] A great but harrowing Vietnam war movie, worth watching if it’s your genre – it is available on BBC iPlayer

[2] The Wolf of Wall Street (Leonardo DiCaprio) is another fun watch, if a little hedonistic.

COVID-19 Support for Businesses

The Government has announced a range of measures to assist businesses in dealing with the financial impact of COVID-19.  We have outlined below the various support packages available. We will be in touch when details of how to apply for the various packages become available.

HELP FOR THE SELF EMPLOYED

The scheme is called the Coronavirus Self-Employment Income Support Scheme (CSEISS).

If you have suffered a loss in income, a taxable grant will be paid to the self-employed or partnerships, worth 80% of profits up to a cap of £2,500 per month.

Initially, this will be available for three months in one lump-sum payment and will start to be paid from the beginning of June.

You cannot apply for this scheme yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online.

Government advice: Individuals do not need to contact HMRC now and doing so could delay the work being undertaken to introduce the scheme.

Who is eligible?

Self-employed individuals and a those who are a member of a partnership. In addition, those eligible must have more than half their income from being self-employed and:

  • have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19
  • traded in the tax year 2019-20
  • are trading when you apply, or would be except for COVID-19
  • intend to continue to trade in the tax year 2020-21
  • have lost trading/partnership trading profits due to COVID-19

Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:

  • having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
  • having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

There a few individuals who have not submitted their 2018-19 Self-Assessment tax return and to qualify they now have until the 23 April 2020 to do so.

CORONAVIRUS JOB RETENTION SCHEME

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. All UK businesses are eligible.

Eligibility

You will need to:

  • designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.

HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

RATES  HOLIDAY

The Northern Ireland Executive has committed to providing a three month rates holiday to all businesses from April to June.

BUSINESS SUPPORT GRANT SCHEMES

The Executive announced last week a grant of £10,000 to be provided to all small businesses who are eligible for the Small Business Rate Relief Scheme and a grant of £25,000 to be provided to companies in the hospitality, tourism and retail sectors with a ratable value from £15,000 up to £51,000.

Together these schemes will provide circa £370m of assistance to some of the most vulnerable businesses by helping their immediate cash flow pressures.

Economy Minister Diane Dodds announced the first set of payments for small businesses impacted by the Coronavirus crisis will be made under the Small Business Grant Scheme on 31 March, if not before then.

An online portal: https://www.covid-19smallbusinessgrants.economy-ni.gov.uk/

has gone live for businesses to register their bank and rates details to secure payment.

Payments of the £10,000 grant will be available in cash to 27,000 small businesses including those in receipt of the Small Business Grants Scheme. An additional 4,000 businesses in the tourism, hospitality and retail sectors will receive £25,000 in cash if they have a ratable value of between £15,001 and £51,000.

DEFERRING VAT AND INCOME TAX PAYMENTS

The Government will support businesses by deferring Valued Added Tax (VAT) payments for 3 months. If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

VAT

For VAT, the deferral will apply from 20 March 2020 until 30 June 2020.  All UK businesses are eligible. If you cannot pay remember to cancel your Direct Debit.

How to access the scheme

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

INCOME TAX

For Income Tax Self-Assessment, payments due on the 31st July 2020 will be deferred until the 31st January 2021.

If you are self-employed you are eligible. This is an automatic offer with no applications required.

No penalties or interest for late payment will be charged in the deferral period.

HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.

SUPPORT FOR BUSINESSES WHO ARE PAYING SICK PAY TO EMPLOYEES

The Government will make legislation to allow small and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19.

The eligibility criteria for the scheme will be as follows:

  • this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
  • employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28th February 2020
  • employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
  • employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note.
  • eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
  • the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.

You are eligible for the scheme if your business is UK based and your business is a small or medium-sized and employs fewer than 250 employees as of 28th February 2020.

THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch this week to support primarily small and medium-sized businesses to access bank lending and overdrafts.

The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value.

Businesses can access the first 12 months of that finance interest free, as government will cover the first 12 months of interest payments.

You are eligible for the scheme if:

  • your business is UK based, with turnover of no more than £45 million per year
  • your business meets the other British Business Bank eligibility criteria

How to access the scheme

The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/

All the major banks will offer the Scheme once it has launched. There are 40 accredited providers in all.

You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.

The scheme will be available from early week commencing 23rd March.

SUPPORT FOR BUSINESSES PAYING TAX: TIME TO PAY SERVICE

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay service.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. You are eligible if your business pays tax to the UK government and has outstanding tax liabilities.

If you have missed a tax payment or you might miss your next payment due to COVID-19, please call HMRC’s dedicated helpline: 0800 0159 559. If you’re worried about a future payment, please call them nearer the time.

Rebalancing – Do I really Need To

Humans have a hard time being investors.  Normally, we like to purchase things when they are cheap and avoid them when they are expensive, but that is often not the case for equities.  We tend to get overly optimistic and enthusiastic when equity markets rise dramatically, as they have done since the Global Financial Crisis a decade ago.  Yet when markets fall materially, we feel bruised and cautious, seeking to hang onto our stable bonds and even selling equities to avoid further falls in portfolio value.  That’s rarely a good idea, especially if you do not need the bulk of your capital in the foreseeable future.

As a client you will know that we have always sought to rebalance your portfolio on a regular basis, by which we mean returning it to the original target allocation that we initially established with you.  Most often, over the past few years, rebalancing has meant selling growth assets (equity-like) and buying defensive assets (bonds) in a contrarian manner.  This has helped to avoid the portfolio becoming dominated, over time, by the riskier growth assets component of the portfolio and to keep you within your emotional tolerance for falls, your financial capacity to weather them and your need to take risk in the first place.

Logically, the reverse also applies; at times like these the proportion of equities in your portfolio will have fallen below their long-term target.  This matters because your portfolio now has too little risk and it will be harder for the growth assets remaining to recoup the falls in value when markets eventually recover.

We can work that idea through with a simple example.  Imagine you own a £10,000 portfolio split 50% (£5,000) into growth assets and 50% into defensive assets.  In the growth assets portion, you own 50 units of a global equity fund priced at £100 per unit.  Growth assets fall by 40%.  Let’s assume your defensive assets are unchanged in value.  You still own 50 global equity fund units, but they are now priced at £60.  Your growth-defensive split has moved from 50/50 to 37.5/62.5.  Time to rebalance.

Figure 1: Market falls leave you underweight growth assets

Source: Albion Strategic Consulting

Rebalancing i.e. buying equities to realign the portfolio with its allocation target, helps to ensure a quicker recovery back to where you started.  This is because the breakeven price of your equity holdings is now lower.

So, let’s now assume that you rebalance by taking £1,000 from your defensive assets and buying growth assets to get you back to a 50/50 split (left hand grid below).  You can buy 16.7 units at £60 with the £1,000 raised.  To get your portfolio back to its starting value of £10,000 your now 66.7 global equity units need to rise 50% to £90 per unit (middle grid).  However, an un-rebalanced portfolio (right hand grid) only rises to £9,500 with this 50% rise.  In fact, to get back to a portfolio value of £10,000 and un-rebalanced portfolio requires a rise of 67% in the global equity units to £100.

Figure 2: Rebalancing helps the portfolio to recover faster 

Source: Albion Strategic Consulting

Even if the markets fall again after rebalancing, the opportunity exists to rebalance again, likewise further reducing the rate of return required to get back to where you were compared to un-rebalanced portfolios.  That takes courage and discipline, when your emotions are telling you to do the opposite.

The issue of a potential rebalance on the back of large market falls is certainly being considered and don’t be surprised if we raise this with you.  You now know why.  Remember, if you are drawing an income from your portfolio, withdrawing from bonds can get you closer to your target.  Likewise, if you have incoming cashflows, this too can be used to buy growth assets.

As David Swensen, CIO of Yale University’s Endowment and one of the world’s most highly respected institutional investors states[1]:

‘The fundamental purpose of rebalancing lies in controlling risk, not enhancing returns.  Rebalancing trades keep portfolios at long-term policy targets by reversing deviations resulting from asset class performance differentials.  Disciplined rebalancing activity requires a strong stomach and serious staying power.’

Do you really need to rebalance?  The answer for most investors is likely to be ‘yes’ when the time comes.  If we feel a rebalance is necessary, we will be in touch to discuss this with you.

As ever, please feel free to give us a call if you have any questions.

Risk Warnings

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Errors and omissions excepted.

[1]    Swensen, D., (2000) Pioneering Portfolio Management.  New York: The Free Press

Today’s Market Falls in the Context of History

Context is an important tool when it comes to investing.  All investors around the world will be feeling the emotional pressures of the recent rapid equity market falls, either because they can remember previous falls and times of uncertainty, such as the Global Financial Crisis (2007-2009), or as younger investors, they have not yet experienced material market falls.  We obviously do not have a crystal ball to see into the future, but the global equity market falls we have seen since January – of under 20% or so at the time of writing – sit well within previous falls since 1970. In terms of expected ranges of outcomes, we generally estimate that 95% of the time annual equity market returns should sit within an approximate range of +45% to -35%.  Outliers do exist beyond these limits.

Figure 1: Today’s falls still sit well within both history and expectations (1/1/1979 to 18/03/20)

Data: Global equities – MSCI World Index (net div.) TR in GBP Morningstar Direct © All rights reserved.

The Table below provides numbers around both the depth and recovery times for each of the five largest falls since 1970 in the figure above.

Table 1: Declines and recoveries of global equity markets (1/1/1970 to 18/3/2020)

Peak date Decline Trough date Recovery date Decline (m) Recovery (m)
Sep-00 -49% Jan-03 Dec-10 29 95
Jan-73 -40% Sep-74 Jan-76 21 16
Jan-90 -35% Sep-90 Jan-93 9 28
Sep-87 -29% Nov-87 Mar-89 3 16
Jan-70 -19% Jun-70 Jan-71 6 7
Jan-20 -19%

Data: Global equities – MSCI World Index (net div.) TR in GBP Morningstar Direct © All rights reserved.

How deep or long the current fall will be, no-one knows.  There will certainly be more rises and falls to come.  Yet we should take some comfort from the fact that things have been just as challenging at times in the past, albeit for very different reasons.  Recovery times sit well within the investment timeframes of most investors.  It is worth noting that an investor in global equites today has, in nominal terms, more money than they did at the end of April 2018, despite the market falls in late 2018 and those recently experienced.

These are tough times for all of us and for our Nation, but the words of wisdom that we always return to at these times are those of the legendary investor John Bogle:

‘This too shall pass’.

It will.

From an investment perspective the key message is to be brave and disciplined as a fall only becomes a loss if you sell. Remember, we are always available to take your call or answer your emails.  Please feel free to contact us if you have any specific questions or simply if you would like some reassurance.

Risk Warnings

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Errors and omissions excepted.

Pacem supports the Story Strategy Traction Labs

Pacem recently sponsored and delivered on a transformative one-day workshop for some 40 local entrepreneurs and wantrepreneurs. The Story Strategy Traction Labs took place on the 4th and 11th March and ensured that participants left with a clear, concise and uncomplicated roadmap for their business or idea, as well as the ability to engagingly articulate the business’s story.

Feedback on the initiative is captured below:

Pacem Crowned ‘Employer of the Year’ at 2020 Eastside Awards

Pacem were delighted to win the 2020 Eastside Awards ‘Employer of the Year’ category at  the annual Eastside Awards in association with George Best Belfast City Airport, hosted by television presenter Tara Mills, in Hastings Stormont Hotel.  On winning the prestigious award, MD, Daniel Glover said “From day one our stated purpose has been to enable everyone who engages with our business (our team and our clients) to achieve success and fulfilment in business and in life. This commitment to ‘team’ and ‘clients’ underpins everything we do and everything we have achieved and we are absolutely thrilled to be recognised for our commitment to this.”

The Damian Hughes Podcast

In this episode, Internationally renowned speaker and best-selling business author Professor Damian Hughes recently visited the Pacem office. Damian’s innovative thinking has been praised by Sir Richard Branson, Muhammad Ali, Sir Terry Leahy, Tiger Woods, Jonny Wilkinson and Sir Alex Ferguson. He is Professor of Organisational Psychology and Change at Manchester Metropolitan University and within this conversation Pacem’s Kevin Kelly explores the concepts of culture and change drawing on examples that range from Pep Guardiola to Jurgen Klopp to the American Civil Rights movement to the smoking ban.

Pacem Support Belfast Business Idea Award

Pacem were proud to be involved in the recent Belfast Business Idea Award. The initiative was designed to unearth, recognise and help to fast track the best business ideas in Belfast. The Awards night was held at Danske Bank Belfast Fintech Hub with over 120 local business start ups in attendance. Pictured on the evening are Daniel Glover, MD Pacem along with the  prize winners. The overall winner won £2,500 cash plus a support package worth over £3,000. The two runners-up  also received a support package worth over £3,000 which included 9 months Innovation Factory membership, 9 months free accountancy services (including software) from Pacem and a free place on the Digital Marketing Communications course at Ulster University.

View the highlights below:

Pacem Proudly Launch the Belfast Start Up Show

Pacem was delighted to support the Belfast Start Up Show which took place on Wednesday 20th November and featured presentations from successful local entrepreneurs (David Maxwell, MD of Boojum and Brendan McDowell, Founder of BPerfect Cosmetics)) and was hosted by one of the UK’s top Entrepreneurs, Best-Selling Business Author & International Speaker, Lara Morgan. Over 300 entrepreneurs registered for the event and the highlights video is below.