Higher crude price set to lift profits at BP
AN ALARMING proportion of small businesses and self-employed people are holding too little cash to help them get over unforeseen events, and the situation is worse in the North than in the South, new research into business resilience reveals.
More than a fifth (22 per cent) of businesses have no cash savings at all, and two in five (40 per cent) hold less than £1,000.
Research from Aldermore, the SME-orientated retail bank which casts itself as the ‘bank for go-getters’, also shows that there’s a definite geographical divide; businesses in both the North and Midlands have, on average, £500 in cash holdings, compared with an average of £3,000 in the South. The average across the whole of the UK is £1,000 in cash savings.
Business resilience is tested when self-employed people face unforeseen events, especially illhealth. More than half (54 per cent) said they have had periods where they have been unable to earn money because of ill-health.
Of these, almost half (48 per cent) remained off work for more than one month, and on in five (22 per cent) lost over a third of the working year. Typically, this costs businesses around £4,000 in lost revenues.
Aldermore said that, since there are more than five million self-employed people in the UK and nearly five million more considering starting their own business in the next couple of years, there was a need to improve financial resilience among freelancers and small businesses.
Aldermore’s head of savings, Ewan Edwards, said: “Starting a new business is a significant life decision. While many self-employed people relish greater flexibility and control, the first few years can often bring long hours, additional stress and relatively small financial rewards.
“Quite often, issues that can affect the ability to earn, such as ill-health or childcare mean that many businesses are failing to prepare financially.
“We want to work with the Government to look at means of backing Britain’s entrepreneurs and helping them devise new policies and financial products that will encourage start-ups and protect growing small businesses from the shocks and uncertainties of self-employment.
“For example, an Entrepreneur ISA or Small Business Savings Allowance could support many businesses that face the ups and downs throughout the year.”
That’s a theme that resonates with Jonathan Lima-Matthews, senior policy adviser at the Association of Independent Professionals and the Self-Employed (IPSE), who said that being unable to work was one of the biggest fears freelancers faced due to the potential for financial difficulty.
He added: “Self-employment works for the vast majority of people, but a lack of tailored banking products is contributing to hardship for some.
“Tailored banking and saving solutions for the self-employed can act to support those with volatile incomes. With almost five million people working for themselves, it is in banks’ best interest to cater to this burgeoning market.
“The government should also recognise the risk these entrepreneurs face when they start their businesses; and provide them with greater assistance.
“Considering the self-employed contribute £255bn to the UK economy every year – enough to fund the NHS twice over – we should be nurturing small businesses, not making life more difficult for them.” OIL GIANT BP is expected to reveal a surge in annual profit next week, as higher crude prices and declining costs drive the oil giant’s recovery.
The company is forecast to have raked in around £4.2bn in underlying replacement cost profit – BP’s preferred income measure – in 2017, a notable improvement on the £1.8bn reported in 2016.
That figure is based on consensus forecasts for £1.3bn in underlying fourth quarter profits, on top of the £2.9bn booked in the first nine months of the year.
There is also potential for BP to swing to a profit on the replacement cost profit measure alone, which in 2016 showed a loss of £702m.
BP is among a string of oil majors benefiting from climbing oil prices, having seen Brent crude hit 70 US dollars per barrel last month – its highest level in more than three years.
The global oil benchmark slipped below 30 US dollars per barrel as recently as 2016 as weaker demand and a global energy glut driven by the rise of shale gas took their toll.
The company’s own share price has recovered broadly in line with global energy prices, having jumped from 290p per share in January 2016 to where they sit at around 501p today.
But Nicholas Hyett, equity analyst at Hargreaves Lansdown, said other factors were at play, such as declining costs linked to the Deepwater Horizon disaster.
He said: “Fortunately, BP’s recent performance isn’t driven solely by a more favourable oil price environment.
“Although costs relating to the Deepwater Horizon oil spill are set to be higher than originally expected this year, at£2.1bn rather than £1.4bn, charges for the disaster are finally starting to decline.
“That should free up significant cash flow for reinvestment and debt reduction.”
Last month the oil giant announced that it would book another £1.2bn charge from the 2010 oil spill – which killed 11 rig workers and led to millions of gallons of oil being spewed into the Gulf of Mexico – but assured that the lengthy settlement process for the mammoth claims related to the spill is now winding down.
“The group has been ramping up production in line with the oil price recovery, turbo charging revenues,” Mr Hyett said.