Young Company Finance Conference – will it blend?

I always feel that the Young Company Finance Conference is the start of a new business year. So first things first. Lets get Phil and Ally (BBC Scotchsterland Hogmymoney Show) to play out the old bad recession focussed business year with a lament and then play in the new business year with a…. hmmm… another lament. Oh well.

I tend to see the YCF Conference as a day to get myself sorted out as the new business year starts – to get re-focussed. This year probably more than ever that refocus activity was a requirement.

Alert folks will remember that we were promised by a man called a Darling in 2009 that the recession would end in Q1 2010 – and technically it did. But recently we have been promised by a man called Dave that we have to pay down the debt and expect tough times.

Hmmm… I didn’t borrow any of that debt… so why am I part of the repayment scheme? However, regardless of my lack of culpability, the recession by any practical measure isn’t ending anytime soon. Flip (substitute your own phrase here ****).

So YCF… what’s the tone this year? Well there was talk of changing business models from The Company Creators, though those models didn’t get an overwhelming reception from Archangels (in my opinion).

There was chatter at lunch about the banks… sorry can’t repeat it… it was all good… honest. Not a lot of banks in attendance actually – so special brownie points go to Llyods TSB (or Group or something) and the Clydesdale for coming to one of Scotland’s leading finance conferences. Hope you got lots of business.

The VC chap from Londonshire at Octopus Ventures (were they the guys that picked the world cup winners?) was pretty good at explaining the type of businesses they liked…. software, low capex, low burn rate, customer focus, alpha iterations, recurring revenue etc. I hate when people talk about you – without realising you’re in the room (we accept cheques payable to cash). 

Blether Media were the token marketers in the room and a good job they did of explaining the social media thing. Much talk of Purple Cows and the guys from Brew Dog dressed as Penguins, and I always like a Will It Blend clip. I wasn’t convinced there were many people pulling on their purple pullovers by the end of the presentation – but it did force me to wonder if we have taken our purple foot of our purple accelerator when it came to exposing ourselves (and my flowing locks) in the social media world. Cheers Kyle – nice one.

Other notable things? Well a number of POC (proof of concepts) did some quick, if perhaps difficult to understand, presentations. Inquisitive Systems I’ve followed for a while and they continue to look really strong, though I did notice that the lining of Jamie’s suit seems to double as a Superman Cape – so that could be an unfair advantage when conquering the security world.

So by day end – where’s my head? A bit clearer – maybe.

Jamie at Inquisitive asked me what I was “taking away from the day”, so after some thought…

• There is genuine concern about the lack of banking support at overdraft level among a wide population of the Scottish business community (in my opinion).
• There is a lack of exits to fund new investments (in everyone’s opinion). 
• There is acceptance that social media marketing works – though it still seems to be an activity dominated by the media companies (in my opinion).

Given the first two bullets it’s a good job the social marketing thing can be done with limited funds! So onwards and upwards with the promotion of our pension advice site.

Just one thing I’d like to know… The UK Debt. Will it Blend?

The Grinch that stole Scotland’s Bank

The Bank of Scotland has gone – stolen away in the blink of an eye despite it’s 300 years of history.

In Whoville the Grinch steals Christmas from under the noses of the Whos. He took the Who’s feast and he took the Roast Beast. So who stole the Bank of Scotland in the 2008 Festive season. Is the Grinch to blame?

Clearly the Boards deserve to carry the can – though many seem to have escaped lightly. The underlying truth is that the current catastrophe was the result of a UK and Global credit regime where credit became easier and easier to secure. Macro economics and common sense ignored in favour of increased lending. The greed of boards and the ambition of Chief Execs made sure the end would always be accompanied by tears.

When the Grinch steals Christmas he finds it comes anyway and on returning the Roast Beast and presents to the Whos his heart grows three sizes. And in the unlikliest of redemptions he even carves the Roast Beast. CEO Andy Hornby returning the Bank Of Scotland to independence (even with the Halifax tag) seems a much more unlikely tale than the redemption of the Grinch.

But how long will we remember the pain for? When Christmas 2010 comes around and hopefully the economy is on the up will the Grinch be watching our excessive consumption once again from afar or will he be carving the Roast Beast with us and ensuring we remember what is important? What do you think?

Relax petrol is below a pound….yeah right

Was there anybody in the country last week who jumped up and down when PM Broon encouraged other supermarkets to drop the price of petrol to below a pound? To get the price back below a quid hardly seems worth celebrating. We’ve had the ffffffinance knocked out of us over the past month or so – and this decrease seems trivial and non newsworthy. It’s also the winter….. we tend to use more energy and this normally means production goes up to compensate and the price falls (or is my glass half empty at time of writing?).

I filled up at Morrison’s t’other day at the pay as you go petrol pump. It wouldn’t let me put more than £59 in. That doesn’t fill my tank – so not only is it expensive I now have to visit more frequently. I could pay at the till – but then I’d also be buying that bar of chocolate that is shouting up at me from the counter to eat it.

Petrol is below a quid and you can’t buy more than 59 quids worth at a time – it’s a strange world we live in.

Fees to become the norm for intermediaries

Intermediaries and the like have long had the option to charge fees on top of (or instead of) receiving commission for the product supplier. John Malone of PMS, a leading UK mortgage club, predicts that advice will become more important and that this elevation will lead to more and more fee charging. He made the comments at last months Mortgage Event in Glasgow.

He was open enough that this would present challenges for some operators in the sector not least of all his own business. But at times of such significant change everyone will have to rethink business models.

A return to retail banking

For the past few years the mortgage lenders have increasingly relied on wholesale lending. This gave them greater independance from the deposits that their savers made and allowed them to gain more and more mortgage business. But as we know that situation has unravelled rather spectacularly.

John Malone MD at PMS anticipates that lenders will increasingly expect borrowers to be savers first and in turn believes that intermediaries have a role to play in encouraging that.

The norm for fixed mortgages likely to shift from 2 to 5 years

In the past 5 or so years the typical fixed rate deal has been over 2 years. This gave maximum flexibility to those borrowing – but for those now seeking a new mortgage that 2 year period must seem dreadfully short. John Malone of PMS at the recent Mortgage Event in Glasgow believes that the trend will be for fixed terms of 5 years and backs that up by pointing out that the average time a person lives in their home is just 7 years. So a five year fixed seems more appropriate.

Time travel – we are back in 2003 according to The Mortgage Event

Gross lending for this year (2008) will be around £220 Billion according to John Malone of PMS. Mr Malone likened this to the levels of 5 years ago and used that as a reason to be cheerful – or at least not to be completely despairing. The message was simple enough - we were all doing well enough 5 years ago so don’t despair. And as a side note – with fewer intermediaries around didn’t this make things better.

He laso reckoned that advice was more important than ever due to the changes in lender behaviur and with the outlook for the economy generally. So with advice now being required by those seeking ever more illusive mortgages things were better than many feared.

Abnormal lending in the mortgage market 2002-2007

Everyone knew it didn’t make sense. This was the impression you came away with having listened to John Malone at The Mortgage Event in Glasgow last month. Mr Malone is the MD of UK Mortgage club PMS and his speech at the event left no-one in doubt that the years ahead will see a return to conventional lending behaviour.

From 2002 to 2007 Mr Malone made it clear that business was done based on volume – pricing did not consider risk. The years ahead will see that change. Lenders will be more cautious and will price based on risk.

This cautious approach will ripple through quickly to valuers who will begin to reflect that caution in the valuations that they apply to property.

Steep decline in intermediaries anticipated at The Mortgage Event

The Mortgage Event is an interesting conference which tours the UK annually. This year it painted a bleak picture for those that would normally attend. John Malone of Mortgage Club PMS, sees a continuing decline in the number of intermediaries as more and more find the going simply too tough.

Some will simply retire earlier than they would otherwise have done faced with a shrinking availability of products to sell. Others will simply tire of continually having to meet more and more FSA regulation. Either way the number of intemediaries in the UK is anticipated as declining by Mr Malone.

John Malone at Mortgage Event predicts packager market will get wiped out

The Packaging market in the UK has gone through a decline for a number of years as the lenders became slicker at doing the job that the packagers had made their own. However, a number of packagers were still around doing a good job of handling specialist cases and dealing with sub prime lending generally. According to John Malone MD of PMS their days are numbered.

At the Glasgow kick off for The Mortgage Event UK tour Mr Malone predicted a wipe out in the pacakager market. Largely based on self certification, sub prime and specialist lending situations the volume of work a packager can expect to gain in a market with no appetite for it is likey to be slim.

Mr Malone made it clear that in hs opinion the Packaging Sector was about to be wiped out.