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| MP65153 |
| MAPS FINANCIAL SERVICES MARKETING TO STARTUP BUSINESSES AND THE SELF EMPLOYED : OCTOBER 2003 |
| Overview |
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This report covers: financial
services marketing to startup businesses and the self employed, proportion of
self-employed falls, income polarisation, startups, closures, bankrupcies,
repercussions of competition commission, drawbacks and benefits of
self-employment,
Companies covered include:
Abbey National, Alliance & Leicester, Aviva, Barclays, HBOS, Bank of
Scotland, Halifax, HSBC Holdings, Legal & General, Lloyds TSB, Prudential,
Royal Bank of Scotland, Bradford & Bingley, Kensington Group, National
Australia Group Europe, Nationwide Building Society, The Standard Life
Assurance Company, Towry Law, Virgin Money Group,
Table of Contents Executive Summary
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Engine| Executive Summary |
| STRATEGIC OVERVIEW |
| Key Financial Services |
| Company Developments |
| Promotion |
| International perspective |
| PEST Analysis |
| Consumer Dynamics |
| The Future |
| 1. Introduction |
| THE TOPIC |
| Objectives |
| Methodology |
| Original Research |
| Problems in the Research Process |
| DEFINITIONS |
| Financial Services |
| The Self-Employed |
| Small Businesses |
| Table 1: European Commission Definitions of Business Categories by Number of Staff, Turnover and Balance Sheet Total (_m), 2003 |
| 2. Strategic Overview |
| TURNOVER SHARE DECLINES |
| Table 2: Composition of UK Businesses by Number, Employment and Turnover ( percent), 1996 and 2001 |
| Figure 1: Composition of UK Businesses by Employment and Turnover ( percent), 2001 |
| PROPORTION OF SELF-EMPLOYED FALLS |
| Table 3: Breakdown of Economically Active Persons in the UK by Employment (million), 1987 and 2002 |
| Table 4: Change in the Number of Full Time and Part Time Self-Employed (000 and percent), Winter 2001/2002 and 2002/2003 |
| Breakdown by Sector |
| Table 5: Breakdown of UK Enterprises in the Private Sector with Zero to Four Employees by Number of Enterprises and Number Employed (number and 000), 2001 |
| Table 6: Breakdown of UK Enterprises in the Private Sector with Zero to Four Employees by Sector and Turnover (£m, £ and percent), 2001 |
| INCOME POLARISATION |
| Table 7: Incomes of Self-Employed Persons in the UK by Income Band (000, £, percent and £m), 2000-2001 |
| Table 8: Average Self-Employment Income in the UK by Industry (000, £m and £), 2000/2001, |
| START-UPS, CLOSURES AND BANkRUPTCIES |
| Table 9: Top Six Geographical Areas Outside London for Start-Up Businesses, 2002 |
| Funding for Start-Ups |
| Table 10: Number of Bankruptcies Among the Self-Employed in England and Wales by Sector, 1998-2002 |
| Table 11: Comparison of Bankruptcies in England and Wales Among the Self-Employed with Other Individuals (number), 1998-2002 |
| REPERCUSSIONS of COMPETITION COMMISSION Report |
| DRAWBACKS AND BENEFITS OF SELF-EMPLOYMENT |
| KEY POINTS |
| 3. Key Financial Services |
| CURRENT ACCOUNTS AND SAVINGS ACCOUNTS |
| PENSIONS |
| Table 12: percentage of Men Contributing to a Pension Scheme in Great Britain by Age Band, 2000-01 |
| Table 13: percentage of Women Contributing to a Pension Scheme in Great Britain by Age Band, 2000-01 |
| MORTGAGES |
| PERSONAL LOANS |
| INSURANCE |
| Top Companies |
| Table 14: Distribution Channels for Sales of New Long-Term Insurance Premiums on APE† Basis by percentage of Sales Value, Second Quarter 2003 |
| Liability Insurance Costs Soar |
| Criticisms of Critical Illness Cover |
| Mortgage Indemnities: Gaps in Protection |
| INVOICE, TAX AND ACCOUNTANCY SERVICES |
| KEY POINTS |
| 4. Company Profiles |
| Introduction |
| ABBEY NATIONAL plc |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 15: Financial Results for Abbey National PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 16: Financial Performance Indicators for Abbey National PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| ALLIANCE & LEICESTER plc |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 17: Financial Results for Alliance & Leicester PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 18: Financial Performance Indicators for Alliance & Leicester PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| AVIVA PLC |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 19: Financial Results for Aviva PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 20: Financial Performance Indicators for Aviva PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| BARCLAYS plc |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 21: Financial Results for Barclays PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 22: Financial Performance Indicators for Barclays PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| HBOS PLC |
| Corporate Strategy |
| Bank of Scotland |
| Halifax |
| Advertising and Distribution |
| Profitability |
| Table 23: Financial Results for HBOS PLC (£m, number and percent), Years Ending 31st December 2001-2002 |
| Table 24: Financial Performance Indicators for HBOS PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| HSBC HOLDINGS PLC |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 25: Financial Results for HSBC Holdings PLC ($m, number and percent), Years Ending 31st December 2000-2002 |
| Table 26: Financial Performance Indicators for HSBC Holdings PLC ( percent and $), Year Ending 31st December 2002 |
| Future Company Developments |
| LEGAL & GENERAL Group PLC |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 27: Financial Results for Legal & General Group PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 28: Financial Performance Indicators for Legal & General Group PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| LLOYDS TSB Group PLC |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 29: Financial Results for Lloyds TSB Group PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 30: Financial Performance Indicators for Lloyds TSB Group PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| PRUDENTIAL PLC |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 31: Financial Results for Prudential PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 32: Financial Performance Indicators for Prudential PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| ROYAL BANK OF SCOTLAND Group plc |
| Corporate Strategy |
| National Westminster (NatWest) |
| Royal Bank of Scotland |
| Advertising and Distribution |
| Profitability |
| Table 33: Financial Results for Royal Bank of Scotland Group PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 34: Financial Performance Indicators for Royal Bank of Scotland PLC ( percent and £), Year Ending 31st December 2002 |
| Future Company Developments |
| OTHER SUPPLIERS oF Notable Financial SERVICES To THE SELF-EMPLOYED |
| Bradford & Bingley PLC |
| Table 35: Financial Results for Bradford & Bingley PLC (£m, number and percent), Years Ending 31st December 2000-2002 |
| Table 36: Financial Performance Indicators for Bradford & Bingley PLC ( percent and £), Year Ending 31st December 2002 |
| Kensington Group PLC |
| Table 37: Financial Results for Kensington Group PLC (£000, number and percent), Years Ending 30th November 2000-2002 |
| Table 38: Financial Performance Indicators for Kensington Group PLC ( percent and £), Year Ending 31st November 2001 |
| National Australia Group Europe Ltd |
| Table 39: Financial Results for National Australia Group Europe Ltd (£m, number and percent), Years Ending 30th September 2000-2002 |
| Table 40: Financial Performance Indicators for National Australia Group Europe Ltd ( percent and £), Year Ending 30th September 2002 |
| Nationwide Building Society |
| The Standard Life Assurance Company |
| Towry Law PLC |
| Table 41: Financial Results for Towry Law PLC (£000, number and percent), Years Ending 31st December 2000-2002 |
| Table 42: Financial Performance Indicators for Towry Law PLC ( percent and £), Year Ending 31st December 2001 |
| Virgin Money Group Ltd |
| KEY POINTS |
| 5. Promotion |
| Principal Advertisers of Financial Services for Business |
| Table 43: Top Ten Main Media Advertisers of Financial Services for Business (£000), Years Ending December 1999 and March 2003 |
| Table 44: Main Media Advertising Expenditure for Leading Financial Brands for Business Ranked by percentage of Total Sector Expenditure (£000), Year Ending 31st March 2003 |
| Categories of Business Finance Advertising |
| Table 45: Business Finance Categories With Main Media Advertising Expenditure Exceeding £1m, Year Ending 31st March 2003 |
| Figure 2: Business Finance Categories With Main Media Advertising Expenditure Exceeding £1m, Year Ending 31st March 2003 |
| Business Advertising Trends |
| TARGET SCATTER |
| KEY POINTS |
| 6. An International Perspective |
| PUSHES AND PULLS |
| NOT TOO BAD IN BRITAIN |
| KEY POINT |
| 7. PEST Analysis |
| POLITICAL Factors |
| Favouritism? |
| No-One Wants to Fund Pensions |
| Late Payment Legislation — If You Dare to Use it |
| Section 8 of the New Local Government Bill |
| ECONOMIC FACTORS |
| Micro Businesses Lukewarm About the Future |
| Grants Directed at Small, Not Micro Businesses |
| SOCIal Factors |
| Debt a Barrier to Self-Employment |
| Table 46: New Loan Approvals Secured on Dwellings by Banks and Building Societies† (£m), June 2002 and June 2003 |
| Redundancy Trigger |
| TECHNOLOGical Factors |
| KEY POINTS |
| 8. Consumer Dynamics |
| Introduction |
| Lack of Confidence in secure permanent employment |
| Tendencies to Borrow and Spend |
| Anxious Time for Savers |
| Analysis of Results |
| S1: "I Am, or Was Until I Retired, in a Secure Permanent Job" |
| S2: "I Am Self-Employed" |
| Characteristics of Those Most and Least Likely to Be in Secure Permanent Employment |
| Table 47: Characteristics of People Most Likely to Be, or Until Retirement to Have Been, in Secure Permanent Employment ( percent of respondents), 2003 |
| Table 48: Characteristics of People Least Likely to Be, or Until Retirement to Have Been, in Secure Permanent Employment ( percent of respondents), 2003 |
| Characteristics of Those Most and Least Likely to Be Self-Employed |
| Table 49: Characteristics of People Most Likely to Be Self-Employed ( percent of respondents), 2003 |
| Table 50: Characteristics of People Least Likely to Be Self-Employed ( percent of respondents), 2003 |
| Table 51: Secure Permanent Jobs in Decline and Self-Employment Limited ( percent of respondents), 2003 |
| S3: "I Intend to Become Self-Employed Within the Next 5 Years" |
| S4: "I Have Been Self-Employed in the Past But Not Now" |
| Table 52: Characteristics of Those Intending to Become Self-Employed in the Next 5 Years( percent of respondents), 2003 |
| Table 53: Characteristics of the Previously Self-Employed ( percent of respondents), 2003 |
| Table 54: Intentions to Become Self-Employed Versus Past Self-Employment ( percent of respondents), 2003 |
| S5: "I Have Become Self-Employed, or Have Started a New Business, Within the Past 2 Years" |
| S6: "Older People Often Become Self-Employed Because They Cannot Get a Well-Paid Job with an Employer" |
| Table 55: Recent Business Start-Ups and Reluctant Self-Employment ( percent of respondents), 2003 |
| S7: "There is a Good Range of Financial Services for the Self-Employed" |
| S8: "Banks Appear Keen to Support New Businesses" |
| Table 56: Poor Range of Financial Services, and Banks Reluctant to Support New Businesses ( percent of respondents), 2003 |
| S9: "There are Sufficient State Benefits for the Self-Employed Who Fall on Hard Times" |
| S10: "Banks Expect New Businesses to Become Profitable too Quickly" |
| Table 57: Insufficient State Benefits for the Self-Employed and Perception of Banks as Patient ( percent of respondents), 2003 |
| S11: "Banks Are Unsympathetic to Self-Employed People Who Are in Financial Difficulties" |
| S12: "Banks Do Not Give Sufficient Support to New Small Businesses" |
| Table 58: Banks Are Not Unsympathetic to the Self-Employed and Not Unsupportive to New Small Businesses ( percent of respondents), 2003 |
| S13: "Insurance Companies Do Not Give Sufficient Support to New Small Businesses" |
| S14: "Lack of Finance on Affordable Terms is an Important Reason for the High Failure Rate Among New Businesses" |
| Table 59: Insurance Companies Are Not Unsupportive to the Self-Employed and Lack of Finance is Not Seen as a Major Problem ( percent of respondents), 2003 |
| S15: "Worries About Financial Insecurity Would Prevent Me From Becoming Self-Employed" |
| Table 60: Financial Barrier to Self-Employment ( percent of respondents), 2003 |
| Comparison between 2000 and 2003 Surveys |
| Table 61: Intention to Become Self-Employed Within the Next 5 Years ( percent of respondents), 2000 and 2003 |
| Table 62: Change in Perceptions Regarding Being in a Secure Permanent Job ( percent of respondents), 2000 and 2003 |
| 2003 KEY POINTS |
| 9. The Future |
| PROSPECTS FOR SELF-EMPLOYMENT |
| Table 63: UK Population Aged Over 65 (million and percent), 1991, 2001, 2011, 2021 and 2025 |
| FINANCE FOR GROWTH |
| PRODUCT POTENTIAL |
| LEADING PROVIDERS |
| KEY POINTS |
| 10. Further Sources |
| Associations |
| Publications |
| General Sources |
| Bonnier Information Sources |
| Government and Official Sources |
| Other Sources |
Back to Top
| STRATEGIC OVERVIEW |
| · Micro businesses with no employees, or between one and nine employees, accounted for 94.6 percent of all UK businesses in 2001, 29 percent of employment and 21.2 percent of turnover. |
| · Approximately 3.1 million people were self-employed in 2002, according to Social Trends 33, 2003. An additional 1.35 million people have some income, or losses, from self-employment. Self-employed men outnumber women by nearly three to one. The proportion of self-employed in the working population has fallen since 1987. |
| · Around 20 percent of the UK's self-employed work in the construction industry. Between 13 percent and 14 percent are involved in diverse business activities, around 7 percent work in recreation, culture and sport, and a further 7 percent in health and social work. |
| · Nearly three-quarters of the self-employed had a self-employment income of less than £15,000 in 2000/2001. NatWest is fully aware of the problem of low income in self-employment and hopes its business managers will help customers to develop their businesses and increase their profits. |
| · In December 2001, the Competition Commission reported on banking services for business and accused the banks of failing to offer good value competitive services to small businesses. The banks have responded with improvements to their services for business and now cater much better for micro businesses. |
| Key Financial Services |
| · Approximately 1.5 million people use personal bank accounts for their business activities, and fewer than half of new entrepreneurs open a business account for their start-up enterprise. |
| · 52 percent of self-employed men and 70 percent of self-employed women were not in a pension scheme in 2000/2001. |
| · Self-certified and flexible mortgages and offset accounts have revolutionised the capacity of the self-employed to borrow for their home and business. Designated business loans and grants are hard to obtain, especially for new small businesses. Government support is targeted on disadvantaged geographical areas. |
| · Employer's liability, professional liability and other protection insurances are high-cost because of rising litigation costs. Liability cover is often prohibitively expensive for the self-employed in risky occupations such as roofing and scaffolding. Critical illness cover is costly because of medical advances resulting in rising longevity. Lack of affordable insurance is a significant barrier to the creation and expansion of micro businesses. |
| · Invoice finance, which involves factoring or invoice discounting, has few customers among micro businesses but offers good potential for improving cash flow for businesses turning over at least £50,000. |
| Company Developments |
| · Abbey National offers free banking for small businesses. Alliance & Leicester's Commercial Bank also offers a free banking account. Barclays' Clearlybusiness service offers useful information and support to new businesses. Bank of Scotland's Smartfinance is a relevant offset product that cuts the costs of borrowing. HSBC relies on brand scale and reputation and on accessibility to sell moderately priced business banking. Lloyds TSB offers tiered customisation of business bank accounts. NatWest has the strongest brand in small business banking, but is facing stiff competition from the innovative smaller banks, notably Alliance & Leicester and Bank of Scotland. |
| · Insurers' products for small businesses tend to lack the degree of brand power possessed by the major banks. Selling insurance products through financial advisers and banks tends to weaken brand identity. Norwich Union's new 'Self employed' suite of policies signals the company's intention to cater comprehensively for micro businesses. |
| Promotion |
| · Royal Bank of Scotland's NatWest remains the largest advertiser of banking services to business generally and small business in particular. |
| · HSBC, Bank of Scotland and Abbey National are the other leading advertisers to business. |
| · The newly self-employed are not an important focus for banks' advertising, or for advertising by other financial-services organisations. |
| International perspective |
| · Business owners in the UK have fewer problems with late payment than in many other parts of the world, and are relatively optimistic about future investment and turnover. |
| PEST Analysis |
| · Budget help for enterprise is focused on companies, not on unincorporated micro businesses. |
| · Late payment legislation and invoice factoring can be used to help improve cash flow. |
| · Debt levels among employees threaten to restrict new voluntary self-employment, because continuity of income is essential for debt repayments. 'Push' factors into self-employment such as redundancy —leading to involuntary self-employment — are likely to assume greater importance. |
| · Lack of national broadband coverage restricts the creation of new businesses in rural areas, especially those needing to use IT. |
| Consumer Dynamics |
| · The percentage of those surveyed who were in self-employment has barely changed since 2000. |
| · Only a small minority of respondents feel they are in secure permanent employment — and feelings of insecurity have risen sharply since 2000. |
| · Despite the apparent increase in insecure employment, far fewer respondents in 2003 than in 2000 intend to become self-employed in the coming 5 years. |
| · Banks emerge from the survey reasonably well. Few respondents say banks are unsympathetic to the self-employed in financial difficulties, or that they do not give sufficient support to new small businesses, or that they expect new businesses to become profitable too quickly. Conversely, few regard banks as keen to support new businesses and even fewer agree that there is a good range of financial services for the self-employed. |
| · The main messages from the survey are a growing sense of insecurity in work, alongside a declining interest in self-employment. The two trends may be linked, in that starting a business and becoming self-employed is a step towards instability, a step that may be too far for people who already feel insecure. If the numbers of those intending to become self-employed are falling as fast as Key Note's survey suggests, banks will have less reason to provide services to small businesses and their proprietors. Banks' keenness to increase consumer lending may, in fact, reduce the number of new customers for small-business services. |
| The Future |
| · `Push' factors leading to self-employment will probably assume greater importance. These factors include redundancy and a need to augment pensions. Reluctant entrepreneurs will need sound, low-cost business advice. |
| · Women who are self-employed are less likely to employ staff or to aim for growth than self-employed men. Women require encouragement and support to launch into self-employment. |
| · There is still enormous scope for the sale of new business bank accounts, but confidence in pensions will remain low. Expensive insurance, especially for employer's and public liability policies and for professional indemnity cover, is a barrier to self-employment in higher-risk occupations. |
| · Pace-setting companies include Alliance & Leicester, Bank of Scotland, Lloyds TSB, NatWest, and Norwich Union. |
| · Direct marketing to the self-employed is difficult because they are so widely dispersed, and the numbers of self-employed are constantly changing. Tightly focused advertising in media that serves occupations with high levels of self-employment, such as construction and management consultancy, is an option, but the best marketing aid is a strong, reliable, respected and highly visible brand. |
| Lobbying government on behalf of the self-employed and their micro businesses builds customers' gratitude and supports other brand-building efforts. |
Text © 2003MAPS
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Last updated by Amanda Porteous November 2003