Business news 3 March 2022
James Salmon, Operations Director.
Unilever and Diageo ‘too slow to pay small firms’. Ukraine crisis will fuel inflation and hit GDP. Oil surges. Bank could rein in rate hikes despite inflation fears. Oil surges. And more business news.
Unilever and Diageo ‘too slow to pay small firms’
Unilever UK and four entities owned by Diageo have been dropped from the Prompt Payment Code for “failing to honour their commitments”. They have been “formally removed” from the government-backed scheme that promotes fair treatment of suppliers after failing to meet agreed terms to pay suppliers’ bills within 60 days.
Small Business Commissioner Liz Barclay said Diageo and Unilever could have withdrawn voluntarily from the programme but “have not engaged” with her, so were delisted. Small Business Minister Paul Scully has urged Unilever and Diageo to “get their acts together,” saying: “As our small businesses recover from the pandemic, the last thing they need is for some big firms to hold back cash owed to them.”
The terms of the Prompt Payment Code require firms to pay 95% of invoices to their smallest suppliers within 30 days and 95% of all invoices within 60 days. A Federation of Small Business survey in January warned that 400,000 small businesses faced collapse in 2022 due to late payment.
Analysts: Ukraine crisis will fuel inflation and hit GDP
Analysts have warned that uncertainty caused by Russia’s invasion of Ukraine is set to hit the UK economy. While Pantheon Macroeconomics had previously forecast that inflation would rise to 7.7% in April and drop back to 6% in October, it now expects inflation to peak at 8.2% in April, and still be at 7.5% in October. It has also forecast that real earnings will see a drop of 2.2% in 2021, with this 0.4% higher than its pre-invasion estimate. Pantheon believes the increase in gas prices caused by Russia’s attack will see the price cap rise by a further 33% in October, having previously anticipated an 11% hike. The firm has also downgraded its GDP growth forecast to 1.5% for both this year and 2023. Elsewhere, Goldman Sachs says climbing energy prices amid the fallout of the invasion of Ukraine could see a 55% hike in the energy price cap and inflation in Britain peaking at 9.5%. Goldman also said the Bank of England may send interest rates to 1.75% by November. Meanwhile, JPMorgan has warned that soaring inflation will cause economic growth to “slow to a crawl”.
Oil surges
Oil surged to its strongest level since 2008 before falling back slightly. Brent surged to almost $120, while WTI hit $116 as the financial sanctions choked the world of supply. Russia is said to be struggling to find buyers for almost 5 million barrels a day. Elsewhere , other commodities from Russia and Ukraine jumped. Wheat also surged past $11 a bushel, zinc hit $4,000 a ton and aluminum notched a new record. The meteoric rallies put the Bloomberg Commodity Spot Index on course for its best week since at least the 1960s.
Bank could rein in rate hikes despite inflation fears
Experts believe the Bank of England may scale back interest rate rises due to the conflict in Ukraine, with analysts at ING saying there has been a “massive” re-pricing of interest rates in the UK, with markets now betting on rates rising from 0.5% to 1.5% by the end of the year. This is a significant dip on the previous expectation of a peak of more than 2.25%. This comes despite economists warning that the invasion of Ukraine will see inflation surge to around 8% in April. ING’s analysis said: “Despite the surge in European natural gas prices and what that means for UK inflation – we have that peaking near 8% now not 7% – the Bank of England tightening cycle has suffered one of the largest re-pricings lower.” Economist Samuel Tombs at Pantheon Macroeconomics believes the Bank will deliver just two more rate rises this year, saying the firm has “become more confident in our call” that the Monetary Policy Committee “will only manage to raise Bank Rate to 1% this year, with 25 basis point hikes in March and May, followed by a long pause.”
Wealth tax ‘is a good idea but has its limits’
Prof Arun Advani of the Wealth Tax Commission says a 10% tax on wealth would not be practical, while a wealth tax beginning below £500,000 would be a “non-starter” given the difficulties that many individuals would have in paying it. He highlights that the International Monetary Fund recently adopted the commission’s proposal for a one-off tax on the top 1% of wealth holders – those with net wealth above £2m. If payable as 1% a year over five years this would raise £80bn over the lifetime of the tax, he notes. Prof Advani says the tax “has three big things going for it”: It is efficient as it doesn’t discourage work, unlike the rise in National Insurance contributions; it is fairer than alternatives and it offsets some of the side effects of monetary policy; and “it raises serious cash.” He concludes that a one-off wealth tax “is a good idea, but we need to also recognise its limits.”
Sunak plans overhaul of ‘generous’ R&D tax credits
The Chancellor is planning an overhaul of the R&D tax credit system to focus more on larger companies amid concern that schemes aimed at SMEs do relatively little to boost investment.
Tax warning for firms giving staff an energy bill boost
With energy bills due to jump by an average of 54% a year from April, BBC News looks at firms that are giving staff pay rises to cover the cost. Clare Bowen of MHA Monahans notes that bosses giving employees extra income to cover the increase in their energy bills need to consider tax. She says arranging for this to be paid net via payroll would cover the tax and national insurance due by increasing the gross amount paid – but warns this could represent a significant sum for someone on a higher rate tax band.
Chelsea FC
Roman Abramovich has put Chelsea Football Club up for sale after almost two decades of ownership as the Russian billionaire continues to be scrutinised. Mr Abramovich said he’s instructed the board to set up a charitable foundation to aid the victims of the war in Ukraine to receive the net proceeds from the sale. The news came as the UN was denounced by the UN.
London Stock Exchange
London Stock Exchange Group enjoyed strong revenue growth across all divisions last year, with a 6.1% boost in overall income. It has topped £6.81bn for income, and is on course to achieve its 5-7% growth target between 2020-23. The company’s adjusted operating profit soared 8.5% to £2.51bn reflecting strong top-line growth and good cost control, with adjusted EBITDA rising 8.3% to £3.28bn
Just Eat Takeaway
Just Eat Takeaway.com reported a significant loss in 2021, as costs rose dramatically, but orders also surged and the company believes it is on the path to profit. The online food delivery platform recorded a pretax loss of €1.05 billion, widened sharply from a €147 million loss in 2020
Ryanair
Ryanair boss Michael O’Leary has warned that air fares this summer will be “materially higher” due to soaring oil prices and C-19 effects. He said the impact of the Ukraine crisis on oil prices was “steep and severe”. Airlines also had fewer seats available after cutting capacity during the pandemic, he said.
Entrepreneurs face ‘penalty’ when seeking jobs
Research by the London Business School (LBS) shows that entrepreneurs face challenges when trying to secure a new role, with it found that company founders – especially male ones – are significantly less likely to be invited for a job interview than candidates with no entrepreneurial experience.
The report suggests that HR managers at large companies not only see male founders as too inflexible, independent-minded and unwilling to take orders, but also believe they are unlikely to want to stay in a role long term. Female founders, however, did not experience the same rejection rate, with them significantly more likely to be called for an interview than their male counterparts.
There was also little difference in the success of female entrepreneurs and those that had not founded their own business. Olenka Kacperczyk, professor of strategy and entrepreneurship at LBS, said: “Entrepreneurship is a masculine activity and women are not associated with it. We are showing that there is a bias.” Reflecting on the results of the study, she added: “There is a penalty for founders … There is a real career cost of entrepreneurship for those that go back to employment.”
Workers changing jobs could see pension pot hit
The Daily Telegraph’s Jessica Beard warns that switching jobs every five years can cut retirement pots by more than £25,000. This is because every time a worker starts at a new company it can take up to three months to enrol them into their new employer’s pension scheme. British workers change employers every five years on average, according to research from LV. A worker earning the average salary who does this before the age of 40 will forfeit £22,828 by the time they reach 67. Meanwhile, serial job hoppers with 10 resignations could be £35,000 worse off as a result. Under auto-enrolment rules, anyone over the age of 22 and earning more than £10,000 must automatically be signed up to a workplace pension by their employer. However, companies have a three-month delay period when a worker first starts, when they do not need to sign them up.
‘Chairman’ rethink may boost equality
Business groups have warned that the word ‘chairman’ may be contributing to gender inequality and should be replaced with the term ‘chair’. In an open letter asking for the change, the British Chambers of Commerce, the Institute of Directors, the CBI, and manufacturers’ organisation Make UK note that ‘chairman’ was still used by Companies House as a default term. They add that a change that would make ‘chair’ the default could easily be incorporated in upcoming corporate governance legislation. British Chambers of Commerce chair Sarah Howard, who notes research showing that just 8% of FTSE 100 chief executives are women, said: “Language matters. Just as ‘policeman’ and ‘fireman’ have been replaced with more inclusive terms, so too should ‘chairman’ be consigned to the history books.” Dame Judith Hackitt, chairwoman of Make UK, said of the potential move away from the term ‘chairman’: “This is a small but positive and highly symbolic change that I hope government will back.” Business Secretary Kwasi Kwarteng is understood to have rejected the idea because it would require a vote in the House of Commons, with a source close to Mr Kwarteng saying: “It requires primary legislation and we have more pressing issues, like supporting businesses through the pandemic and a war on European soil.”
Average house price hits £260k
House prices have risen above £260,000 for the first time, new figures from Nationwide show. The average price for a home has risen by £29,162 over the last year, hitting £260,230 in February. This marks the largest ever annual increase in cash terms recorded on Nationwide’s monthly index, which launched in 1991. Annual house price growth climbed to 12.6% in February, up from 11.2% in January, with this the seventh consecutive monthly increase. The average price of a UK property is now £44,138 higher than the pre-pandemic average logged in February 2020. The report also highlights that the price of a typical home is currently about 6.7 times average earnings, up from a ratio of 5.8 in 2019. Robert Gardner, Nationwide’s chief economist, said: “The continued buoyancy of the housing market is a little surprising, given the mounting pressure on household budgets from rising inflation,” adding that the strength of the market is “particularly noteworthy since the squeeze on household incomes has led to a significant weakening of consumer confidence.” Looking ahead, Martin Beck, chief economic adviser to the EY Item Club, said growing uncertainty about the economic outlook will restrain the Bank of England from increasing rates much above 1%, “But overall, while the cost of mortgages may rise more slowly than had been expected, the outlook for the housing market is looking less buoyant.”
Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we charge our members a fixed annual subscription irrespective of how high the debt value is!
It takes less than 17 minutes to see how you would benefit, do you have the time now?
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.