Business news 23 May 2022
James Salmon, Operations Director.
Small-business chief in Downing Street talks over late payments. Banks braced for surge in bad debt. Cut three taxes to ease the cost of living crisis. Bank of England economist hints at rate rises. WFH increases as flexibility is in focus. And more business news.
Small-business chief in Downing Street talks over late payments.
Martin McTague, the new chair of the Federation of Small Businesses, has called on the Government to include in the long-delayed audit reforms a requirement for a board-level role with responsibility for payments.
Banks braced for surge in bad debt.
Banks are preparing to cover the cost of £7bn of unsecured loans over the next two years. The amount of debt is expected to be around a third higher than levels before the pandemic, with the cost of living crisis set to hit household spending power and leave some borrowers struggling to repay credit cards and loans. With banks setting aside cash to cover the increase in bad debts, analysis by AJ Bell shows that provisions for impaired loans at Lloyds are expected to rise from £820m this year to more than £1.3bn by 2024. Nationwide Building Society has warned that it expects more people to default on personal loans, credit cards and overdrafts this year. Nationwide has lifted its provisions on its £4.6bn unsecured lending from £502m to £529m. Anna Anthony of EY comments: “Households are already feeling the cost-of-living squeeze and unfortunately this is set to worsen in the coming months.”
Cut three taxes to ease the cost of living crisis
The Conservative MP for Wokingham, Sir John Redwood, is calling for the Prime Minister and the Chancellor to scrap the recent National Insurance hike, suspend VAT on domestic heating bills and bring forward the planned cut to Income Tax to help ease the cost-of-living crisis.
“I don’t think you want to tax work more heavily. The best way to pay your bills is to have a job,” Sir John said, adding that the Government should also abandon plans to increase Corporation Tax next year. “The evidence is overwhelming the countries that set the lower tax rates collect the most business tax because more people set up and invest in those countries.”
Redwood’s comments come as research shows the tax hike will make the UK one of the hardest places in the world to do business. Accountants from UHY Hacker Young said the UK is set to drop 16 places in its corporate tax league table – from one of the most competitive countries to lower than the global average. The firm’s tax lead Andrew Snowdon said: “These tax hikes may lead investors to question the UK as a place to set up shop.”
Business chiefs call for tax cuts to boost investment
A survey of business leaders by the Centre for Policy Studies has found Britain is becoming a less attractive place in which to invest due to the Government’s failure to develop a strategy that made an irresistible case for Britain as a place to do business.
In a report published today, it says: “Investors are not only worried about the UK’s trajectory but concerned that the Government is not as focused on the problem as it should be. While they welcome steps such as the creation of the Office for Investment, there is a consensus that we are too reliant on, and complacent about, our existing advantages. And if the Government has a story to tell investors about why post-Brexit Britain is the best place to come, it is not one that enough of them have heard.”
The report offers a ten-point plan to revive Britain’s attractiveness to overseas investors, including cancelling the rise in corporation tax, which is due to go up from 19% to 25% by 2026. The report also calls on the Government to extend “special tax regimes that bring wealth and talent to Britain” and “enhance tax breaks that boost investment”. It wants ministers to introduce “cutting-edge regulatory frameworks to capture new markets” and to put a “new competitiveness unit at the heart of government”.
Central banks drove inflation, says King
Mervyn King, a former governor of the Bank of England, says central banks have pushed up inflation by printing money during the pandemic. He said banks printed more money through quantitative easing while the economy was shutting down, meaning there was more cash and less to buy with it, causing prices to increase. Mr King told Sky News: “It’s interesting that it was common to all central banks,” adding: “They basically felt: ‘We must demonstrate that we’re here, we must do something’.”
Bank of England economist hints at rate rises
With inflation hitting a 40-year high, the Bank of England’s chief economist has said interest rates might need to rise further. Huw Pill said inflation climbing to 9% is a “very uncomfortable situation” for the Bank, adding that the tightening of monetary policy “still has further to run.” Mr Pill, a member of the Bank’s rate-setting Monetary Policy Committee, said the committee forecasts that inflation will rise to double digits in Q4. In a speech to the ACCA, he added that the Bank will need to take steps to bring inflation back to its 2% target.
Reform will boost small business procurement
Proposed reform could see small businesses bid for public contracts worth £300bn a year, with ministers looking to use post-Brexit freedoms to stop big firms “gaming” the procurement system. A Government source said: “We’re moving away from 350 different European regulations that govern procurement down to one British one.” They added: “We’re making the system as transparent, fast and light-touch as possible, with a focus on making it easier for small businesses to get contracts.”
Markets
For the first time since March 2020, the S&P 500 index officially entered into bear market territory on Friday. Having dropped due to the fresh concerns about high inflation and slowing growth. With 7 straight weeks of declines, the index has now seen its most prolonged fall since 2001. Meanwhile the Nasdaq has lost more than 30% this year.
Kingfisher
Kingfisher reported strong post pandemic growth in the first quarter, with three year like for like sales up 16.2%. The company recorded sales of £3.2bn in line with expectations thanks to resilient demand from both DIY and trade segments, but was still down 15.8% compared to 2021 figures. While the retail giant said this dip was down to an exceptionally strong year last year, where home improvements rocketed, Chief exec Thierry Garnier said the firm has made strategic focus, gaining a significant proportion of the increased sales.
Retail sales up 1.4% in April
Office for National Statistics data shows that UK retail sales rose in April. Sales volumes were up 1.4% last month, following a fall of 1.2% in March, while the overall value of sales rose by 1.9%, despite consumer confidence falling to its lowest level since the 1970s. Experts had forecast a decline in sales, with consumers expected to have cut back amid rising living costs. The rise was in part driven by an increase in sales from food stores, which rose by 2.8%. While sales volumes at non-food stores were down 0.6% in April, online sales rose by 3.7%. Sales of alcohol and tobacco helped push up sales volumes, while clothing sales were also strong. While sales climbed last month, in the three months to the end of April, they declined by 0.3%, revealing a longer-term downward trend.
WFH increases as more employers move to hybrid models
With the pandemic having sparked a permanent increase in homeworking, the TUC says many workplaces and staff are still trialling new arrangements for remote and hybrid working, as well as negotiating long-term policies. A TUC study has found that the proportion of employees regularly working from home has risen from 6.8% in 2019 and 12.1% in 2020 to 22.4% in 2021. It also found that nine in 10 of those who worked from home during the pandemic want to continue working remotely at least some of the time. However, the report also flags that some staff are being denied homeworking requests without their employer giving them a good reason, while others have experienced negative treatment from their employer as a result of working flexibly. TUC general secretary Frances O’Grady said: “Everyone should have access to flexible working, but while homeworking has grown, people in jobs that can’t be done from home have been left behind.” She called for all staff to have rights to options like flexitime, predictable shifts and job shares. She added: “Homeworkers also need better legal protection.”
Flexibility in focus
The Observer’s Phillip Inman considered the climate for UK workers, saying that it appears the pandemic has forced employers into a major rethink of how to attract and retain staff. He says banks, accountancy firms, large consultancies and legal businesses are increasingly offering more flexible working. However, he argues that while some employers are considering more flexibility, surveys suggest that this is only being applied to working from home. A TUC poll shows that while regular home working tripled during the pandemic – rising from 6.8% of the working population in 2019 to 22.4% in 2021 – other forms of flexible working are being implemented “as inflexibly as they ever were.” Mr Inman highlights that while the number of people on flexi-time has increased from 12.6% to 13.5% over the past two and a half years, part-time work declined – from 24.9% to 23.5%. The proportion of people benefiting from annualised hours, term-time working and job shares declined from 0.5% to 0.4% of the working population. Negotiated pay rises seen by consultants XpertHR have risen from 3% in January to just 4% in April, with this far short of the inflation rate. Mr Inman suggests that staff at firms like Deloitte “can expect more flexibility – to go with their already high pay – but for everyone else, all the indicators show that the direction of travel is backwards.”
Bonuses boost pay amid real terms wage cuts
Jill Treanor in the Sunday Times looks at efforts to find new staff and retain existing ones, saying that firms are increasingly using bonuses to lure or hold onto workers. Analysis shows that demand for workers is outstripping supply. With the unemployment rate at 3.7% and 1.3m vacancies, it marks the first time that there are more job openings than people out of work. Office for National Statistics data shows that in Q1, average wages rose by 4.2% year-on-year but taking inflation into account, real terms pay fell by 1.2%. Tony Wilson, director at the Institute for Employment Studies, says people are earning more but via more generous bonuses than through wage rises. Bonuses make up 22% of private sector pay, compared with 16% a year ago. Mr Wilson notes that when bonuses are taken into account, average pay rose nearly 10% year-on-year in March — the steepest climb since comparable records began. Ms Treanor notes that Bank of England governor Andrew Bailey is concerned that fast rises in pay could create an inflationary spiral. He recently commented: “I do think people, particularly people who are on higher earnings, should think and reflect on asking for high wage increases.”
Regulator fee rise ‘threatens small firms’
The Financial Conduct Authority has been urged to rethink a plan to raise fees for financial firms with Martin McTague, national chairman of the Federation of Small Businesses, warning the move threatens the viability of the smallest operators and risks reducing consumer choice.
Office developers in London wait for costs to dip
Deloitte’s latest London Office Crane Survey reveals building work on new offices in London has slowed sharply in recent months as developers hold out for construction costs to drop.
Nationwide: Inflation may trigger fall in house prices
Nationwide has warned house prices could fall later this year, with the rising cost of living and surging inflation set to have an impact. The building society expects market activity to slow and the rate of price growth to moderate in the coming quarters, saying: “There is a risk of a downward movement in house prices, given the pressure on household budgets.” Nationwide analysis shows that the average house price climbed 0.3% month-on-month to £267,620 in April. This represented a slowdown on the 1.1% rise recorded in March and the smallest increase since September 2021. Meanwhile, the latest figures from Halifax show that the average house price hit a record £286,079 in April, with year-on-year growth of 10.8%.
Benefits must be increased amid cost of living crisis, says IDS
Former Work and Pensions Secretary Sir Iain Duncan Smith believes benefits should be increased in line with inflation to provide a “shield” against the cost of living crisis. The former Conservative leader said rebates and discretionary funds represent “a step in the wrong direction for tackling poverty”, arguing it would be better to uplift universal credit as it “links benefits to work.” This comes after Sir Iain recently said that an emergency Budget is needed to cut taxes and boost universal credit.
MP condemns KPMG’s “mad wokery”
KPMG’s decision to require all its UK staff to take unconscious bias training has been branded “mad wokery” by Conservative MP Andrew Bridgen. The move comes a year after UK chairman Bill Michael quit after being filmed dismissing the concept as “complete and utter cr*p”. The Mail notes that Whitehall scrapped such sessions for civil servants in 2020 after an official study found no evidence they worked. But KPMG’s UK chief people officer Kevin Hogarth said the training will ensure inclusion and diversity “gets the attention it deserves”.
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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.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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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!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.