Debt write off, GDP and Zombie firms – Business news 14 July 2020.
14 July 2020.
James Salmon, Operations Director.
GDP is disappointing, debt write off is proposed, the rise in UK zombie firms, job losses in SMEs, retail sales, Output figures, covid and market news and lots more.
Here are CPA we want to share the business news stories we have seen that we think will affect our members and readers. Many of us are busy fighting to protect our businesses and therefore might have missed some of the news that could impact small businesses, their owners and those that sell on credit.
GDP
The UK Economy grew at a much slower rate than expected in May after April’s historic crash, official figures have shown, in a sign that the recovery could be weaker than anticipated. UK GDP expanded by 1.8% in May, the Office for National Statistics said, after shrinking by an enormous 20.3% in April. Analysts had expected growth of five per cent.
OBR boss proposes debt write-off
Richard Hughes, the new head of the Office for Budget Responsibility (OBR), says a broad write-off of toxic coronavirus debt may be the only way to save the economy. He has suggested making repayments on £45bn of taxpayer-backed loans earnings-contingent, saying they could be linked to companies’ revenue, with anything owed after a set timeframe cancelled.
Speaking to MPs on the Treasury Select Committee, Mr Hughes said: “The longer the crisis goes on for, the more likely it becomes that Government-guaranteed loans become less of a facilitator of the recovery and more of a burden, because firms have built up large stocks of debt which they will struggle to write off.”
He added: “The more that debt is a burden on companies, the less they will invest.” Edwin Morgan, of the Institute of Directors, commented: “Our figures suggest corporate debt could cast a shadow over investment plans for some time.” “We’ve called for a student loan-style system, by which firms pay back as they recover,” he added.
UK sees rise in zombie firms
Britain is now Europe’s capital for zombie businesses, accounting for a third of the region’s indebted companies kept alive by low interest rates and bailouts.
Bank of America analysis shows that the proportion of UK non-financial businesses which were zombies has jumped six percentage points to 15% in the last year, the highest level in Europe.
The study shows that the coronavirus crisis prompted a surge in zombie firms across Europe in Q1. Barnaby Martin, credit strategist at Bank of America, said: “Too much debt risks leaving corporates as zombies, which makes it even more challenging for economies to rebound from recessions vigorously.”
He added that the increase in zombie firms “puts extra urgency on proactive fiscal policy by governments to help reduce corporate leverage in this crisis”.
Small businesses could see 1.4m job losses
Small business may be forced to cut 1.4m jobs unless ministers move to rescue the economy, according to a survey by computing company Sage. The study found that more than three-fifths of SMEs have launched redundancies or are planning to do so amid the coronavirus crisis, with 15% saying they expect to collapse if there is a second wave of COVID-19 cases.
Around half said they could go bust if revenue drops by a fifth between now and September. The poll of 2,000 firms saw 65% say management jobs were most likely to be targeted, while 79% do not expect to be making the same profits they did before the pandemic by year-end.
Sage managing director Sabby Gill, who described the findings of the report as “gut wrenching”, noted that businesses are embracing the digital revolution as a result of the pandemic, adding that small firms could be encouraged to invest in technology with tax breaks and other support.
BoE governor ‘very worried about jobs’
Bank of England (BoE) governor Andrew Bailey has said that while the economy is showing signs of recovery from the coronavirus crisis, he remains concerned about unemployment. He told an event organised by Speakers for Schools: “We are seeing the economy come back now somewhat, because obviously the restrictions are beginning to be lifted … But there’s a long way to go, we are very worried about jobs, as are a lot of people.” “We think it is likely that more activity will return, but more jobs will not return necessarily immediately,” he added.
Output increases
Business output across UK services and manufacturing increased significantly in June, with BDO analysis showing both sectors benefited from the continued lifting of lockdown restrictions. BDO’s Services Output Index rose by 11.20 points to 64.73 in June, its largest increase on record. This mirrors the jump seen in May’s Manufacturing Index, which rose from 69.55 to 80.47. Overall, BDO’s Output Index rose by 11.16 points to 66.50 in June, with this still below the 95 level that represents positive growth.
Retailers see sales rise in June
Retailers saw the biggest monthly sales jump since May 2018 in June after a number of high street stores reopened, with the British Retail Consortium-KPMG retail sales monitor revealing a 3.4% increase. This represents the first growth since the lockdown was introduced and marks an improvement on an average decline of 6.4% recorded over the previous three months. Helen Dickinson, chief executive of the British Retail Consortium, said: “June finally saw a return to growth in total sales, primarily driven by online as a result of lockdown measures being eased and pent-up demand being released.” She added that retail “is not out of the woods yet”, warning that the pandemic “continues to pose huge challenges to the industry, with ongoing store closures and job losses.” Paul Martin, head of retail at KPMG, said: “Retailers won’t be picking up where they left off and months of reduced or no sales will threaten the survival of many.”
London leads Europe in follow-on fundraising
Data from EY shows that London markets have seen their busiest six months for follow-on fundraising in a decade, with more than £21bn of funds raised in H1. Of all the funds amassed in Europe in Q2, 40% was raised in London. In a combined measure of IPO and follow-on activity since the start of the year, London came behind only NYSE and the Nasdaq, and Hong Kong. EY’s Scott McCubbin commented: “Whilst IPO activity has been almost extinguished by COVID-19, in what is historically the busiest quarter of the year, the markets were focussed on supporting fundraising by existing issuers to shore-up finances to mitigate the impact of the pandemic.”
Nationwide to restart 90% mortgages
Nationwide is to restart mortgage lending to first-time buyers with a 10% deposit, saying the stamp duty tax break introduced by Chancellor Rishi Sunak had helped restore confidence in the property sector. The building society restricted its mortgages in June, citing fears that falling house prices could leave high-mortgage borrowers in negative equity, with only customers holding a 15% deposit having been able to apply for loans. It has now said it will resume lending to first-time buyers with a 10% deposit as of July 20. Following Nationwide’s announcement, Coventry Building Society said it would offer 90% mortgages on a trial basis, while Platform, part of the Co-operative Bank, will now also offer 90% loans.
ARGA plans will come when parliamentary time allows
The Government’s response to the Business, Energy and Industrial Strategy (BEIS) Committee on inquiry into Thomas Cook been published. In the original findings from its Thomas Cook inquiry, the BEIS Committee expressed disappointment the Government had not pressed ahead with audit reforms and brought forward legislation to replace the Financial Reporting Council with the Audit, Reporting and Governance Authority. The Government’s response says a timetable on plans to create the new regulator “will follow as soon as parliamentary time allows.”
Darren Jones, chairman of the committee, said recent audit scandals highlight the need for the Government to address concerns over the audit sector “as a matter of urgency”, adding that is “important investors and other stakeholders can have confidence in audits.” The Mail’s Alex Brummer says the business select committee has every reason to be frustrated about Government delays on an audit shake-up,” saying that despite a number of reviews of the sector calling for reform, there is “no sign that the minister concerned, Lord Callanan, recognises the urgency of the situation.” He adds that Britain is “a pioneer in governance but risks falling behind”.
Francesca Washtell in the Mail says auditors have been under the microscope since the collapse of contractor Carillion in January 2018, while accounting fraud at Wirecard and the collapse of Thomas Cook “have piled even more scrutiny onto accountants”.
Audit post mortem ‘intriguing’
The Times’ Patrick Hosking says “one of the more intriguing” aspects of a disciplinary hearing into Deloitte and its botched audit of Autonomy was presiding judge Lord Dyson ordering the firm to conduct a “root cause analysis” of the reasons for its failings. He says “one can only feel pity” for the Deloitte partner who is “tapped on the shoulder and told that they have been selected to investigate the whys and wherefores of these failings,” adding that they are “not going to be winning any popularity contest with their colleagues.” Mr Hosking says wider cultural issues may come into focus, saying pay structures, accountability and training could come under scrutiny, as could “fuzzy things like the degree of challenge encouraged in the firm”. He highlights that the Financial Reporting Council is calling for a record £ ;15m penalty for Deloitte over the issues at Autonomy, noting it would “smash” the £6.5m fine handed to PwC over its failings in regard to BHS.
Fund manager knew Wirecard was ‘dodgy’
Fund manager Thomas Brown, of the Miton European Opportunities fund, has admitted that he held shares in Wirecard in his portfolio despite knowing the company was “dodgy”. He said he had been “stupid” to trust the firm’s accounts as he “knew that Wirecard was dodgy” and “a little bit murky in what they were doing.” He blamed the firm’s auditors, EY, for not verifying that Wirecard’s cash existed and himself for trusting the auditor. EY said there are “clear indications that there has been a large-scale international fraud … expertly designed to circumvent all the checks and balances.”
Quiz suspends supplier
Fashion firm Quiz has pledged to launch a “full review” of its auditing processes after it was revealed that workers were being offered as little as £3 an hour to make its clothes. Quiz says it has suspended one of its suppliers which had used a sub-contractor “in direct contravention of a previous instruction from Quiz”.
Market abuse amid the pandemic
Writing in City AM, Duff & Phelps’ Nick Bayley looks at abuse in capital markets, with a Duff & Phelps survey having recently found that 32% of industry professionals thought that the risk had increased “significantly” during the coronavirus pandemic, while 55% thought the risk had increased at least “marginally”. He says that despite the difficulties and an unorthodox working situation brought about by the lockdown, the industry’s ability to tackle these challenges has been “robust”, with 78% of the poll’s respondents saying their firm’s market surveillance arrangements were coping well.
Covid-19 general news
The number of covid-19 cases detected globally surpassed 13 million with almost 193 thousand new cases and deaths exceeding 573 thousand, as the World Health Organisation (WHO) warned that warned that things won’t return to normal for the foreseeable future, that a new vaccine won’t become available to everyone immediately and the pandemic could yet worsen. Many countries, the WHO judged, are “headed in the wrong direction”.
Yesterday the number of deaths from covid-19 in South America (almost 145,000) overtook the death toll in North America. Only Europe has suffered more deaths with more than 200,000.
German biotech firm BioNTech said its vaccine candidate would be ready for regulatory review by the end of the year, while Gilead Sciences said its drug Remdesivir had been relatively effective in treating the virus in clinical trials.
Boris Johnson has said people in England should be wearing face masks or other coverings inside shops to help prevent the spread of coronavirus. Wearing masks will become compulsory on 24th July.
Germany’s virus reproduction rate, rose back above the key threshold of 1 for the first time in three weeks.
Research from King’s College London suggests survivors’ antibody immunity may only last for a few months.
Markets.
The FTSE 100 climbed 1.5% yesterday along with global markets as sentiment turned positive on various treatments. In the US the S&P 500 Index briefly touched its highest since the pandemic sell-off in March, before closing lower. The Nasdaq also hit another record before finishing in the red.
Don’t let Covid-19 bust your business!
It will if your cash flow dries up, either sooner or later.
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 sometime to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. Above all tactfully, because maintenance of goodwill is paramount.
To meet the needs of creditors in the current crisis, we have designed a “critical care” package especially tailored for the situation.
- The annual package costs start at very low rates
- A minimum performance warranty is provided
- Several complimentary services included
Clients instruct CPA on-line via their PC or phone, completely user-friendly. Your late paying customers are told to pay you direct (not to us).
A very recent report shows a 23% increase in the number of unpaid invoices since March 11th THIS YEAR – are you getting a build-up of late payers?
Right now, overdue accounts must be a concern and CPA has a great track record of encouraging slow-payers to pay their suppliers quickly.
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.
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When your customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
You might be hesitant about contacting a debt collection agency. What are they going to be like?
Can they help your particular type of business?
There is no need for concern. CPA are courteous, helpful and very probably have had direct experience of working with your type of business.
Debt collection agencies are not all alike.
Success lies in both recovering money and keeping customers happy. The Credit Protection Association was founded in 1914 and has helped tens of thousands of UK businesses to collect outstanding payments and reduce the risk of incurring bad debt. We believe that creditors deserve to be paid for the work or goods they have supplied but we fully understand the need to maintain
the best possible relationship with customers!
At The Credit Protection Association, we provide solutions, advice and back-up in all areas relating to the supply of services or goods on account. Client-members receive everything they need from a single source to reduce debtor days and write-offs.
The Credit Protection Association has helped has assisted tens of thousands of UK businesses with their credit control requirements, since the First World War.
We are polite, firm and efficient when it comes to recovering outstanding debt.
“We have used CPA for a number of years now. The website is easy to navigate around with lots of helpful reports. The staff are always at hand and very friendly. CPA has helped us reduce our debt over the years and keep track of potential issues with our customers.”
~ CPA client in Buckinghamshire
“The service from CPA has proved to be everything that you said it would be. We have already seen a huge benefit. We have had a number of overdue accounts paid promptly and directly to us. It is also a huge weight off our mind to know that once we have passed an overdue payment over to you, you take care of everything whilst keeping us informed.
~ Credit Controller client in Warrington
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
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