National debt surpasses GDP – business news 19 June 2020.
19 June 2020.
James Salmon, Operations Director.
We look at the increase in national debt, the BOE announcing more QE, the contact tracing app, the move in the alert level, markets, retail, the digital service tax, casual dining and a lot lot 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.
Covid-19 general news
In an embarrassing turnaround, the British government announced it will design a new contact-tracing app based on Apple and Google software and ditch months of work trying to develop their own in-house app that critics said posed privacy risks. Originally the app was to be available in May. They are now aiming for the winter. Germany and Italy, which both agreed to use Apple and Google’s technology more than a month ago, debuted contact-tracing apps this week.
Antibodies to Covid-19 may last only two to three months in the body, especially in people who never showed symptoms while they were infected, according to a study published on Thursday.
The UK’s coronavirus alert level has been downgraded from four to three, the country’s chief medical officers said. Under level three, the virus is considered to be “in general circulation” and there could be a “gradual relaxation of restrictions”.
While European nations continue to slowly reopen their economies, covid case numbers continued to mount in Asia, South America, the US and Mexico.
Global death tallies have now passed 450,000.
Public-health experts say people need to reset their expectations and change their behavior. “People are fatigued. They mistakenly feel that things were going away,” said Cameron Wolfe, an infectious-disease doctor and associate professor of medicine at Duke University. “We’re going to have to figure out a way to live with this.”
Markets.
Shares in London were mixed yesteray having gone up and down throughout the day. At the close of the market, the FTSE 100 was 29 points down at 6,224, whilst the 250 was also down 64 points at 17,518. The turbulence came after the bank of England increased QE by £100 billion and said interest rates would hold at 0.1% but said it would slow the pace of asset purchases.
Sterling is one of the weakest currencies of the week in response to the BOE move.
UK debt passes national GDP
UK Borrowing exploded to £103.7bn over April and May’s lockdown, official data showed today, as debt exceeded GDP in May for the first time in 57 years. The current financial year to date – April to May 2020 – has already seen borrowing rocket to £103.7bn, £87bn more than the same stretch last year.
BoE pumps an extra £100bn into the economy
The Bank of England (BoE) has announced a new stimulus package for the economy in an effort to mitigate against the impact of the coronavirus crisis and lift inflation from the current 0.5% and closer to the 2% target.
The Bank confirmed a fresh £100bn in quantitative easing, with this following a £200bn boost announced in March. The £100bn added yesterday takes the BoE’s asset-purchasing programme to £745bn, a figure equivalent to around a third of GDP.
BoE governor Andrew Bailey said the pace at which bonds would be purchased will be slower than in the previous period as financial markets are far calmer than three months ago, saying: “We are slowing from warp speed to something that by historical standards still looks fast.”
The Bank’s Monetary Policy Committee (MPC) also voted to keep interest rates at the historic low of 0.1%. On the immediate state of the economy, the Bank said there are signs of a post-lockdown increase in consumer activity, with this coming in the current quarter when the Bank had anticipated it would be Q3 before evidence of an upturn.
The Bank said it now expects the economy to contract by 20% in the first half of the year, having previously suggested a 27% reduction was on the cards.
Andy Haldane, the Bank’s chief economist, said if the recovery in demand and output continues, the loss of output due to the pandemic may be half that previously envisioned by the Bank, “boosting inflation prospects”.
Meanwhile, Ben Broadbent, the BoE’s deputy governor for monetary policy, voiced concern over future unemployment rates as the job retention scheme is unwound.
English shoppers’ return points to a gradual retail recovery
The FT considers the climate for retailers, with KPMG’s Yael Selfin saying reopening stores means businesses that were viable are more likely to survive, while warning of job losses.
UK Retail Sales began to rebound in May, exceeding expectations by rising 12 per cent month-on-month following a record plunge in April, with the proportion spent online hitting a record high.
With fuel excluded, retail sales climbed 10.2% month-on-month, data from the Office for National Statistics showed.
Opinion: VAT cut not the way to go
Ryan Bourne, who holds the R Evan Scharf chair for the public understanding of economics at the Cato Institute, considers reports that Chancellor Rishi Sunak is mulling a temporary cut to VAT to boost consumer confidence as Britain moves into the post-lockdown recovery phase. Mr Bourne argues against the move, saying US data show that pent-up demand will see retail sales jump as shops reopen, even without intervention.
Chancellor argues the case for digital services tax
The UK will continue to push for a solution for taxing international tech companies, despite the US abandoning negotiations for a global digital tax.
In a letter to US Treasury Secretary Steven Mnuchin, Chancellor Rishi Sunak and finance ministers in France, Italy and Spain have stressed the importance of tech giants such as Google, Amazon and Facebook paying a “fair share” of tax.
The letter says that the coronavirus crisis “has confirmed the need to deliver a fair and consistent allocation of profit made by multinationals operating without – or with little – physical taxable presence.”
Arguing that such firms will emerge from the crisis “more powerful and more profitable”, the letter says it is “fair and legitimate” to expect those benefiting from free access to the European market to “pay their fair share of tax within countries where they create value and profit.”
A Treasury spokesperson commented: “We have always been clear that our preference is for a global solution to the tax challenges posed by digitalisation, and we’ll continue to work with our international partners to achieve that objective.”
In France, finance minister Bruno Le Maire labelled the US decision to suspend the OECD-led talks a “provocation”, and said Paris would apply a tax on big technology companies “whatever happens”. Editorials in the FT and Times both detail the importance of an agreement on taxation for digital firms.
Casual dining chains brace for pandemic aftermath
Dominic Walsh in the Times looks at the challenges being faced by casual dining chains, noting that many have hired restructuring advisers as the sector braces for a wave of CVAs, insolvencies and administrations amid the COVID-19 crisis. Mr Walsh looks at the work of Will Wright, head of KPMG’s regional restructuring team, while noting that PwC, Deloitte, RSM, Alvarez & Marsal and FRP Advisory “are also working flat out” to support chains. Figures from consultancy CGA show that the UK has just over 6,600 casual dining outlets, down 3.1% on last year and 5.7% on three years ago.
IFS in tax warning
The Institute for Fiscal Studies (IFS) has suggested that the Chancellor may have to increase taxes to address a hole in public finances brought about by the coronavirus crisis. IFS analysis suggests Government borrowing will stand at £158bn next year, and about £130bn up to as late as 2024/25. The report from IFS and Citi says Chancellor Rishi Sunak would need to find £30bn to £40bn of tax increases or spending cuts to stabilise public debt levels at 100% of GDP. The Office for Budget Responsibility estimates that public borrowing will hit almost £300bn in 2020/21.
Big Four in diversity pledges
Bosses at the Big Four have vowed to drive up efforts to boost diversity after analysis highlighted that just eleven of the almost 3,000 equity partners across the firms are black. This equates to less than 0.4% of the firms’ partners. The analysis shows that Deloitte has just one black equity partner, while EY and KPMG have two each and PwC has six. The Telegraph report shows that workforces are more diverse at more junior levels, with 4.3% of staff at EY black but less than 1% of partners identifying as such. The study also shows that other minority ethnicities are more heavily represented in lower pay brackets, such as at Deloitte where 21% of staff are from a minority ethnicity. PwC UK chairman Kevin Ellis said the firm should have more black people in senior roles, adding that it is “accelerating existing plans” to remedy the issue. Steve Varley, chairman of EY UK, said the firm wants to double the proportion of BAME partners to 20% by 2025. Dimple Agarwal, deputy chief executive of Deloitte, said the firm will announce a new strategy within weeks, adding: “We have a lot to do and much further to go.” Anna Purchas, head of people at KPMG, said diversity will be the first thing on the agenda at its annual partner meeting this week, reflecting the “strength of feeling in our organisation and the desire for action”. She noted that the firm exceeded its recruitment target for BAME graduates and apprentices this year.
Wirecard auditor questions cash balances
Wirecard has said that its auditor has raised questions over cash balances worth £1.7bn, with EY refusing to sign off on the payments company’s accounts, saying it was unable to confirm the money existed. EY’s refusal to publish the accounts marks the fourth delay this year. The missing sum amounts to about a quarter of the fintech firm’s total balance sheet. Wirecard has said there was evidence of “spurious” figures intended “to deceive the auditor”. It appointed KPMG to conduct a special audit last year and the report in April said the firm was unable to identify what of Wirecard’s profits reported from 2016 to 2018 were real.
DfT calls in KPMG for TfL review
The Department for Transport (DfT) has hired KPMG to review Transport for London’s (TfL) finances and business plan, with London Mayor Sadiq Khan having to secure a £1.6bn bailout to keep the capital’s Tube and bus services afloat until September. A DfT spokesperson said that as part of the funding package, KPMG has been called in to conduct an independent review so the Government can understand TfL’s needs, “now and in the future.”
All Saints in rent talks
All Saints is seeking to shake up the way it pays its rent after warning that “a small number” of branches are set to close. The retailer will launch a CVA to switch most of its stores to a model where rent is based on how much money the store makes. All Saints says the turnover-based arrangement would prevent it from shutting a string of stores. UK landlords will vote on the plan on July 3.
AIM reporting and governance improves
Writing for City AM, BDO’s head of audit, Scott Knight, looks at the AIM as it marks its 25th anniversary, saying the junior market is proving “remarkably resilient and adaptable”. He notes that while the FTSE all-share index dropped 21% of its value in the first five months of 2020, the AIM all-share index lost just 9%. Mr Knight considers standards that firms on the junior market adhere to, saying there “have been vast improvements in the standards of reporting and corporate governance” in recent times.
Northern towns lead property surge
Eight of the ten places in England recording the biggest jumps in buyer demand since the housing market reopened were towns in the North, according to Rightmove. Hereford took the top spot, with a 77% jump in buyer demand between June 1 and 14 compared to the first two weeks of March. It was followed by Wigan (71%), while Rochdale, Wilmslow, Scarborough and Bolton saw spikes of between 66% and 59%. Overall, Rightmove found that buyer demand in England was 32% higher between June 1 and 14 than in the first two weeks of March.
Divorce row could spark tax probe
A judge has warned that a £12m divorce battle could see both parties facing an investigation into possible tax evasion. Marine magnate Paul Crowther is arguing that a fleet of ships is not beneficially owned by him, his ex-wife Caroline or their company and should be ignored in their divorce, while Mrs Crowther says they are assets of the marriage and ought to be considered when their wealth is split. Lord Justice Males, in the Court of Appeal, has warned the former couple that if Mrs Crowther’s position is deemed the correct one, details of the ships’ ownership could see both parties implicated in a “criminal conspiracy… to evade tax properly due” on their earnings.
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